wildebeest. >> you'll know it when you see it. that's continue. >> they're fast according to josh brown. i'm melissa lee. thanks for watching. see you tomorrow for "squawk on the street" and 5:00 p.m. for more "fast." don't go anywhere. "mad money" with jim cramer starts right now. i'm jim cramer. and welcome to my world. you need to get in the game. 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 "mad money," welcome to cramerica. other people want to make friends, i'm trying to save you some money. my job is not just to entertain you but i'm trying to teach and educate. so call me at 1-800-743-cnbc. we are not the world. ♪ we are not europe's children. we're the ones who make a brighter day, so let's start buying!

all right. how can you not think of that classic? right, that classic song when you dissect this market with the dow only dropping 33 points, s&p edging just so slightly .06%, nasdaq actually advancing .12% despite hideous action in europe. action that will only get worse when the banks open tomorrow. >> sell, sell, sell! >> you see, we truly aren't one world anymore. we were one world three years ago. when the european crisis began. but both our companies and our investors have witted that market now. mostly to take advantage of the strong german economy. >> house of pleasure. >> we can keep trying to fret about europe, it's easy to, it's easy enough given how red ink spills over from europe, drips all over our screens every day at the opening. but then they come back. the exception offing the biggest banks, do not and should not

trade on europe. yes, there are currency translations issues. we do have to fret a bit about a weakening euro. at the same time, though, we're seeing a dramatic influx of european money over here. it started in real estate, but it's also in our bonds and now it's in our stocks and that is other parts of our economy and our stock market. to put it simply, there are as many people who like to buy stocks off a european dip as like to sell stocks off european lows. and that's the big change of 2013. the big change to so many skeptics, including many in the media refusing to recognize. the markets have little memory and no justice. you may think all bank stocks should be sold because deutsche bank and bvva are going down. but if you're a loan officer in columbus, ohio, you don't know or even care about cyprus. and if you're a banker at citigroup, you're trying to figure out how to handle the huge influx of capital from the

continent. what are we supposed to sell, right? what are we supposed to sell because of this inner relation or lack thereof? how many times, how many times does that have to occur to people before we realize how rong it is? how many times do we have to sell raw stores or bristol-myers because of cyprus? someone say we need to sell every single time we get bad news out of europe. i would say the admonition that there's a sucker born every minute fits these fine. every time the future sellers get in there and blowing out of stocks all over the place, it's been a terrific opportunity to -- >> buy, buy, buy! >> it's not bullishness people, it's common sense. ross dress for less doesn't become ross dress for more because the banks in cyprus. bed bath & beyond doesn't become bed, bath and price range

because of an election. costco doesn't result to cost too much co, it just gets more card holders. why given what happens every single day does the pattern persist? why do sellers still swamp the market only to be met by buyers at lower levels? why does this keep happening? have these people learned nothing? are they obtuse? let me give you the insider's guide to the selloffs because tomorrow the banks open their doors and it is logical to expect the euro will break down again and italian spanish bond markets will be pummelled! how about 2%, 3%, let's write the script right now. here are scenarios to be aware of and how you should take action with each one. our market opens higher. this is an unlikely scenario. if it comes to pass, you cannot trust that opening, not at all. and up opening tomorrow is the sucker's opening because the people worried about europe have been waiting for higher prices

to sell and they'll obliterate that up opening. you need to exit on an uptake and come back in lower. which brings me to scenario two. a flat opening. again, given the fabulous pictures we're going to see of having fistfights while waiting in bank lines. however, in a flat opening, you look for individual opportunities that could be gifts. tomorrow's gift could be pinnacle foods, the ipo, let's say you don't get into this deal tonight when it's priced, you need to be ready to buy pinnacle foods tomorrow. i think it could turn out to be a gift. why? because the tepid opening might allow you to get the food stock, think bird's eye, duncan hines. perhaps the son of b & g foods which has given you 182% return. pinnacle with brands that are 85% of american households, i

checked in my household, found some last night. it's going to run by a seasoned pro who managed the $8 billion north american portfolio of mars, the candy and pet food business. he will do amazing things with this company. and by the way, the company fits this election to a tee. we get an opening tomorrow, don't look that gift horse in the mouth. just buy, buy, buy. finally, there's the most likely scenario. and that scenario is the big woosh down like we had today. the one where the s&p futures are indicated down 1% or more. and the cnbc heat map is showing no green whatsoever. >> the house of pain. >> you'll be very challenged to buy anything in the morning because i do not expect the cyprus bank situation to be that much like the run at the building loan association in "it's a wonderful life," i can't imagine a calm, george bay l bailey holding people's hands

