tv Mad Money CNBC July 10, 2012 6:00pm-7:00pm EDT
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to my world. you need to get in the game. those firms are going to go out of business and he's nuts. they're nuts! they know nothing! i always like to say there's a bull market somewhere. "mad money" -- you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you money. my job is not just to entertain but i'm trying to educate here. call me at 1-800-743-cnbc. the market, it's stupid. it's moronic, it's imbecilic. it's dumb as a bag of hammers. slow as molasses. which at last is your edge. anything that idiotic can be gained kbi you at home, allowing
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you to capitalize even on days like today when the dow sank 83 points down 0.81% and the nasdaq nose dived a full percent. how can we measure this market's obtuseness. what do i mean by this? we simply have to look at two charts. the chart of cummings, giant trucks, overlaid on the dow jones industry jal average. take a look. yes, news out of this company drove this whole market lower, thanks to a midday release entitled cummings increases dividend by 25%, updates 2012 revenue outlook. hmm. how could that -- uh yo know, then boom, the whole market follows. at first glance, you have to expect some pretty good news
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here, right? cummings already played 40 cents a share in that dividend. now it's going to pay 50 cents a share. you might have expected the stock to roar on the dividend boost, not plummet $8.53 to finish at $86.91. >> house of pain. >> i mean, we're head over heels on this show about dividend boosts. largely because of our anti-notorious b.i.g. philosophy of more money, fewer problems. remember, though, nothing is more important than the outlook. and i want you to think of this chart whenever you doubt me on that concept and cummings outlook, not awful, but seriously disappointing. so disit.ing, before i tell you how you could have anticipated and side stepped this decline, not because i suggested you do that this very morn on "squawk on the street." i want to parse this statement to its fullest because it's a metaphor. it's not an analog, for what awaits us this huge earnings
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season that started unfolding last night at 5:00 p.m. first, we get the glowing terrific news of the dividend raise, including a statement that, quote, with strong cash flow and low levels of debt, we are able to fund investments in our future growth and increase dividends to shareholders. wow, bravo! i'm panting for the stock after this. give me some cummings. all right, but then we get the boom. the wrecking ball. the one that took apart this whole stock market. stopped it right in its tracks. it's like kryptonite for superman, you know what i mean? first, i'm reading from the release, the company also lowered its full-year revenue outlook for 2012 and now expects 2012 revenues to be in line with 2011 compared to the company's
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previous guidance. cummings had a dynamite year last year. who cares if they can't beat it this year. in this business, doesn't cut it. cummings, despite a smokestack flavor is a growth stock. cummings has outengineered everyone in the game, particularly navistar, which is a wreck because it can't make engines that comply with more rigorous air quality standards. bhiel cummings breezes through the tests. so when a company suddenly says those revenues are going to be flat, you think like this, people. you've got to presume two things. one, the best of the best is struggling. but two, more important, the world must be slowing rather dramatically for this to happen.
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while the company followed this up by saying it dpunt provide earnings guidance, you can guess it would cost cummings a buck per share. immediately. instead of panting, i could hear the three deadly words that constitute a stock obituary and i have traded stocks and written obituaries in my career. slashing numbers cummings. now, maybe a wrecking ball is all too soft of after description. maybe imploding dynamite that brings down the whole shooting match is a better description. here it goes. we have seen demand in some markets weaken recently as growth in the global economy has slowed. cummings sells its equipment through 6,500 dealers in 190 countries. that's a pretty sweeping territory. it's called the earth. t the ceo is then quoted as saying trends for trucks and power generation equipment have
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softened and demand in brazil, china and india is not improving as previously expected. hold it! hold the phone! we know the u.s. has been a little weak, but brazil, china, india? that's the b, c and i of bric, the acronym that stands for some of the fastest growing countries on the planet. there's no doubt on anyone's mind now that the whole world is slowing if the b, the c and the i of bric are tanking. that leaves the r, and ro russia, the r, cannot carry the world. then one last one. our revenues have been negatively impacted by the appreciation of the u.s. dollar against a number of currencies. oh, lordy. the dollar is just going up huge just this week. and things have only gotten worse, even today. that's it. here we go. 271 words. 271 little words of inelegant prose from columbus, indiana,
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took down your whole stock market. and why not? here's cummings, best of breed, the best of the best. taking market share from its principal competitor and they're having a hard time. now you know the truth of what's happening out there in industrial america. in the industrial world, sure there was other negative news in the last hour. semiconductor firms and semiconductor manufacturers they both blew up. jcpenney announced sizable rp corporate layoffs, not long after credit suisse doubled its estimates for a second quarter loss. but hey, that could mean that intel, kla are killing it out there and jcpenney continuing its nasty spiral. you can't make that mental jump from cummings, though. they were the best. they weren't beaten by anyone. they certainly didn't shoot
