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tv   Mad Money  CNBC  January 6, 2014 6:00pm-7:01pm EST

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threshold of janet yellen's confirmation as federal reserve chair. she's well on her way to confirmation. the no votes stand at 26. we're going to watch this vote which is ongoing, to see if she got more than 30 no my mission is simple, to make you money. i'm here to level the playing field for all investors. there is always a bull market somewhere, and i promise 0 to help you find it. "mad money" starts now. >> hey, i'm cramer. welcome to "mad money." welcome to cramerica. my job is to teach you. call me at 1-800-743-cnbc. when you know what you want ahead of time, when you figured out what you will do if we get a correction in days like today
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where the dow was down, the s&p down, these days are made for you. first let's discuss money saving tactics before we address profit making strategies. for as long as i've been doing this show, i've been astounded by how bullish people get at the opening bell on mondays. it's like they can't contain themselves. when we have an up opening where the s&p futures are going higher, moving all stocks reflecting the collective wisdom of a bunch of hot spurs, people can't resist paying up above what they need to do. do you know how many people decide if repeatedly buying high on a daily basis that the whole exercise isn't worth it. we call this the pickoff. you've been picked off by paying up on a day like today or
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because spring training hasn't started yet and we're in the heart of the playoffs. my describe is get rich carefully, my new book. i can tell you that the vast majority of times, a real preponderance, not some pl plurability, why does this elude people? there is a natural belief that the train is pulling out of the station when they see the futures up. you can't miss it because another doesn't come around for ages. not only is there another train coming but it comes around 10:30 so the panic is misplaced. people realize they just got the top tick for the day and that's a sickening experience, one we've all had. i'm trying hard to excise it
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from your stock diet. one of those diet no fat resolutions. consider making this one of your 2014 resolutions. you will not pay up for securities, especially on monday mornings. that's a tactic that should be easily embraced. let's talk strategies. there are two ideas. longer term themes and bankable ceos a salute to 21 of the best only those who have come on the show and made you money time and time again. i am a huge believer in the power of biotech, hence my title for my four favorites, i call them the four horsemen of the big pharma e apocalypse. long term viewers of this show know that one of my salute
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favorites is cellgene. we have people in this country who are have been delivering time and time again for their investors. who is one of the best in the 21 bankable ceos? how about the ceo of cell gene. you know bob has been a frequent guest when there are important successes or when the stock has been unfairly maligned at a time when businesses quite good at getting better. perhaps there are concerns that another drug is about to run out of gas. i have come to trust him like few others as i've watched this stock soar from $50 a share to
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$162.62 where it finished today which is why i thought today was so poignant. today goldman sachs downgraded the biotech group and specifically took cell gene from a hold to a sell. the report gashed cell gene which fell $7.19 in one brutal, punishing session. now let me say upfront that you know i have become more conscious of the biotech industry because many of the smaller companies have gotten too hot, especially the players with just one product. i favor cell gene with multiple shots on goal. i don't want to temper your enthusiasm for the group as a whole. i recognize that cell gene moved up a great deal. it has other drugs for
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pancreatic cancer, psoriasis and has earning streams as much $17 in earnings power in a few year's time. that would mean a stock in the 160s sells slower than lily or pfizer. goldman takes aim at several aspects. it has moved up further than every other biotech and it's done so without goldman being on board. i think it's worthy of the multiple expansion and the estimate increases. second, the analysts question the possible success of the anti-psoriasis drug. i'm a huge believer in the potential of this drug and it will have a much longer reach. goldman questions my analyses and suggests there could be competitive threats for this drug. i'll admit that if goldman is
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right cell gene could pull back more. one of my tenants is that when you have a theme like biotech and a company like cell gene, you use the weakness to buy, not sell. second you need to have conviction in the ceo. he thinks he has real winners in the pipe. so far he's been right. why do we cut and run? i don't. he's bankable. that's why this decline is a terrific place to start a position. you want to buy 100 shares, buy 50. this is a $160 stock. i just want you to recognize that the combination of a long term theme and a bankable ceo means opportunity, not disaster. that's my strategy and advice. when you have a powerful long term theme and a bankable ceo then you get to take advantage of a sale that was thrown by the
