ingog into earnings on friday. >> dan >> ea looks leak a good bounce uptrend. >> trader versus trader, that's a great first round. tremendous stuff take space >> "mad money" starts right now. ♪ my mission is simple, to make you money i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now hey! i'm cramer welcome to "mad money. welcome to cramerica other people want to make friends. i'm just trying to make you some money. it's my job, not just to enterta entertain, but to educate and teach you. call me 800-743-cnbc or tweet me @jimcramer.

maybe, just maybe we've been looking at this economy all wrong. with all the attention president trump has put on manufacturing, you forget the united states is a nation built on consumption, not industry, on sales and services, not on making things so, in a day when the dow dipped 89 points while the s&p declined 0.04% and the nasdaq actually gained 0.38%, thanks to, you guessed it, f.a.n.g., i think this manufacturing obsession is throwing a lot of people off the scent and off the track. we have had some truly stunning retail sales numbers of late, and they're not getting the kind of attention they deriserve and they're not being put into the vast pastiche that is the stock market i don't want to overlook the problems from the guilty verdicts for paul manafort and michael cohen, but later how it will impact your stocks. i got back from talking a lot

about indicators on tuesday's "off the charts. there is a compelling case that historically, the stock market shrugs off political turmoil he looked at the nixon resignation, the iran contra and the clinton impeachment. from the perspective of the market, these were never more than short-term distractions selling stocks in political turmoil has been a bad bet, he explained to me in the chakin-cramer webinar. instead -- >> buy, buy, buy >> -- you should be buying the news of the guilty pair of the one-time trump advisers has obscured a lot of good consumer news and has led to an understims of the earnings power of the retail group. that's just one part of the story. the other part is what i mentioned before -- the president dominates the headlines, and when he talks about the economy, he's laser focused on international trade and bringing back lost manufacturing jobs that's what his base wants he doesn't talk much about the consumer at all. and in fact, his tariffs have undeniably raised prices for

them while of course we do want as much manufacturing in the country as we can get, that doesn't mean investors like you should be laser focused on manufacturing. two-thirds of our economy is based on consumer spending in other words, we spend far too much time worrying about our trading partners and far too little time talking about what our economy is really about -- shopping for goods and services. don't get me wrong, i think the president's right to crack down on the unfair trade practices of countries like china, but with a $19 trillion economy, it is a side show, people! so, what's the main event? the main event is retail this week we got a number of just amazing, amazing reports from american retailers, and these companies make up a much larger part of the economy than, say, the steel or aluminum manufacturers. we have now seen -- let's tick them off -- incredible results from target, lowe's, urban outfitters, kohl's, tjx, along

with stellar earnings from walmart, nordstrom, and home depot. and just now, just this very night, williams-sonoma, home goods, which had a colossal earnings beat and is soaring in after-hours trading, which i think you should have known from when we had the company on the show not that long ago what a story now, target's typical. and i'm also expecting about a 4.1% same-store sales growth, uh-uh, 6.5%. what a beat! traffic was strong both in store and online sales trends accelerated in all five of the core merchandising categories, up 41% online. as ceo brian cornell told us on the conference call -- and i quote -- comp growth in our home category was amazingly strong, up nearly 10%. headlines also -- hard lines also saw high single-digit comp growth driven by strength in both toys and electronics, end quote. guys, these are incredible numbers. i don't even -- i've never seen anything like it the source of this strength, cornell pointed out that, i

quote, like others, we're currently benefiting from a very strong consumer environment. perhaps the strongest i have seen in my career. whoa holy cow cornell did address the impact of the trade war, saying, quote, we are concerned about tariffs because they would increase prices on everyday products for american families, end quote he's not oblivious -- "a prolonged deterioration in global trade relationships could damage economic growth and vi l vitality in the united states. but the real takeaway from this target call, and nearly every other major retailer, except for jcpenney is that the analysts that follow a major swath of this economy have been dead wrong about both the health of the consumer and the state of retail in general. their estimates being so low are why these stocks are now going so high. these so-called experts are always eager to fearmonger about amazon they're happy to tell us that