saying keep calm, it'll all work out. as we get our first ever televised bank run. i think it's more of a potter operation there than a bailey thing. you should -- what should you bid for? what's worth grabbing in that sea of red ink that bleeds into u.s. waters? i think domestic security. last week you heard the ceo of general mills tell you things are getting pretty darn good for the maker of cheerios, pistieec. this stock has not had a minute to catch its breath since the quarter trending ever higher. including today. but there should be plenty of people tomorrow who will think that wheaties must no longer be the breakfast of champions because they're going to be sellers of the shares of this terrific company. breakfast of losers. how about -- what else? what about costco? this almost entirely domestic company with no european exposure has only put on sale on the days when the europeans ruin

our stock market with their lunacy and idiocy. don't forget your costco card tomorrow and your appetite. those free crab dip on crackers are amazing. i bring multiple outfits when i go to costco so i can come back for more without being embarrassed. let's get some rdn, that's the insurer that won't seem to go down at all. given the lines around the block in cyprus and the potential for actors paid by short-selling hedge funds to stand in lines in rome and madrid, extra euros for what that's worth if they throw punches at each other. maybe they get paid to throw 3 billion worthless euros in a fountain. radian, insist you buy their stuff when you buy a home in the u.s. what a fabulous business in the early innings of a housing boom. so here's the bottom line, we know that tomorrow will be ugly. but we aren't the world. we aren't their children, and we've got to stop acting like

it. get some pinnacle, costco, general mills and radian while everyone else sits. while the windows of the banks we'd never heard of three weeks ago and won't care about three weeks from now. ed in illinois. ed? >> caller: hello, jim, first of all a double thanks for your continued help for the small investor and for taking my call. >> triple your welcome right back at you. >> caller: okay. i got a question for you, but a little lead-in here. as you know, we've got great natural reserves of natural gas. and i have a feeling that within a year or two as this unfolds and they can get it to the consumers whether domestically or via export, gas is going to -- exclude the pun, explode, i'd like to be in on that. my question to you is this, how does exxon fit into that picture? >> yeah, you know, i've got to

tell you, ed, exxon is a very big worldwide lever company that did overpay for xto one of our favorite companies, mr. simpson put it together, it's not a natural gas play. the natural gas plays are southwest energy, capital oil and gas, and to a lesser degree, conoco, every one of those better than exxon. we are not the world, people. we are not europe's children. although, many will act like it tomorrow with eyes on cyprus. so when they are selling cyprus, look at costco, look at radian, look at general mills and pick up pinnacle foods. "mad money" will be right back. coming up -- positive prognosis? all week cramer's looking at the best in biotech. the companies on the cutting edge of medical science, tonight fda approval for a new treatment sent this stock soaring today. but is it headed even higher?

and later, on the button, from calvin n t tommy, the stoc of pvh was strutting its stuff but recently come off its highs. should you treat this pullback as the sale of the century? don't move, cramer's earnings exclusive with the ceo is just ahead. all coming up on "mad money." don't miss a second of "mad money," follow @jimcramer on twitter. have a question? tweet cramer, #madtweets, send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.

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all all week i've been reminiscing about the glory days of big pharma. back in the 1990s when the drug stocks were growth stocks trading at 30 or 40 times earnings per share. well, the curtain's been drawn on that europe. as the growth has tapered off in some cases almost nothing.

they're like fixed income securities. but we know what made the big pharma companies so hot in the '90s. they were innovating, developing major new drugs, bountiful pipelines and we can use that template to find the stocks of the next big drug companies, the ones that trade the way merck and pfizer did in the 1990s. and that is why all week we've been highlighting the larger biotech companies, companies with terrific prospects like celgene and gilead. right now, they're the ones doing the innovating. and tonight i've got a new one for you, and that stock is biib. it's a major biotech that hit a new 52-week high today and $183 as the stock soared $5.60. up more than 3% after the fda approved their new multiple