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department store that is goldman sachs to begin doing some buying, not selling, of a great american stock. annette in california. >> caller: happy new year. my question is on twitter. i know when it first came out you probably thought it was going to go lower than 40 and then run up to 77 and it was downgraded. my question is, do you think it's going to go lower or do you prefer that over facebook? >> i think facebook is much cheaper on a metric. facebook has got a lot more going for it. fabulous article this morning in the "wall street journal" about zuckerberg. i think twitter still makes sense. i go to ty in minnesota. >> caller: hey, jim. it's freezing in minnesota but
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will boston scientific be a hot stock this year? it just got upgraded today. >> last year it was one of the top ten. it is still cheap. it got knocked back and a lot of people had given it up for dead. it wasn't dead. i would buy it up to 15. the combo of a bankable ceo like bob yugen and the long term theme of biotech say cell gene, get your engines started, people. "mad money" will be right back. >> announcer: coming up, time to tune in. a big for satellite radio broadcast sirius sent stocks searching. will it stay up in orbit or will it soon come back to earth. later, the markets soared last year but tonight kramer is looking at the worst names of
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2013. plus, higher calling, america's economic crises caused air generational collapse in the u.s. job market but the country's come back is spurring an equally rare opportunity for the players putting us in uniform. find out which companies are suiting up, coming up on "mad money." don't miss a second of "mad money." follow @jimcramer. send jim an e-mail to "mad money" at cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to "mad money".cnbc.com. [ male announcer ] we could say a lot
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>> by this point as you probably know on friday night we found out liberty media wants to buy the 48% of sirius xm, a stock i know you care about, that it doesn't already own in a complex stock for stock transaction. if you pay attention to the market you've been hearing about this all day including the
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fabulous interview with the ceo. tonight i want to give you my own spin on how you can profit from liberty gobbling up the rest of sirius. i think there is a tremendous opportunity for you in this one. before i can tell you how to play it, you need to understand how this deal is going to work. first of all, liberty is a mass media company controlled by the great john malone who is the company's chairman. they own the atlanta braves and a variety of companies and they own a chunk of live nation, barnes and noble and most recently they bought a 27% stake in charter communications, the country's number four cable operator. also and this is really important. liberty currently owns 52% of sirius. they bailed out sirius and might have gone bankrupt with a $530 million deficit during the great recession of february of 2009.
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here's liberty's new plan and you need to know how this deal works before you know how to profit from it. it's not easy. liberty media is creating a new class of stock called liberty c which will trade under the symbol lmcc. the current shareholders will get 230 million dollar lmcc shares at a two for one stock dividend. more important they will exchange 460 million of these shares for the rest of sirius for the one share of sirius being worth .076 shares of liberty. what is that in english in for every 131 shares of sirius you own, you'll get one share in the new class of liberty media stock. citigroup downgraded it off this news but i couldn't disagree with them more on this downgrade. the essence is that liberty media is a big conglomerate and
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trades off of its net asset value. that's true. th because liberty media is buying sirius xm, city cut the price and downgraded the stock from buy it to neutral. i find this absurd. i say hallelujah for them. i think it's a brilliant deal. get rich carefully i talk about how companies that take their fate into their own hands and get busy living, specifically on making acquisitions send to do very well in this environment. this liberty serious deal is exactly the kind of thing i talk about in the new book. plus, it's hard not to mention
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that i believe strongly in liberty media's john malone. they have a great track record of extracting value from their holdings. they make acquisitions, hire the right people and put up phenomenal results. they aggressively consolidated the cable industry, done at the low of europe last year. the sirius fully under liberty media's control the company will be able to extract as much as $5 million from sirius' balance sheets and they can use the money to make purchases. liberty media's purchase of 27% of charter communications in march. they're in works to buy time warner cable. if they do end up buying time warner cable then liberty's
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stake will be diluted. according to this investment act of 1940, the company has a 20% stake in charter. liberty can easily do that. liberty having control will make this consolidation easier. liberty could buy spot afly or pandora. this deal could be still one more reason pandora flew up $3.90. i believe liberty media is a great stock. i believe john malone is a genius. this is the guy who al gore once referred to as the darth vader of cable. right now the best way to play what is happening is actually to buy sirius. i know i always tell you that we never buy stocks after they've caught a take overbid and sirius already rock eted 7.2% higher today.