trump has created some kind of aura of negativity they love talking about the huge costs the trade war with china, but these guys have missed the big boat they were way too negative on retail and almost all of them are now playing catch-up, as you can see their price targets are well below where the stocks are. and so many retailers smashed wall street's earnings estimates because the estimates reflected gloom! i have some theories about why the professionals got this wrong. first, we've heard endlessly about a slowdown in housing, okay a lot of retail is directed to housing. but it's the fabulous carol tombay, the ceo at home depot told us, but no one seemed to listen, because there's not much housing turnover, that doesn't mean people have stopped spending money the refurbishing and renovation business is off the charts, something that marvin ellison, another person i like, the new ceo of lowe's, confirmed on what i thought was his brilliant introductory conference call to that great chain no wonder home depot's stock is

up 7% from where it plummeted end of quarter if you have been into target or lowe's or home depot, you know people are spending fortunes on their houses or apartments one time lowe's was up like nine points and it was down three before the chowder heads who sold it down three had a chance to even listen to what ellison said another disgrace stop trading in after hours and before market when you don't really know what you're doing. second reason why they were wrong -- we were way into the idea that amazon was the retail death star just when they doubled down on web services and advertising, the two other businesses perhaps retail has become a lower goal for them, but web services is growing. i have a large respect for amazon, it's the largest position by far in my charitable trust, which you can follow along by joining the actionalertsplus.com club. but amazon's purchase of whole foods is starting to look like a big fake-out they haven't disrupted the food industry, hence the run in the

stock of kroger. they haven't disrupted the discounter world, as we see in the strength of walmart, target and kohl's amazon hasn't even dented the off-price business, which is why burlington, tjx won't quit the drugstores are relatively unscathed, too and we know that any do-it-yourself-oriented business, whether costco or home depot or lowe's, or autozone and advance auto parts, has been pretty much immune to the death star that was supposed to crush them let me put it this way, we have a red-hot job market, right? the consumer's feeling fabulous. a lot of people just got a tax cut. in this environment, amazon can only crush the retailers that are already hobbled, like a toys "r" us or a bon ton. in the face of a robust consumer who is benefiting from a torrid job market and lower taxes, amazon can't crush all but the most hobbled of companies, okay? there you go, throw in like a sears, a jcpenney. unlike all of the big, successful retailers i've mentioned, none of the ones i've just talked about that are doing badly, none of the troubled chains have a strong enough

balance sheet to really compete with the online colossus it was the balance sheet that did them in. all of these other guys have beautiful balance sheets, really extraordinary. came out of the great recession with fabulous balance sheets finally, sorry, i've got to go there. we've got to talk millennials. i'm so sick of millennials i hate millennials i just hate them anyway, they're the most misunderstood cohort out there thank heavens i got two of them. here it goes we know from victor ruiz, the ceo of tapestry, used to be jimmy choo, that millennials love -- i'm sorry, no, stewart weisman and coors bought them. they used to be coach, but people also know them as stewart weisman. he told us when he came here, look, i get choked up about millennials because i wish i were one, but therefore, i hate them millennials love to spend money to distinguish themselves. they buy things like shoes and handbags to express their

identity in a way the previous generations didn't, because we didn't grow up with instagram, so you actually talked to people no, they like to have things so they can show them online. i like to speak. it's a lost art, i think we know from target that millennials love to fix up their apartments it's driving the incredible growth of the small-format stores we know from the fabulous ceo of take-two interactive that millennials can't stop playing these video games! that's one reason, by the way, like nvidia so much. their graphics processors make video games look like movies there's a guy out there saying bad things about him i think he's left, no, right anyway, you saw him on the previous show. these spending decisions matter. they're much bigger than what the president wants from china on steel or aluminum or even technology they matter more to the stock market than mickey cohen or paul manafort the bottom line, these retail themes are the real narrative that helps you make money, not the fed, not the ten-year, not the inverted yield curve, not

the soybeans, not the corrupt facebook pages if you want to understand this market, worry less about trees of trade and focus more on the forest of consumer spending. let's go to ben in florida ben. >> caller: cramer! >> yeah! >> caller: a big vanderbilt university boo-yah to my former teammate who recorded a victory last week at wyndham and historic 59. my question for you is this. with all the headline issues surrounding papa john's lately and wendy's just recently divesting in their $450 million stake in arby's, do you see wendy's positioning themselves to make a move on pizza as it trades around a five-year low -- >> boy, i've got to tell you, that would shock me. wendy's is doing so well and is so well run, i don't know why they would want to go buy what i regard as a deeply tarnished brand. so, i'm going to have to say don't buy pizza off that one that's pzza. all right, look, the thing that bothers me so much, i don't know okay, lots of noise these days,