sclerosis drug. it's had a rally since it recommended it last january at $117, when everybody i know thought it was too high. and it's given you a 56% gain. but please, remember the analogy here. baaing in the '90s when the stocks were on fire, they would run and run some more and run some more year after year. even at the 52-week high, the stock is far from expensive on the earnings. sells for 19 times next year's earnings with an 18.3% long-term growth rate. that's kind of nuts, isn't it? one time its growth rate? in other words biogen sells for 18.8 times next year's estimates. bristol-myers is one of the big pharma names. i like it enough to own it for my charitable trust. but we're living in crazy town if the slow-growing traditional drug company is getting the same multiple as a fast-growing biotech. it sells 20 times for next year's earnings, more expensive

than biogen. biogen is a lot more upside than the old line pharma names and deserves to trade at a much higher priced to earnings multiple. let me tell you why. biogen made the bones by treating a horrible chronic disease, interrupting nerve impulses between the brain and the rest of the body causing everything from fatigue, numbness, difficulty with balance, walking and coordination, bladder and bowl dysfunction, even paralysis and loss of vision. the disease affects some 350,000 people in the united states 200 million worldwide. there's no known cure for m.s. and that's terrible for people who suffer from this awful illness, but if you want to be cynical from the perspective of a drug company, it's pure gold. multiple sclerosis is a chronic condition, comes and goes. and the goal of every m.s. drug out there is to prevent relapses, to keep the disease at bay. again, if we're being cynical, you've got a population of people who need to take these drugs for life in order to stave

off the worst symptoms. that's why the total m.s. market should be worth nearly $18 billion by 2016. that's gigantic. there were four main drugs people took for m.s., this is a big drug, did $2.9 billion in sales last year. but it's in decline as the old line therapies are being replaced by a new generation of drugs. biogen is developing a longer acting drug that could be approved next year. but these treatments is where biogen has been coming into its own. there's tech group dera. that's got the potential to become a leading first-line treatment for the disease. this one has received a lot of positive attention from neuroologineur neurologis neurologists. as well as great relationships with doctors. so i think the it will be a commercial success from the get go. analysts are looking for this drug to do $1.1 billion in sales. i think that's going to be a

lowball number. biogen has one more drug on the market but still has plenty of upside potential. back in 2006, the company introduced a more effective treatment for m.s. however, this drug was seen as having a greater risk of bad side effects. even with this handicap, it has managed to rack up 10% market share, last year did $1.6 billion in sales and the analyst consensus could do more in 2013. i think the peak number could be more like $3 billion. this drug is liked by doctors very much. plus a little over a year ago, here's why. the fda allowed biogen to change the safety on the label. it allows them to single out which of the patients most add risk for the drug's worst side effect, which is a potentially fatal brain infection. i see this drug gradually taking a larger share of the m.s. market and biogen agrees. last month they bought the full rights for an upfront payment for a $2.35 billion contingency

payments. now they keep it all. therefore they can keep the lion share of the profits. what else? a piece of this drug from rheumatoid arthritis. their cuts equal about 20% of the sales. then there's the non-m.s. related pipelines. working on a hemophilia franchise that could be worth $3 billion in sales by the second half of the decade. reported strong phase three data on hemophilia a and b. the fda could approve both drugs in 2013. a lot of milestones here. this year and that could also give a stock a boost every time they talk about it. hemophilia is a complicated market and if the drugs are approved, it could take some time to switch patients off their current medications. finally they've got some early stage products that aren't really being factored into the stock yet. it's a little premature. but they do have antibody based therapy for m.s. that's in phase two development. and they're partnered with isis

on a spinal muscular atrophy drug. but it's in phase one, way too early to think about. biogen has given us monster gains, especially with today's huge move after the fda approved the new drug. but given the strength of the company's m.s. franchise and their fantastic pipeline, i think there's still plenty of upside here. of course, i hate to chase, the stock at the 52-week high, i say you wait for a pullback and do some buying, that is if we get one. let's go to joseph in massachusetts, please. joseph? >> caller: hey, jim. the health care index has been hitting all-time highs along with the market. i have $55 call options for this january in eli lilly. do you think it has more room to run? or is it time to take profits? thanks. love the show. >> no, i think -- it's not my favorite drug company. it does have a lot of good things in the pipe. i think it's inexpensive in this market people want to own that kind of stock. i want you to hold on to the calls. martin in new york, please.