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themselves in the feet. this is the surest sign of a global slowdown. today's decline was all on cummings, especially since europe was up nicely last night that means we should see the earnings of all industrial international companies come down. that's why we aren't done selling off yet. now you've got a description, how do you make money off of it. was any of this shocking? no, that's so amazingly stupid about this stock market. it's where your edge comes in. you would have known this was going to happen suggested you sell kit pillar this very morning when it was still up. it was on alcoa's first conference call, all on that call last night. the fabulous ceo of this very difficult to manage company came out and said sfepecifically the
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truck manufacturers, which is this because there really aren't any others, but they had dramatically lowered their aluminum orders in the last quarter. he cited truck manufacturers, and every single reason, including china which he called out dramatically on the decline. plus it's going to get worse not better. he said sell cummings now. he didn't say it, he didn't have to say it. that's your and mie job. cummings opened up! not down, but up more than a dollar. then it continued to rally all the way to $97.36. this is a stock that closed at $86.91. 10 points. you could have gotten out at a profit from yesterday. you could have then swapped out and put money in the five reception stocks.
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four of rallied nicely today. here's the bottom line, the market at times can be dumb as plywood, and you can beat it if you just do the homework. if you listen to alcoa, you've got an advanced copy of this release. basically that's what you got. get out of cummings and a host of other industrials and had a chance to jump ship in what turned out to be a great opening of a bad day. but if you didn't listen, if you didn't do your homework as i suggest every night, then you're just as slow as the market itself. so how can you ever expect to beat it? let's go to brad in illinois. brad? >> caller: hey, jim. 25 years old. i've been watching your show every day. i've been waiting a long time to give you a windy city boo-yah. >> windy city chi-town boo-ya h-back at you. go ahead.
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>> i've got a question about ford and how the stock might be affected by the recent news out of alcoa. i know alco beat their quartererquarterer ly expectations yesterday. >> actually, it was somewhat upbeat about automobiles. that was the part of the conference call. that and gas lines weren't that big. however, he did talk about a strong dollar and he talked about weakness in europe. so you don't want to buy any ford off the call. but that was not as easily spelled out as the way he told you to sell, sell, sell, the truck manufacturers. and that means sell cummings. market is very stupid sometimes. but you don't have to be. and cummings is proof that outlook matters. "mad money" will be right back. coming up, face the charts.
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facebook will give investors a status update when it reports its first official quarter later this month. but tonight, cramer is turning to the technicals to find out if you should invite it into your portfolio, when he goes "off the charts." plus, and the winner is -- cramer asked and you answered resoundingly on twitter. which second quarter all-star have cramericans used to hit it out of the park for the rest of the year? and jim is giving this one its greatest test yet. all coming up on "mad money." this man is about to be the millionth customer.
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people don't like to miss out on money that should have been theirs. that's why at ally we have the raise your rate 2-year cd. you can get a one-time rate increase if our two-year rate goes up. if your bank makes you miss out, you need an ally. ally bank. no nonsense. just people sense. if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this.
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disastrous ipo in living memory, is it finally okay to buy some facebook? well, you know the facebook doog deal was a fiasco in epic proportions, it soured regular people even worse than the flash crash and for good reason. there's a price for everything, even the most tarnished merchandise. the stock is now six points below where it came public and 10 points below where it opened on the first day of trading. although you could say i'm late here, although it's fair to note the $31 stock has had a huge rally off its nasty bottom of $25 and change. but could facebook now ook which you willy be worth buying? a brilliant technician who is a strategic officer of t3 trading. let me just say, i am wary of going anywhere near facebook before it reports later this
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month. we have heard too many worries about a slow down in facebook's business, caused by users massively and quickly migrating to mobile devices in droves over the last two months, leading up to the deal because mobile has dramatically lower ad rates. my view is that it still might not be safe. after all the things that have already gone here now, the prudent course is to wait and see the numbers. i would rather see something in the charts that makes them think the danger has passed and now it's time to buy facebook. here's a guy who had been embarrassed practically from the beginning. and that's why i think we have to take him seriously when he says the stock bottomed.