but let's cut through it together it's a company spending decision that matters focus on that, not the trees of trade. we need to focus on the consumer, not the industrialists on "mad money" tonight, what does the michael cohen guilty plea have to do with the price earnings ratio of johnson & johnson? i'll reveal. then, pets aren't just for cuddling, they can warm your wallet, too. i'm putting together a brand-new homemade etf to help make money off the trend. and exact sciences is soaring on news that pfizer will market its color guard test is there time to get into the action after a 30% gain? i've got the ceo, so stick with cramer >> announcer: 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

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let me ask you a question, what the heck does michael cohen's guilty plea have to do with the price-to-earnings ratio of johnson & johnson sure, it's not good when the president's chairman gets caught committing multiple felonies, but it sure doesn't impact j&j's pipeline or the quarter or the year if anything, a weakened president means a weakened dollar, which is terrific for j&j because it means their foreign earnings will translate into more greenbacks of course, investors who believe trump is great for the stock market might worry cohen will flip and tell special counsel robert mueller what he knows about the russia connection, but let's think this through the president could easily pardon cohen tomorrow, and that's that. granted, it wouldn't look good, but since when has this white house cares about optics while the president was implicating cohen's plea agreement, i think that plays out the same way i suspect that robert khuzami, the deputy u.s. attorney in new york who prosecuted the case, would like to refer this matter to washington for some sort of

prosecution of the president, if the documents are clear and cohen wants to testify, but where does that get us the justice department is run by jeff sessions. i don't see him wanting to make that case. i certainly don't see him creating a second special counsel parallel to mueller's russia investigation you can't just prosecute the president. doesn't work like that here's what some people don't seem to understand as long as the republicans control both the house and the senate, president trump is practically untouchable. end of story stop reading about it. yeah i think you'd get away with a lot worse than campaign violations or obstruction of justice or whatever you think he may have done in washington. remember, the capitol is just too partisan for senators and representatives to turn on their own guy. even if the democrats take back both houses in congress in november, they could potentially impeach the president, but they won't have the votes to do it in the senate a lot of people want to go away until midterm elections, but that's not ilittive and may be

true for some. i think that's what happened today in the down tape in the industrials. counter that is a belief that the chinese will wait until the midterms, too, betting on a change in congress if that's the case, you can expect heightened trade tensions from this. aren't we all waiting for the president to tweet, if it says "made in china," don't buy it? i know i'm waiting but the parts of the market hurt before by tariffs and trade, some industrials and some techs, they can hurt again. nothing new. a lot of them went down today. the rest of the market might even benefit from the rotation out of those stocks. so, let's circle back to the original question -- what does any of this mean for the price-to-earnings multiple of j&j, what we pay for the stock of j&j in the end, nothing. honestly even if the democrats take back congress and president trump somehow gets impeached -- very unlikely, okay do you think a president pence would be any less business-friendly? do you think he'd be worse for a company like j&j i don't. oh, and yes, i used to say, what does all this have to do with the price-to-earnings ratio of

bristol-myers, but that was before merck jumped ahead of them in their anticancer portfolio. i know this is deeply unsettl g unsettling it may be huge for american democracy, but when it comes to stocks like j&j, i'm betting, i'm betting it's a nonissue. stick with cramer.

♪ some teams are just so darn powerful, so profitable, that i just can't stop hammering them home, like the humanization of pets it's a theme i've been pounding the table on for years, and it's been a gigantic winner nowadays, people treat their companion animals like members of the family. meaning when we spend fortunes taking care of our cats and dogs, we don't mind! we think it's the right thing to

do and when it comes to the pet stocks, we have an embarrassment of riches. do you buy pet iq? and do you buy from the maker of veterinary diagnostic equipment? there are high-quality pet stocks to choose from and you only have so much room in your portfolio. tonight we're going to create our own homegrown humanization of pets etf. why not? we're going to help you get some diversified exposure to this incredible theme at moment, there's only one pet etf, the pet parent fund launched two months ago, but i think we can do a much better job, frankly let's start by introducing you to the components. who deserves a place in the "mad money" humanization of pets index? first, there's central garden pet and company. this is a name we haven't paid much attention to but it's an amazing loe ining long-term pew. 60% of its business is pet-related. central garden was a single-digit stock a couple years ago, but then thanks to an explosion in the pet supplies division, their growth