martin? >> caller: hello? >> hi, martin. >> caller: thank you for taking my call, mr. cramer. i'm a retiring optometrist from the bronx. >> okay. >> caller: and i have with my wife some stock. my question to you is we got it at $34, should we hold it? should we buy some more? or should we get rid of it? >> let's see, 52-week high, luxury category, expensive eyewear as you know better than i do, i would sell half of it and let the rest run. got a big gain and it is connected with europe and connected with europe, particularly one based in milan, i'm concerned about. blake in minnesota. blake? >> caller: b-b-b-boo-yah. >> explosive boo-yah back at you. >> caller: i'd like to give a shout out to the golden gophers' women's hockey team. they won the national championship. not bad, huh? >> loving that. >> caller: hey, i'd like to get your thoughts on isrg.

the stock's been crushed. it's had a bit of a bounceback lately. and they just announced that they've got $1 billion stock repurchase. >> right. but i've got to tell you something, blake. congratulations to that woman's hockey team. my friend herb greenberg has told me to be careful, isrg, he's done terrific work and work to come. that's enough for me to tell you to stay away from isrg. biotechs are the new biopharmas. what we see in celgene and gilead, it's leading the m.s. market. and i suggest if you get a pullback and look, remember, cyprus is going to give us a pullback. that's your opportunity. after the break, i'll make you more money. coming up -- on the button? from calvin to tommy, the stock of clothing kingpin pvh was strutting its stuff but has recently come off the highs.

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announcer: scottrade- proud to be ranked "best overall client experience." ♪ ♪ it's not easy to find bargains in this roaring bull market. even on a day like today, stocks in the power business have been put on sale. they've been hammered. down average about 4.5% while the s&p's up roughly 3% during

the same period. pvh is calvin klein traded down $112 today, which means the stock has given up all the gains for the year. pvh dropped to the level right where the company announced the last day of october. licensed the calvin klein brand for jeans and swimwear. a ton of success in the past buying up the licensees and operating more efficiently. they're getting the brand back together. while the company beat the street's estimates, nothing new there, off $1.50 basis, higher than expected revenues, terrific. also had cautionary statements about the integration. might disappoint some nrss. we'll find out more about the quarter and whether we should be concerned about the impact of this now closed acquisition of the company's outlook. manny, how are you? >> nice to see you. >> have a seat. >> thank you. >> all right. you've been on the show many times and it's always been better than expected, better than expected and this quarter's

better than expected. you did have cautionary comments about the outlook for an acquisition and i know we champion because i think you can run it much better than it's being run. is this a speed bump? is this guide down, an indication this was a worse business than you thought? >> two things, jim. it's really 2003 for us will be a major transition year. making investments to position ourself for long-term growth with the calvin klein business. the business which was operated as a licensee, a renter of a brand had some substantial growth 2006 to 2010. the last couple of years, that growth has slowed down a bit. and they've had their own speed bumps. we feel very strongly if we make these investments today, we can have outsized growth in 2014, 2015 and beyond and it's really about doing what's right for the business and what's right for calvin klein. >> it's 25 cents, does that include what i think some people -- i know that jpmorgan's been very good on the stock.

saying, listen, this is a transition year. did say the jeans were soft. is this jeans business something that's not good for pvh? >> well, look, the jeans business is the largest apparel category we have. jeans over $1 billion business globally. >> okay. >> the jeans category the last two years has been under more pressure. if you look out there, which on the men's side, we've been selling chinos and denim has really had a tough two years. we see that stabilizing this year and starting to grow. jeans a category that does go through cycles. and i think we might be buying at the right time to see ourselves second half of this year as long as i see some real growth in that jeans business globally. >> one thing we're sure of is that you know how to integrate. can you compare where this calvin klein acquisition is to where you were with hilfiger, similar time. >> sure, i would say it in two ways. this is a much more complicated acquisition. >> okay.