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this is an odd situation. i think you buy it as a way to get in on the ground floor of this liberty class c shares i've been talking about. why not just buy liberty's regular class a shares? they will you got you a ton of c shares once they're created. the stock is now 15 cents higher. any other situation i would tell that you paying like this, height of stupidity. like i said before, this deal is unique. liberty already owns a majority interest in sirius. the next step is for sirius' management to review the terms of the deal and vote on them. david faber says it is independent. i think they could force liberty to pay more than what they're offering them. some have been saying it's worth
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as much as five bucks. i wouldn't be surprised if liberty is forced to close in recent highs. it could be a way to play liberty with a bit more upside. after the deal closes, all of your sirius will become class c shares and will represent 70% of liberty's value. i think they'll doing a better job of generating massive amounts of cash. i think this sirius xm deal is a fabulous idea and the best way to get in on the ground floor to go out tomorrow and buy sirius. don't pay too much, please. i bet liberty ends up paying more for sirius thanks to the independent committee which could mean getting the new liberty c shares with added performance. what's not to like? after the break i'll try to make you more money. >> announcer: coming up, higher calling, america's economic
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>> as 2014 begins to unfold this will be the year when unemployment starts to come back with a vengeance here in the united states. we know that our country's gdp was smoking last quarter. companies don't like to hire new workers and you only pay to bring in new people if you have no other choice, meaning businesses don't really get hiring until the economy is growing fast enough that they desperately need new employees. i think we finally reached that part of the cycle. i think this is a terrific time to be in the uniform rental business. the companies that rent all sorts of uniforms to other firms, everything from
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construction and manufacturing uniforms to health care and hospitality, to special flame retardant clothing for firefighters. the math is so simple it's almost obvious but we live in a moment where the truly obvious is run by talking heads who want to convince you that nothing is more important than the federal reserve. i need a little bit more room there. you've got four main operators but only three of them are pure placed. the largest is cintas. i like them. 55% return. but i don't think they're the best way to play the pick-up right now. it doesn't really fit with the rest of the company. cintas is the 800 pound gorilla
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in the room and we don't want that. it's a well known story and that means it has less upside than something not as well known, something relatively undiscovered. who else operates in this rental space? aramar, big player, but uniforms are only a small piece of their business. they're a food service company. then there is unf, the third largest uniform company. i like that they focus on higher value uniforms like industry specific outfits but the company had execution issues that make me wary of recommending the stock. which brings me to gk services, the number four rental uniform service. with g and k we're venturing
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into undiscovered territory. that is a relatively small company, gets a lot less attention than the big dogs. it's got a lot more upside. this morning g and k announced that it sold its noncore uniform direct business. i like it because the company has done a terrific job of growing its business in a difficult environment. they were out there cutting costs aggressively, expanding the gross margins and boosting its profits. we've been seeing a lot of stories lately of companies that took out a ton of cost during the downturn and then we got an earnings explosion. back in 2010 they said they would get their operating margin up ten percent. now they think they can get 12
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to 13% over the next several years. let me be clear here. the other uniform players already have higher margins than g and k. you have to remember the stock market will always react better to a b minus student who starts getting as than a straight a student who keeps getting as. the fundamentals have to improve and that's what g and k are giving you. that's why i think they're the best uniform player here. this company is going to have great earnings revenue. think about this. g and k is already running trucks full of uniforms to the customers. when the customers expand the work force, they spend the same amount of money but they rent out more uniforms which means whenever they rent out an additional uniform it goes right to the bottom.