accelerated dramatically and their stock surged to 39 bucks then they had a secondary offering this month to pay for a recent acquisition i think it's intriguing at these levels secondly, the best performing pet stock of 2018, freshpet, up 87% for the year freshpet is the one that makes fancy natural food for cats and dogs, the stuff that needs to be refrigerated not long after the company became public in 2015, its stock got eviscerated. many of us sort of forgot about it, but it's caught fire the last couple years. especially as it gets its product in more stores, sales keep climbing, up 19% in the last quarter and now they have reached a point where they can turn a profit. since blue buffalo was acquired by general mills at a pretty price, this thing has been the last remaining pure play on natural pet food all the rest have been gobbled up it belongs in the index. third, let's not forget our

returning champion, idexx lab, maker of veterinary equipment and diagnostic instruments we just had john ayers on the show two weeks ago here's what he told us >> see preventive care, including blood work, as one of the major long-term growth drivers. the diagnostics is sort of the voice of the pet and what our innovation does is it expands their vocabulary so they can tell us more about their health status. >> man, he taught us so much isn't he a great teacher an educator. anyway, i like idexx here. they're already up 57% for the year i don't care, i think it's got more room to run fourth, there's petiq, which is the reason why we're doing this etf today. when they became public arrest year, it was all about pet products, especially medication, but they acquired vip petcare, which gave them a bunch of veterinary clinics in pet stores then in march, they made a deal with walmart to open up in 20 stores and this partnership could potentially get bigger they're up 78% for the year but i think pet iq has legs.

fifth, pedmed express is behind 1-800-petmeds, the largest animal-oriented pharmacy last year the stock nearly doubled, but so far in 2018, it's down 17% in part because they reported an ugly shortfall last month now, i'm somewhat wary of petmed express, but we're trying to create a diverse tied index and i'm betting they can turn things around, given the company's strong long-term track record, plus it's the cheapest in the index. last but not least, there's the big dog -- ha ha -- the gigantic veterinary pharmaceutical maker zoetis they are like any other drug company, but aimed at pets and livesto livestock. thanks to the humanization of pets, this is a great business if cats and dogs are members of the family, you'll be willing to pay to keep them busy. cash business. that's why they've been one of the best performers in pharma, up 25% for 2018 and more than tripling over the last five years, since it was spun off by pfizer by the way, lily will spin off lanco. we have to watch that.

zoetis just reported an upbeat quarter, delivered by strength in its vaccine and dermatology business have you ever seen a dog scratching themselves? they put the elizabethan collar on them before that. zoetis got a downfall from stifel last night, citing peak valuation. i don't know how do you peak the love affair of pets and humanization anyway, the stock got pancaked but honestly, you could have made the same argument in recent years and if you listened, you would have missed out on huge gains. of course, we need some non pure plays. general mills is a pet food business thanks to its acquisition of blue buffalo pet products, which is what we use in the cramer household. i'm not a big fan, but the stock is cheap with a 3% yield also a substantial veterinary business, henry schein, which will be merged with vets choice. they are worth owning

approaching the breakup. this packaged food play smucker's owns pet food brands that may be able to save the company. that along with the accusation of ain't worth, maker of rachael ray's pet food brand, could turn things around, and it's cheap. i hate to throw it away. same about general mills i can't throw it away. the yield's too good finally, cramer fave walmart, which is actually the largest pet retailer in america. do you know that and there is the new partnership with pet iq to open veterinary clinics in some of their stores. i think walmart's worth owning with or without the pet exposure just a rapidly growing business. how do we spread our money across this humanization of pets here's the way the etfs have to be structured. we have six core pet plays and four alternates. i put 12.5% of the allocation into six, 6.5% for the alternates, but we want more exposure to our favorites. so idexx, zoetis and petmeds get