>> it's geographically more diversified. big businesses in asia, latin america, brazil particularly. north american business and european business. when we bought the tommy business, it wasn't a fix in any real place. the brand was growing. dynamic management team, and we really integrated two businesses. europe, north america, with a real focal point. this is four geographic areas we're focused on. and having the brand is having difficulty, significant difficulty in europe in particular. we think given our strong base of operations there, the management team has really grown that brand to over $1.5 billion in sales just in that region. the calvin business by comparison is only $400 million to $500 million. calvin is significantly larger than tommy, we view europes a huge opportunity for us in a business today under the management that's operating at 2% to 3% operating margins where

our tommy business is closer to 14% to 15%. >> tommy seemed good in europe. we're dealing with europe, but seems tommy hilfiger, these are foreigners coming into germany and buying up tommy hilfiger stuff? who has all this money? >> well, look, i wouldn't consider it a luxury brand. we're a premium brand. and so i think 75% to 80% of all business being done in market with that local consumer. yes, there is a portion of the business that is driven by tourism. this isn't like some of the luxury brands. at i i will say is to give you indication, our retail comps in europe are running first quarter up 5% to 6%. when we're looking out, the most positive news i can say about europe is our full holiday order book is up 10% to 11%. >> okay. >> that's coming off of two seasons where we were up more like 4% to 5% after coming off double-digit growth.

we're feeling really good about how our business is shaping up. and again, as you think about it. it's northern europe, central europe, very strong, our italian business, our spanish business, under pressure, down double digits, but germany, turkey, russia, scandinavia, france and the uk all up solid double digits for the second half of the year. >> you have been dead right about the american consumer. you came back to school, said it was going to be good, holiday said it was going to be good. is it still good in america? >> well, we had a fantastic fourth quarter based on the results. we started the year off really strong, january and february, really were strong months. but as we've turned into march, i hate to talk about weather. it's like one of those things that, you know, it's almost like an excuse. but 65% of the business that's done in the united states across all retailers is under such pressure from a weather point of view. temperatures are down from this time last year on average, 20 to 25 degrees. it's very tough selling shorts,

with the kind of martha we've had. so we've really seen across the board a bit of a pullback in march. i really believe it's temporary as we start to see the business really accelerate, i think you'll see that business get back on track. we're really talking about a three to four-week phenomenon that we're going through right now. i really think you'll see it back. calvin and tommy businesses continue to comp even with that up in the mid-single digit poz positive comp area. the two lead dogs for us continue to -- >> all right. he said please ask manny, whether there's been any degradation he's seen from the store concept with jc penney. >> well, with the business in general is under a lot of pressure. you don't need me to tell you the kind of comps we've seen. i would describe our business with penney's in two categories. we have a dress shirt, neckwear classification business on the

main floor which you're wearing right there. >> i'm wearing right now. >> that portion of the business under pressure. and similar toward the store is down -- >> that can't help you. >> it'll cost us last year about $40 million. but our sportswear businesses where we've opened the shop and shops, izod in particular, the izod business is one of their best-performing brands, performing on plan, we are thrilled with the presentation, the performance of the brand there, and we're seeing similar performance out of the vanheuisen brand there. and i think they are really looking at the pricing strategy. >> okay. >> they're looking at their positioning on inventory, especially with the classification businesses, opening price point businesses, and i think they need to be more aggressive there and starting to implement those. >> you're still sticking with them. you're not worried. >> no, and it's been a great strategy. >> okay. >> for us with penney's. >> super bowl ad, payoff? >> yeah. tremendous momentum. >> yeah. >> look, it was also a great thing to do right on -- right,

you know, about two weeks before we announced the closing of the warnaco transaction with the calvin klein underwear brand. got tremendous buzz, the ad itself broke through from a pr point of view. we followed it up in the fourth quarter with an investment of about 6 million incremental marketing there and the first quarter of this year, about another $5 million. that obviously is an investment we're making to demonstrate to both the consumer and to our investors that we're getting behind this brand. >> one last question, next year at this time. work through the transition, it's good to have asia, brazil going to the olympics and the world cup. are you going to be able to reset enough this year that you believe next year is going to be good? >> yes, i think so. i think even with this reset and balancing the distribution in sales and slowing down some of the sales growth in order to really bring the business in, we're still growing -- brazil still plans to grow 10% and asia

overall is planned to grow between 4%, 5% with china up double digits. the one area in asia is the korea marker and the underwear business there. much more challenging. i think that's a more challenged consumer. so with the developing parts of the world, we're feeling really good about how calvin's positioned for 2014 and beyond. >> all right. well, manny, as always, you tell it really straight. i think the stock could get hit. i believe we stuck with you the whole way through thick and thin. it's been the right thing to do. no reason to change course now. thank you. it's always straightforward. always lots of data. i like this combination. maybe not this quarter, but certainly later in the year. stay with cramer. thank you, manny.