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that and he called the bottom in apple on this show a year ago. so why does redler think facebook is a buy? he says he now likes facebook for some of the reasons why he initially hated it. simple supply and demand. as in the supply of shares versus the actual demand of them. let me walk you through it. first, take a look at this shart chart, which shows you the first three days of trading in facebook following the ipo. there are a ton of reasons why this deal was such a walking, talking catastrophe. but as redler sees it, you could have saved yourself misery and money by focusing on the supply of stock and demand shortly after facebook became public. there were two clues that facebook would be an unmitigated disaster right off the bat. first, in the first hour or two of trading after a company comes
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public, if the stock can't stay above the opening price or the high of the first 15 minutes, that's a huge red flag, indicating the supply is overwhelming the demand and the stock is not worth trading. facebook opened at 42, okay? and then shot up to 45 in the first 15 minutes, burr the stock never climbed back up above those levels later in the day. so here, here and boom. that was strike one. a knuckler enthe outside corner. how about redler's second test? if on the first day the ipo drops below the offering price or closes near the lows of the day, that tells you the deal was mispriced and mishandled. for facebook, that price was $38 and on day one it closed 28 cents above that level, which was the second red flag in a sign that you had to head for the heels. sure enough, the lousy fist day action caused a selling frenzy which caused facebook to fall another seven points in just two days.
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a pain that you could have side stepped for following these two simple rules. if anyone remembers when i was on tv when this happened, oh, my gosh, it's got to hold this price, got to hold this price. now, check out this chart that showed the first dozen days of trading after facebook became public. after the initial crash down to 31, facebook paused for a few days and tried to find a floor of support. however, the first pattern facebook made was known as a bearish flag. because it looks like a flag. a stock starts to work its way high on low volume. what makes it bearish? it's called a continuation pattern. it's short hand for a stock that's marking time before it resuming its previous downward trajectory. technicians like redler have one more reason to believe the pain was far from over. it does this continuation
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pattern and then bingo. that happened in early june. now facebook has rallied back to $31.47. the technicals nailed in one on the way down and now redler believes the chart has now turned positive. let's take him seriously here. what's changed? take a gander at facebook's full daily chart since the day of the disaster, all right? let's get that up. in this next pictograph, there we go, redler sees signs showing investors -- when the sdmand ux exceeds supplies, it goes up. this tells redler, buyers have come out of the woodwork to accumulate the stock. it's not just a cup, it's a cup with a handle. how many times have we told you about that? cup with a handle.
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when you get this cup shape bottom and then trading side ways in a tight range that looks like a handle, that signals to guys like redler that the stock could roar. it's been trading well during this terrible decline here in the last couple of days. redler believes it's a solid buy between $30.50 and $32.50, he likes it more in if the stock breaks above $33. based on the size of the last ralry from the bottom of the cup to the beginning of the handle, redler believes facebook could move seven, eight points back to 40. you know my view, ad rates are lower. the last two months have been unbelievable. i'm going to wait and see what the company has to say.
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but according to redler, facebook's hideous chart has turned down right porpertude. looks like there's something finally to like about facebook. not enough to make me endorse the stock, but it's a start. after the break, i'll try and save you some more money. coming up, and the winner is -- cramer asked and you answered resoundingly on twitter. which second quarter all-star have cramericans picked to continue to hit it out of the park for the rest of the year. the results of our stock derby are in. and jim is giving this one its greatest test yet. and later, silicon valley? specialty medals provides the critical compounds for some of the world's largest industries. but fears of a global slowdown have caused this stock to meltdown. is it about to reverse course?