a percentage knock smucker's down to 8.5% because the former's under better than the latter walmart's too tangential, but own that as a stand-alone. now let's back test this thing how would you have done if you invested in this made-up etf in the past for 2018, it would have given you a 30% gain over the past 12 months, 41% over the past three years 144% those numbers outperform the s&p 500. bottom line, past performance of course does not guarantee future results, but if this exercise has shown you anything, it's that the pet bull market has been a huge winner so, if you can't decide on a favorite pet play, you can always divvy up your money across this basket of animal-related stocks and fetch a lot more than just pet food! >> all aboard! >> dan in florida. dan. >> caller: ba, ba, ba, boo-yah, mr. cramer >> all right, here we go what's happening >> caller: i'm a longtime

listener, first-time caller. i have a question about cigna health care. i know you have other health care in your charitable trust, but i bought into cigna and i'm up 14% they're buying express scripps, and unfortunately for me, i took a small profit and moved on, but i've read that this was supposed to help cigna but hurt express scripps, and just the opposite's happening. i'm just wondering your thoughts on it. >> everybody's going to win in this one i know, our travel trust, you can follow along by joining the club we had a real good seminar today. we have been favoring united health and talked about that extensively today. but cigna's real good. i had been behind the merger i think it's great you will do just fine, so stay long cigna if you're eyeing pet play, and i think what you have is horse sense! this bull market is a huge winner hey, much more "mad money" ahead, including my decree exclusive with the ceo of exact sciences they're partnering with pfizer and the stock is soaring

then, in 2013, there was a female steve jobs, so what led to the fall from grace the man who wrote the story and what a book he's got and rapid fire, the lightning round! so, stick with cramer! at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got near real time inventory updates. & he'll find the same shoes in your store that he found online he'll be one happy, very forgetful wide footed customer. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & if your customer also forgets socks! & you could send him a coupon for that item.

♪ do you hate a colonoscopy but know they can prevent a curable form of cancer if caught early? exact sciences, exas, the molecular diagnostics company came one a noninvasive way using your own stool to screen for colon cancer the stock has been obliterated over the last month, plunging from $67 in late july down to $50 yesterday in part because of a not so hot color short sellers were in hot pursuit, like a huge grizzly bear to a wounded deer, but now they will acquire pfizer, helping them rocket its flagship product, and it went higher. the short sellers bought to propel the stock 13% or 30%, one day. i've always liked the company's technology instead of getting a colonoscopy, a really unpleasant procedure, exact sciences lets you send them a stool sample

which is scanned for science of cancer however, wall street hasn't always been thrilled with the company's execution, even as the latest quarter was pretty okay, certainly much less bad than the stock's behavior might have been, i think. so, could this partnership be a game-changer let's take a closer look with kevin conroy, the chairman and ceo of exact sciences, to find out more about what his company's deal means for you as a shareholder. mr. conroy, welcome back to "mad money." >> hey, jim. thanks for having us on. it's great to talk to you. >> all right, kevin. how much better can exact sciences do now that you have something like 625,000 calls that pfizer's going to make on your behalf? >> you know, jim, this is a big, big problem, and it requires big partnerships and big solutions, because there are 50,000 people a year that die of colon cancer, despite being preventible and curable, if detected early what pfizer brings to the table is deep experience, obviously, a breadth of resources, and real

credibility, both with primary care physicians, which is important, and also in the large health systems, which really control screening in the u.s and despite all of the use of colonoscopy over the last 20 years, still, two in five people in this country remain unscreened, and that is not okay with us. together with a great company like -- >> what percentage of people that currently use exact sciences and which percentage do you think could advance to with pfizer >> yeah, so, with a $100 million quarter last quarter, that still only represents about 3% market share. our goal is to this year achieve between 900,000 and 920,000 people screened. our goal over the long term is to have over 10 million people a year screened with cologuard so we can solve this problem. and we think that pfizer is the perfect partner to help us achieve this goal of working on

cancer eradication >> all right, so kevin, what is the split for a pfizer rep or for pfizer, between exact sciences and this? and was pfizer ever interested in taking an equity investment in exact sciences? >> well, we won't talk about the details of the potential for the relationship, but here's basically how this works we agreed on a baseline for each of the next three years, and then pfizer splits the gross profits over that baseline on a 50/50 basis with our team. so, we still, as our team has to deliver tremendous growth and collaborating with the pfizer team, we think that we can do so much more together. >> all right, well -- >> and both sides will benefit from that, jim >> okay. so, i applied and just got the pack about, let's say two months ago. i haven't had a chance to use it they called me last night on my cell phone and they offered me a