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mississippi. blake? >> caller: hey, cramer, how's it going? >> not bad, how about you, sir? >> caller: doing good. calling about garmin. price at 52-week low right now. >> i'm not a believer. not a believer. before they -- i always felt there was competition, now the competition is winning. i can't get behind it anymore. i'm sorry. let's go to dennis in virginia. dennis? >> caller: big blue ridge boo-yah to ya, jim. >> sweet. >> caller: i'd like to get your take on amd -- >> no, we've got intel that's basing here. i'd rather be in that than amd and they're competitors and i don't like that. let's go to chris in arizona. chris? >> caller: hey, jim, big tucson boo-yah. >> hey, not far from where i'm from, my friend david faber. excellent, what's going on? >> caller: i want to ask you about chevron now they're trading at all-time highs, do you think that company has a chance of maybe doing a split? >> i don't know if they'll split.

i do know they're doing a terrific job and chevron is good to go. do not sell that stock. let's go to gabriel in texas. gabriel? >> caller: boo-yah, jim cramer from dallas, texas. hey, i want to ask you about goldman sachs, 11 points down from the 52-week high. >> i think we answered the question about what to do with goldman sachs when warren buffett decided to become a gigantic shareholder. you want to invest alongside warren buffett. it's going to be a good idea. let's go to brandon in georgia. brandon? >> caller: jim, a big florida gators boo-yah from atlanta, georgia. >> you bet, man, i'm doing a gator thing right now. what's going on? >> caller: i wanted to hear your thoughts on cvs. it's had a big run. >> it's not done. hope it comes down so we can -- >> buy, buy, buy! >> for the trust. john in new mexico, john? >> caller: yes, b-b-b-boo-yah. >> great.

what's up? >> caller: jim, can i short amazon? >> no, no, no, no. this is a wild card. we don't know whether to go short it or long it. and we don't just therefore presume -- >> don't buy, don't buy. >> and sell, sell, sell -- >> it's too hard. too hard. it's been a bad short for a lot of people. i need to go to mel in california. mel? >> caller: hi, jim, how are you? >> all right. how are you, mel? >> caller: fine. i've been doing a little research on baidu, i'm wondering if it's time to pull the trigger. >> there are a lot of people telling me it is. i say, you know what? china too hard for this guy. go find someone else who likes it. i need to go to alvin in michigan. >> caller: boo-yah, jim, congratulations on eight years. >> you're too kind. thank you, man. feels like nine already. what's up? >> caller: my stock is fbc, regional bank from michigan and surrounding states. it took a dive after january

when it lost, what do you think? >> i've got enough banks doing poorly without legal exposure. i would welcome management come on and tell us why it's in that situation. and that, ladies and gentlemen, is the conclusion of the "lightning round." >> the "lightning round" is sponsored by td ameritrade. [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade.

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while the easter bunny might be putting all kinds of chocolate eggs in your basket this weekend, dark, white, my personal favorite milk chocolate, i want to make sure you aren't putting all of your eggs in the same basket and keeping your portfolio diversified not to protect against any worries that might be coming your way from europe, say. next week, week after, you know, europe's going to be with us forever, that's why we're playing am i diversified. you call me, tell me your holdings. maybe you need to mix it up a little, defend yourself from this chaos. so let's start with a tweet sent to @jimcramer from steven m.

who says am i diversified? and aggressive enough for a young investor? apple, gld, which is the etf for gold, berkshire hathaway, eaton and allergen. let's go to work. eaton down for the third straight day, stephanie link and me, we were like puzzled, we think it's a buy, it's a manufacturing concern. some gold and apple, boy, a young person's portfolio, that's a dream. we've got tech, gold, manufacture, we've got drug and we've got a diversified industrial company led by none other than warren buffett. let's play on. let's go to dwight in illinois. dwight? >> caller: howdy, jim cramer. the luckiest guy in new jersey. >> really? >> you get to work with a very smart lady stephanie link. she is also quite the fox. >> oh, doctor!