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>> last night, in an attempt to exploit the baseball all-star game, we announced our "mad money" version of the home run derby. the rules were simple because this is the most interactive show on television, i gave you the highlight reel for the quarter's biggest gains. i then gave you, the viewers, a chance to go on twitter and vote on which name would surge the most in the second half of the year. i promise to do a deeper, closeup analysis of whichever stock you home gamers chose as the winner once i knew that the tribe had spoken. now, the polls are closed and we've tallied the votes. the results, in dead last, pharmacyclics. fourth place, us airways. . co-ing in third, onyx which might merge. second, melanex tech. and the winner, arena pharma.
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overwhe overwhelming, 67.1% of the vote. the people have spoken and their choice is crystal clear. you think arena has the best shot by far in the second half the of the year. we know the voters liked arena pharma by a big margin, but are they right? analyzing it through the lens we use to evaluate any tech stock. in the second quarter, it rallied 2.25%. it's already had a truly phenomenal run. it doesn't have any products on the market, let alone any profits. the secret to arena's success is a weight loss drug. the first obesity drug they've approved in more than a decade. of course, we have an obesity epidemic here in the united states, so this could be a huge market.
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the analysts who cover the stock say peak sales with a con sus around $6 billion. it could be cheap even after its massive run, considering it has a market cap of $2 billion .. all of this sounds sdarn sexy. but i worry it won't be able to live up to the hype. and honestly, the fact that so many people voted for arena makes me a whether itle more skeptical. we like small bioteches when they're undiscovered and not many people believe in the story or know the country exists. arena is the exact opposite. the stock has already run from less than $2 to nearly $12. how much higher can it go? and suppose the story doesn't pan out like we hope. how far can it fall? this is a case where the ri risk/reward i to longer think is in your favor.
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what can go wrong. i think their drug is being blown out of proportion. they produced 5% to 6% weight loss. that's right, you heard me, over 12 months. that's not particularly effective, when you consider the drug is supposed to be taken by the very obese. let's say someone weighing 250 pounds. we're talking less than 15 pounds of weight loss in 12 weeks. nowhere near as effective as, say, diet and exercise. plus, you can't take more of the drug to produce better results because it's unsafe at higher doses, causing hallucinations and other side effects. even worse, the drug's label says if a patient doesn't lose more than 5% of their weight in 12 weeks, they have to start taking it. that's 60% to 70% of all patients. in fact, right after the drug was approved, a spokesman for
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wellpoint, the huge hmo came out and said uh-uh. they're not covering it. now let's assume arena's drug does live up to the hype, maybe it can be a blockbuster, but they don't own the whole drug. at best they'll get a 40% cut. if you take that into consideration, people are valuing it like it's a $6 billion drug. arena's partner here, which they're relying on to distribute the drug, okay, they're a pretty small u.s. presence. not encouraging that belvic. vivas has a weight loss drug coming up for approval next week on july 17. if it could get thumb's up, it
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should launch sooner because it doesn't need to be launched by the fda. vivus owns the entire rights. that could be hard on arena. plus, at this point, even some of the most bullish analysts out there have price targets that are below where the stock is actually trading. arena pharma may have won the vote, but i don't think the stock will be a winner in the second half. this is a situation where you just have to say okay, great one, but i missed it. what would be better, out of the second quarter all-stars, i think onyx pharma has a better shot of continuing to outperform here. that would have been my vote. it's likely t lly fda will appr their blood pressure drug. the results are in and arena pharmaceuticals is the people's choice, but it isn't my choice. the stock has run so much i just
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don't see how it can live up to the hype anymore. the risk is definitely too great. if you've been riding this one, i reiterate what i said last night, i want you to sell half and you can let the rest ride. or if you're worried about the competition outline, maybe take much of your initial investment out of the stock and then play deliciously with the house's money. linda in connecticut. linda. >> caller: hi, cramer, how are you? >> not bad. >> caller: i went to the farmer's market and got new jersey peaches. they were good. >> my tomatoes are a couple weeks late, but they're good already. what's up? >> caller: they're fabulous. i have a stock that was running with the bulls. collaborate with world leading pharmaceutical companies. i don't know how to play it. the i.q. is lgnd. >> you know, here's what i'm going to do for you.