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when g and k last reported at the end of october the company forecast 2 to 5 percent growth which translated to 6 to 10 percent earnings growth. i think the earnings could be on the higher end of the spectrum. the company is doing a good job of retaining old customers and getting new ones what else? how about a strong balance sheet? more important, there is been speculation that they may pay out a big special dividend like it did in april of 2012. back then the stock was trading around 30 bucks and you got an intant 20% gate. i think you'll be very happy. not only do i think they have the most upside but they're cheaper than the big dogs. they sell for slightly less than 19 times earnings, 12 percent long term growth rate. cintas only has 10.6% growth so
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that makes g and k the one to buy. remember, if you are lost on how i do this analyses i explain it all in the homework section of get rich carefully. with employment finally making a major resurge ens in this country, something that will be confirmed by this friday's labor department numbers, don't outsmart yourself. more jobs is more needs for uniforms and my favorite rental play is g and k. stick with cramer. [ male announcer ] this is the story of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. ...and the little room above the strip mall off roble avenue. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories.
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>> before i get started i want to thank the great people at the view. what a great show where you can reach regular people. you guys are terrific. it's time for the lightning round. are you ready? it's time for the lightning round. i want to start with denny in pennsylvania.
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denny. >> caller: boo ya. short and long term what's your take on linked in? >> i wrote a piece where i said that yelp signals to me that maybe linked in is next. i want to be a buyer. >> caller: i have an easy question to ask you. with the drop of beverages is dr. pepper still good? >> i would prefer pepsico. if you like the beverage business, throw in a growing snap business, by pep. willie in louisiana. >> caller: hey, boo ha, cramer. >> hey man, what's up? >> caller: bw. >> refining? ballaro would be my second
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favorite. jerry? >> caller: how can resources -- >> we talked away from hall. if you want the speck we've gone back to magnum hunter. let's go to chris in south carolina. >> caller: yes, yes, thank you very much for having me on. i love the show. the question i got for you, where do you see usg going in this upcoming year? >> i think it goes higher. i'm a big believer in housing part two. play it with ma skchsco. it's cheaper. let's go to pat. >> caller: hey, jim. i was just wondering what your thoughts were on a stock like nly. >> i walked away from them. i think that business model is no longer a great place to be and i don't know what they really have or are going to do as we get through the taper so
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it's too hard for me. let's go to cole in iowa. >> caller: boo ya, here cramer. i bought your book and i absolutely love it. >> thank you. i know it just came out and a lot of people are tweeting me. please do that. tweet me with pictures of get rich. >> caller: i love it so much. i was wondering what you think about starbucks. >> starbucks has come down. in the book i recommend it. howard schultz is one of my bankable ceos. he used the weaknesses of starbucks to buy. let's go to pearson. >> caller: boo ya. thank you for what you do for the little investors. do i buy bank of america? >> it's one of the largest positions. you can follow along. both stephanie and i this is the one, the bank for 2014. armand in california. >> caller: hello, mr. cramer.
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thank you for talking my call. a few weeks ago you mentioned waiting for go go to go down to the mid 20s. now it's around 24. is it a good investment for the long term? >> a lot of people are telling me i'm on the wrong side of go go, it's an extreme short. it did spike up after we recommended it. it's come down to a level where i feel comfortable to say, yes, this is where i wanted go go. that, ladies and gentlemen, is the conclusion of the lightning round. >> announcer: lightning round is sponsored by td amayor trade. in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade.