$25 reduction, a gift certificate on it. and then i said to myself, geez, why would they have to do that if the business is so good >> well, jim, your life is really important to us, and we want you to return your sample so we can make sure you get screened we've been chasing after you for a long time now, jim get that sample in >> okay. >> and this is one of the things that we do, you know, provide a way to get certain people who otherwise wouldn't get screened to get screened. we're creative about that. >> okay. now, that last quarter was, by all accounts a disappointing quarter. i've got the research in front of me, just what they say, you know, william blair calls it a disappointing quarter. what happened? because you have a lot of good commercials, a lot of people getting brand name recognition and was it -- was wall street's perception of a slowdown one of the reasons why you wanted to do the pfizer deal? >> the answer to that question

is absolutely no we were up 70% year over year, and in a high-growth company, there are times when there's slight variations in terms of what expectations are. we try to look at this over the long haul. and we know that our team is driving tremendous growth in awareness. we think that pfizer can be a real game-changer over the duration of this agreement so we don't look at this from one-quarter perspective. we're trying to look at this over a period of five or ten years and how can we change this significant public health problem. >> one last question, kevin. you guys are doing a lot of great stuff that we don't talk about. what else do you have in the pipeline, diagnostically, that we should be looking for >> well, one thing that we have that we're working on, we released data showing the ability to detect 95% of liver cancers, which is the number two cancer killer globally from a

simple blood draw. that could be a game-changer, because there's no good way to detect liver cancer noninvasively. and we're committed to rolling out additional products, beyond the liver cancer test, through our partnership with the mayo clinic we're really excited about the ability to detect cancer from simple blood draws. >> boy, that would be just so fantastic. anyway, congratulations on the pfizer partnership kevin conroy, chairman and ceo of exact sciences. good to see you, sir. >> hey, thanks, jim. >> absolutely. okay, look, big run. pfizer is a fabulous endorsement. pfizer sales force, best there is "mad money" back after the break. before you can achieve a higher standard of craftsmanship, you need a higher standard of craftsman. see for yourself at the lexus golden opportunity sales event. get 2.9% financing on the

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tripadvisor. visit tripadvisor.com >> announcer: "lightning round" sponsored by td ameritrade >> it is time! it's time for the lightning round! >> buy, buy, buy >> sell, sell, sell, sell! >> and then the lightning round's over are you ready? let's start with judy in indiana. judy >> caller: hi, jim thank you so much for all you do for us little investors. >> you're quite welcome.

>> caller: i have a question today regarding xpo logistics. >> yep, xpo. in the seminar, i did this webinar with mark chakin today he was so bullish. i wish the club had not sold it, but had a big game yes. this is brad jacobs. he's doing fantastic >> buy, buy, buy >> let's go to charles in virginia charles! >> caller: jim, greetings from clarkson, virginia, located on the amazing carr lake. >> there you go. >> caller: i'm calling about arcadia pharmaceuticals -- >> i used to have tremendous hope on it i no longer feel it's the way to go, which is the biotech i'm recommending, it is amgen! amgn, that's the cheap one david in pennsylvania! >> caller: boo-yah, jim. how are you? >> good, david how about you? >> caller: good, thanks. i'm calling about dropbox. >> i like dropbox! i think the sellers are all wrong. i like the model throw in spotify is another one i like both of them richard in virginia! richard! >> caller: hi, jim, how are you

doing? >> i'm good, richard how about you? >> caller: good. hey, question. what's your view of ford's value stock? >> i think it's safe, but i like up side. i don't see up side there. i would rather own a bond. lauren in georgia! lauren >> caller: hey, jim, boo-yah >> boo-yah. >> caller: i'm a millennial and i'm new to the market. tell me about avalera. >> just a little down about the millennial situation if you're going for tax, intuit. that's the only one, millennial or not okay, millennials, here's your do and that is the "lightning round" >> announcer: the "lightning round" is sponsored by td ameritrade td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell?