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these are stocks that are so in flux i've got to do work and come back. i cannot opine on that, i don't know where they are right now at this exact moment. so i've got to wait and see. i've got to do more work and i'll come back. these things are so day to day, i can't opine without knowing where their tests are. and i will come back. the viewers, they chose arena. as the top second quarter performer that's going to go all the way. they expect this to be the all-star of the year. i respectably disagree. stay with cramer. coming up, ride the lightning. take a nonstop thrill ride as cramer goes stock after stock. all your calls taken rapid fire on "the lightning round." and later, silicon valley? specialty medals provides the critical compounds for some of the world's largest industry. but fears of a global slow down
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it is time to start with "the lightning round." i'll say buy, buy, buy, sell, sell, sell. when you hear this sound, and then the lightning round is over. are you ready skee-daddy. mike in texas. >> reporter: this is mike from texas. tractor supply. >> i got to tell you, i am not su sure. it is still expensive. and people are getting cheaper. >> caller: i'm calling from north carolina. my stock is honeywell, hon. >> i like honeywell. i prefer to buy it between 50 and 51 after what happened to
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cummins, inc. reerl may grandson want bs your opinion on disney. >> my take is that as the stock comes down, you want to pull the trigger as the travel trust will do right along with you. let's go to elizabeth in ohio. >> caller: thanks for helping me and the next generation of investors. my company is goodrich, gr. >> it's done. ring your register stock. sell, sell, sell, sell. let's go to michael in new jersey. >> caller: cramer, i love your show, you're doing a good job. xls. the president retired.
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>> with that information i'm going to put it on hol and find out why. i'm not going to give you an answer until i know because i did not know that myself. james? skraerl bo . >> caller: boo-yah, james. >> what's up, my friend? >> caller: it's an investment, not a trade for me. >> select comfort is not the king. i'm not going to touch that guy. it worries me, that industry worries me. it's gotten very competitive. i'm not there with you. let's go to steve in michigan. >> caller: hey, boo-yah, jim. steve in michigan. lulu lemon? >> i still like lulu. i know everybody has panicked. to me, you buy deep in the money calls out six months and you'll be fine. i'm not giving up on lulu. tracy in ohio. >> caller: this is tracy with a
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nevada boo-yah. >> i like that. high spirits. >> chipotle and cmg. >> you have to buy these on a way down in a horrible market. i'm going to continue to reiterate, you buy deep in the money calls six months out. i'm going to use starbucks an allergen. that's the conclusion of "the light niening round." take the privileged investing tools of wall street and make them simple, intuitive, and available to all. distill all that data. make information instinctual, visual. introducing trade architect, td ameritrade's empowering web-based trading platform. take control of your portfolio today. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.
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how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion.
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thank you, mr. davies. we try to spot bottoms here on "mad money." i consider myself a connoisseur of big bottoms, wide bottoms, fake bottoms, bubble bottoms, you name it. how can you tell when a stock has been brutally pounded. take gsm, the leading glow sbal supplier of silicon medals. we'll show you what that is with massive market share. gsm is a high quality operator, low cost producer. it's been raising prices
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periodically. lately prices have been softer, though. i like that. the company sees consumption rise by 35% by 2016. however, the stock has been hammered. it's barly more than $1 above a 52-week high. not just the silicon dependence semiconductor industries. the aluminum industry and the steel business has been getting hurt. all of these could get worse before it gets better considering the economic slowdown. of course, a lot of the weakness is already baked into the stock. and there was a sign of the turn last time the globe reported. the company did -- welcome back to "mad money." before we get started, i am
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going to ask people -- this is what people are going to ask me, what the heck is silicon. what do they make. >> we make a product called silicon medal. we all touch and see every day and tires on your car to your ipad. they're everywhere. how do we make this stuff. we take quartz -- >> found in a lot of places. >> not really. we need a special kind of quartz. we need a low iron pure quartz. so a specialty coal which is only found on otwo spots on earth. >> on earth? >> one is colombia, south america, and the other is kentucky. and the kentucky mines we own. this is the most reactive high quality coal for silicone metal. >> you can't make your stuff without this? >> you can't make it without