yeah, she's the co-director of actionsalertplus.com. i thought you meant i won that -- >> caller: no. jim, i'm retired and living quite well off the dividends of these cramer picks. the combined dividend rate is 7%. i sleep very well at night. here goes. duke energy, new 52-week -- >> yes, i saw that, so excited. >> caller: thanks, jim. annaly capital. >> oh, doctor. go ahead. >> caller: here's where we may disagree, lin energy and boardwalk pipeline. jim, can i get a hallelujah and amen on this retiree's take on diversification? >> oh, man. you're pressing it. you're pressing it. but because of that nice stephanie link comment, i'm softening the views here. the late mike ferrell's terrific company and built into one with a juggernaut.

duke is great utility, lin, okay, boardwalk, this is pipe and we're going to say this is oil. and we're going to let that happen. woo ere going to call this a utility and this an oil company and this is auto. auto, oil, utility, mortgage rate and, oh, man, duke energy. we can't, we've got to get rid of boardwalk partners. replace that with bristol-myers! >> okay. let's go to joe. i can't do it. >> let's go to joe in new jersey, joe? >> hello, cramer. here are my stocks, we've got arm holdings armh, cvs care mark, e.d., phillip morris, pm, silver trust slv. cramer, am i diversified? >> how about the spirit with which these callers are emba

embarking. we're a gold bug, but silver will done. cvs is a drugstore chain, obviously that is also in my charitable trust. arm holdings is the big chip behind apple, and then phillip morris is the international portion of marlboro. we've got tech, silver, and utility. and that is perfect. what can i say? no changes need to be made. thank you all for playing am i diversified. "mad money's" back after the break.

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why why are we suddenly willing to pay 18 times earnings for general mills when we're only willing to pay 15 times last year. right now, right here, i'm talking about the conundrum known as multiple expansion and how we're supposed to hate that fact and learn to live with it. unless right now you're puzzling over this very issue. you're simply not taking this market seriously. you don't know what's going on. so listen up. first, the phenomenon of multiple expansion is not something we should ever feel comfortable with. we know it's legitimate to pay more for a stock as its earnings go higher, as it grows. when we decide a 10% grower should get a 15 priced to earnings multiple, and arrive at a price to pay. because in the end, stock prices, here's what they are. the earnings estimates times the

multiple. that reveals the stock price. but how about when we suddenly decide we're going to junk everything? junk the historical 15 times earnings we pay for this and gravitate, some would say levitate. over the course of a few months, we've decided not that we should pay up for growth of future general mills, no, but more for the same growth we did a few months ago and that's called pure multiple expansion. and we know we should be uncomfortable with it because it feels like all you're doing is acting like a greater fool when you embrace it. you shouldn't wake up one day and say, you know what? i'm going to start paying 19 times earnings for something i paid 15 times for earnings and implicit with that is the determination someone will come along and pay 20 times earnings and take you out. if someone doesn't, you're going to get hurt. as stocks, multiples would eventually revert to the mean. or should they? see, that's where we are right now. that's what has to be examined. first, you could ask, what's really changed about general

mills? and second, you need to ask what's changed about the world that we're willing to pay more for the future earnings of this company that we call general mills, a title this stock is most indeed most worthy of by any stretch of the imagination. the ceo was on last week, done a magnificent job of navigating through cut-throat competition and a fickle consumer. his slow and steady hand on the tiller certainly worth a higher multiple than the s&p 500 which currently trades at 15 times earnings. so as that goes higher, it's reasonable to think that general mills should too. general mills has been nothing short of remarkable payer of dividends. general mills, it's just incredible. in 2009, general mills paid 90 cents in dividends. now after the most dividend boost this month, pays $1.52, that's terrific appreciation. during that time the market capitalization has gone to $31 billion. if the stock stayed the same market cap, it'd be yielding 4.9%. in other words, it had to go

higher. and i think that's the key to the equation. you cannot get a sturdy 4% yield in this market anymore because the world is starved for yield and growth. thanks to the low interest rate environment stoked in part by ben bernanke. i think the reason why we can go from 15 times earnings to 18 times earnings is precisely because the dividend tax advantage unexpectedly stayed low at the same time that ben bernanke committed us to low rates until 2015. it's not the earnings, no, that's not what's driving us, it's the tax advantage dividends. how do we know? because you can perform the exact same function that i just did for almost every single soft goods company now yielding 3%. same progression of dividend, same progression of the priced to earnings multiple. that's why the step up. greater fool? no, just greater search for safe dividends that give you a tax advantage yield and that explains the levatioitation. that's an explanation of the conundrum i can live with even at this elevated levels, at

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