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>> last week i told you about last year's five biggest winners in the s&p 500. tonight we're looking at the losers. i was thinking about going through the slag pile of the s&p, the first worst performing stocks in the index for 2013 is that with these dogs the only goodness is relative. some stocks are simply worse than others. with that negative preamble out of the way let's explore the merits of last year's performers. new mining down an astounding
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50%. cliff's natural resources down. peabody energy and tera data both down 50%. why was the stock cut in half? newmont has three big strikes against it. first if you want a mine you want one with growth and newmont's is paltry particularly versus rand gold. only an individual gold stock has been a nightmare because you don't know if it's going to go up or blow up. if the price of gold rises maybe your stock doesn't go up with it. after a decade of going higher
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it got hammered last year. long term investors need some gold exposure as an alternative currency. true mont is not the way to play it. second loser, cliff's natural is very close to home situation for me and my charitable trust. as one of north america's leading producers, it seems to be an excellent ship in a global recovery. the brazil based mineral giant, even though iron or hasn't plummeted as much, they have the highest short interest of any stock in the s&p 500 meaning that people are betting against it and maybe it could back fire and the street is riddled with sell and hold recommendations. i noticed that that won't matter if iron doesn't increase in
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value. another recommendation says the balance sheet isn't as bad as it used to be. there is more downside ahead and unless you want to go extremely long term and recognize that one day like aluminum the surplus of iron will tick toward equal ib brum, you can skip it entirely. i can make a case for edward's life sciences, the stock. the stock was crushed when edwards lowered the boom on earnings. useful guidance, scorched earth earnings cuts, unless you're in the bottom fishing you might not know that this is a potential buying opportunity. nothing beats a reset of the earnings calculations. when you get a slash and burn that drops the earnings
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estimates, it is with numbers going from 350 down to 3 bucks you might finally have a beatable forecast and that's what we're looking for, a forecast that can be beaten. that can make the stock rocket higher on any good news. why don't you go out and buy it? edwards life sciences is a medical device company and the medical device business someone is always out there with potential better mouse trap. in this case that someone is med tronices with it's core valve for the acor tick valve replacement and that's the heart of these businesses. that was a good pun, heart. edwards has potential approval of another device. if it doesn't then you got $3 estimate on a 66 stock. that's a prescription for another leg down if only because
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med tronices sells at 15 times turning and saint jude clocks in at 16 times earnings. why gamble on edwards when it's more expensive than med tronices. this might be a case where edwards must fall further just to get in line with the group. i will give it this though. it's worth doing more homework on this one before a totally negative judgment can be reached. the fourth biggest loser i've reached a totally negative judgment is peabody energy, this is attempting because after all half of its revenues come from overseas, in china. talk about oversupply. coal is in abundance everywhere. btu was able to raise its guidance the last time around but the obama administration has declared an aggressive war against coal. that's a nightmare for a company
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like peabody particularly because it has so much debt. i don't think you know the depths of the coal industry unless you've been on some of these conference calls. i would say that president obama is determined to wipe out the coal business within the time he has left in office. it's part of an overall love for fixing the environment, something i think we are all in favor of. it's not just that no new coal power plants will be bllt in this company. this is the neighborhood from hell so i wouldn't want to move into the sector's penthouse. half of peabody's business is here and that half is going away more quickly than we thought since climate change seems to be the most important issue the president is embracing.
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finally there is tera data. 13 percent growth rate in europe. they're a company that is challenged cyclicly and secularly and it's under fire from better competitors that offer lower cost products that might be doing a better job. they offer no guidance for 2014. people in tech want growth. it's entirely possible that one of these stocks could have a major run because they're down so much and my relative judgments will turn into positive performance. in other words, i'm not giving you a chance to make money in these. if any of these rallies happen there will be so many other stocks that do far better than these and in the end isn't that what really matters? can we go to paul in texas, please. >> caller: booyah, cramer. >> yo-yo. >> caller: my question is around hilton. when i look at it trading at $22
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a share compared to star wood trading higher, my first reaction to buy at the level but the debt to equity is five times. i wanted to know if you would be a buyer at its current price even with the high debt load? >> yes, we felt you could buy in the mid 20s. we think it's a delevering situation of something going from a bad balance sheet to a good balance sheet which will send the stock higher. if you do an valuation of the enterprise you will see that hilton comes out cheaper than you think. i would be a buyer. can i go to hugh in california. >> caller: hello? >> you're up, chief. >> caller: hello. jim cramer, booyah. god bless you for take i my call. i had two calls last year. one was best buy at around 12. it went to 40 and then i had goodyear tire and rubber at 12