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this. >> and if you're making sit con metal, you will have higher productivity using this coal than any other coal. >> put it into the furnace, heat it up to 2,800 degrees. >> who buys this? a shampoo company takes this -- >> silicon goes into hundreds of products from shampoo and toothpaste. that is growing 2% 3% year over year. the middle glass is developing around the world. great market. >> so you export the stuff everywhere? >> yes, but most of the business is here in the states. that's about 50% of the silicon metal. about 40% ends up in aluminum castings. the most predominant part would be rims on your car. what's happening to auto? globally, auto is growing. finally, last but not least, the
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semiconductor and solar. >> a deeply cyclical company, and you sell specialty metals. what's wrong with that? >> we're a cyclical company. >> so that's true. you're in the cummins land. >> we're the lowest cost producer of this stuff in the entire world. why? we own our entire supply chain. we have this specialty coal mine. we own that, we bought that last year. we have the quartz minds, the woodchiping operations. we're totally backward sbe great nighted. >> so if all of your businesses are -- if everything's got growth and you've got the huge growth number that you're predicting, who's coming against
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you if you have 50% of the market? >> so the u.s. is an importer of silicon metal. we all know europe has slowed down. so what's happened? the guys putting a lot of product into europe, specifically the south africans and the brazilians who are the marginal players, those guys are now moving product to the u.s. >> they tend to undercut anyone when they need to. meaning, that's euphemism for dump here. >> so that's what's happened. but the bottom line is, jim, we can make money in any market. when you go back to the crisis of '09, we never lost money. >> that's when you came public. so obviously -- >> we never lost money. >> well, when you guys look at this, i mean, if other countries are dumping, my word, this product here, okay? even though you have -- you're the low-cost producer, when do prices go up? if autos are going to be built,
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14 million autos and that's pretty good. semiconductors are in a secular bull market, how come prices can't go higher? >> we believe it will. if you look look at the cycles, prices peaked at $1.55 a pound. today it's $1.30. >> you're still making a lot of much. >> when the world is slowing, people take out and shoot small cap, middle size cap companies that they believe is going to be hurt the worst by a worldwide slowing, even if it's not the case. could you agree with that supposition? >> yes, but we're unique. >> so if the world doesn't slow down further, we might think of the stock a couple points off its low and a great opportunity. ? >> and a key fortunate point,
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there is no new western world supply being built at all. we've got growing markets, a supply base not increasing. >> within a point or two of the bottom, it's a compelling story. i know the world, the fer sepgs matters more than reality right now in your industry. >> thank you. this is it, guys. this is what they make and no one else makes it in this country. >> that's right. >> unbelievable. "mad money" is back after the break. ♪
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i am sorely, sorely tempted to be like everyone else and call a bottom in the natural gas. an article this weekend about oil and gas companies are deciding to stop drilling aggressively in the marcellus shale. meanwhile, we're having a real hot summer, so hot we're burning off a ton of the stuff. we have plans to support. that ral gas from canada and louisiana. utilities are doing joint ventures. no owner can just pay for the fuel outright. it seems look it's only getting tougher, thanks to the recent court of appeals decision that pretty much gave the epa
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unbridled uh poer to crack down. you be trs and locomotives are being built to run on natural gas. it could all be for nougt. no bottom call balanced budget worth squat without a real push from washington. we're not getting it. not from either candidate. hamm's an oil man. he's not a nat gas man. and the greatness of hamm is he provides relatively clean burning oil. oil. but i do not include hamm as a natural gas backer, so mitt romney might not be either. larry nichols, available. that would have indicated that he believes in harnessing natural gas for service fuel. as a service fuel for vehicles. holy grail of fuel use.
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how about president obama? he never stopped saying that nat gas is one of many fuels, and we know he and his fwas are anti-fossil fuel. he's not a fracking defender that i can tell. sadly, without support from washington, calling a bottom could be a fool's errand. and natural gas stocks are telling you the exact same thing. have you seen them? sure, maybe they've bottomed. they sure aren't going higher. don't bet on them rebounding in the near future without a change in the political climate. and i don't see that happening. no, maybe not this election. stick with cramer. >>sitting on the sidelines from all the uncertainty? with over 25 years of experience in bull and bear markets, let coach cramer show you how to play to win. >> thank you for keeping us in the game. >> "mad money" weeknights on cnbc.
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