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and change and it went to 22. i've got one call this year so far called baric gold abx. i've read two articles in barrons on it. they say the values was initial 44. they think it's 35. it's trading around 18 and change, 8 times earnings. it's just above book value. they're trying to clean up their act. i'm wondering if you think barron gold could have a come back this year. >> i like the gdx if you are going to buy gold miners and that will get taken up, too. i'm not a big fan of this company but i do like your track record. i would go by your instincts. it's just not a favorite of mine. sometimes you can find these fabulous gems, these diamonds in the rough. look at these s&p dogs. can i ask you to look elsewhere. >> announcer: tomorrow, kick off
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the trading day with squawk on the street, live from post nine at the nyse. >> these are remarkable. >> it's going to be a fun space to watch. >> announcer: it all starts at 9:00 a.m. eastern. [ male announcer ] here's a question for you: is your tv powered by coal? natural gas? nuclear? or renewables like solar... and wind? let's find out. this is where america's electricity comes from. a diversity of energy sources helps ensure the electricity
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effort to create jobs and modernize infrastructure of course that would increase the attractiveness of job location in our country. >> i've always wanted to know why the democrats didn't say we need a defense against the countries that take our jobs and pollute all over. we don't care about that. what we care about is when workers come to this country from other countries they get jobs. why don't we care more about our people. >> what happens if you question our country's love affair with free trade or if you wonder whether we should temper immigration until we get our own unemployment down to reasonable levels? what else if you suggest that we're supporting the exporting of jobs to areas like china while we stifle industry with climate controls? it's a recipe for being laughed at. what happens if you say that even though you support a boost in the minimum wage, question what it does to create a highly
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trained work force for skilled jobs? that's how i felt when i met the obama spokesperson on meet the press on sunday. i'm not saying there was a feeling of con attempt from gene who i've known for a long time. but trying to question free trade, not to mention trying to be pragmatic about global warm and immigration seems to be wrong by this administration. i don't want to be viewed as a kook. i don't want to crack down good employers over global warming here when they can take jobs in mexico or china where you can pollute at will. what's the matter withholding
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off on immigration until our excess of supply gets hired. i don't want to hear that we favor all but i suggest that natural gas could be an amazing bench mark that we create jobs, most certainly and promote domestic security which is a constitutional preamble thinking, right? ideas is an endorsement of the height of evil, fossil fuel, even as it's ridiculous to think we're going to power our cars and trucks with solar or wind or water. all these common sense ideas are way too easily dismissed by both parties who prefer to discuss the nonjob creating minimum wage boost and unemployment benefit extensions. the painful thing for me is that i endorse those things. i just wanted to take the conversation into a deeper level. perhaps by putting an import
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duty, take advantage of trade deals that never allow our country to have a surplus balance of trade, they don't even listen when someone is agreeing with them. and then outlandish ideas to hire more americans, shocker. many of these ideas come from matt horn who is provocative because of his common sense nonideological thinking. the fact that he's considered provocative for caring about jobs is just downright sad. we can't leave these ideas still born. they're the hope for a stronger growing economy which would lead to greater profits, more jobs, and higher stock prices, all of which last i looked seemed downright positive to me. stick with cramer. >> subzero temperatures, what
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happened to global warming and why should congress and their staff be exempt from obama care? all that and more next up. [ male announcer ] this is the story of the little room over the pizza place on chestnut street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i-95. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪ ♪ this magic moment fifteen minutes could save you fifteen percent or more on car insurance. yeah. everybody knows that. did you know there is an oldest trick in the book? what? trick number one. look-est over there. ha ha. made-est thou look. so end-eth the trick.
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and shift through all eight speeds of a transmission connected to more standard horsepower than its german competitors. and that is the moment that driving the lexus gs will shift your perception. this is the pursuit of >> after the bell one of our favorite network companies that does security, pal low alto announced they're buying morta.
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you do by the acquire. i reiterate palo alto network. sirius satellite, i typically do not recommend stocks after they get bids. this is different. i want don't look now but what happens with global warming? it's not just chicago and boston recording record lows but the deep south is also under severe cold warnings tonight, we're talking atlanta, even south florida. we have a live report and much more just ahead. and we have a big battle in washington coming up over extending benefits and the minimum wage. i save aby abolish the corporat income tax totally. everyone would

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