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♪ this is what happens when you work to change things. and first they think you're crazy. then they fight you. and then all of a sudden, you change the world. >> i just finished the best business book since phil knight's incredible autobiography. this is "bad bloods" about the alenelled blood diagnostic company and its charismatic founder elizabeth holmes it reads like a novel about arcadia and tragedy by the people who used it as a vice i promise you that you will hate almost everyone connected with this company and will think they belong in jail after you read

this remarkable book, written by the pulitzer prize-winning reporter from the "wall street journal. that's why i was thrilled that he dropped by the set to talk about his riveting expose that you should read between now and labor day. take a look. john, anyone who read "bad blood: secrets and lies and the silicon valley start-up," can they still believe she is anything but crazy >> well, i think people earn the right to, you know, ask and question what's going on in her mind and what has been going on in her mind for 15 years i like to say that this is different from a bernie madoff type of fraud in that she dropped out of stanford really wanting to be an entrepreneur and her idol was steve jobs, and she idolized apple and really wanted to replicate that success story. and i don't believe that she dropped out with this notion that she was going to pull a long con and defraud investors

but unfortunately, over the years, she ran into setbacks with this vision of a blood testing device she was trying to pursue, and instead of admitting those setbacks and, you know, admitting to her investors where she was with the progress, she lied, and the lies got bigger and bigger, and eventually, the lies got so big, relative to reality, that it became a pretty massive fraud. >> well, john, there's two schemes of this book, and i just love it. one is how all these people were fooled but the other i want to put first. you have a quote of someone screaming at one point you heard people, this woman really hurt people, didn't she >> one of the most outrageous things about the theranos scandal is the fact that the company went live with its finger stick tests in walgreens stores in northern california and arizona five years ago, in the fall of 2013, and knew that the two people at the top, elizabeth holmes and her boyfriend, knew very well that the tests were unreliable. for one thing, the theranos

machine only handled seria hand of the tests, and most of them were done on third-party commercial analyzers that they had modified and hacked to adapt them to small samples. and one of the things they did was they diluted the small droplets of blood to make the volume bigger to accommodate these commercial machines, and that, of course, introduced all sorts of room for error. and in the end, this company had to void nearly a million blood test results. >> who knows what could have happened on june 15th, she was indicted by the federal government. and when i read the book, i felt that you could make a very compelling case right from the book that she did commit fraud and if you think fraud should lead to jail time, that she should be in jail. is that a reasonable presumption? >> i mean, i think this did metastasize into a fraud, especially once she and sunny bolwani, her boyfriend and number two at the company, made

the decision to go live with the finger stick tests in the fall of 2013. aside from endangering the public health, which they did by doing that, the key thing to remember about that decision is the company was running out of money then, and so, by going live with the technology, they were able to solicit new funding to go to people like rupert murdoch, who, by the way, owns my newspaper. >> right. >> and other investors, such as the walton hairs, and say to them, look, obviously, we're for real, obviously, i've succeeded in inventing what i've told you i've invented because we've gone live with the technology we're offering these finger stick blood tests in stores in two states so, obviously, it must be real and that's how she was able to raise the last $700 million in funding, is by using the fact that they had gone live in the stores to get more money. >> well, there's another element through the book that i love, this insular nature of what basically is a stanford contingent and you've got some, i regard, genuine villains, including people i revered -- george

schultz is a villain in this story! david boies, the attorney, is a villain in this story! i have to tell you, general mattis is a villain in this story! >> well, these are people -- two of them, mattis and schultz, were on the board of theranos. and i agree with you, they don't come off looking good in the story. i don't think they realized that theranos was doing most of the blood tests on these hacked commercial machines. in fact, i've seen documentation recently from the s.e.c. inquiry that pretty much shows they had no idea. and so, she was lying to her board as well. >> okay. >> i believe even david boies, whose associates certainly don't come off looking good in the book after what they did with tyler schultz, george schultz's grandson, who they ambushed at one point in his own grandfather's house -- even david boies i don't think knew that out of 250 blood tests on the menu, you had more than 240 that were being done on hacked commercial analyzers.

>> okay, well, that's -- we're going to give them that, but i don't know what to give to mr. bird, who at that point was running safeway. so desperate for growth. to walgreens, fearful that cvs was going to get this. >> right. >> blinders in these people! major business people. >> right one of the most incredible parts of this story is that walgreens actually hired a laboratory specialist, a consultant, and brought him in house in 2010 and 2011, a guy by the name of kevin hunter and he was hired to look after their interests and to kick the tires and to do diligence on theranos, which he proceeded to do he went out to palo alto several times to see the company's headquarters, meet with sunny and elizabeth. he's also in these video conference calls they had every week and he started smelling a rat. in late 2010 and he tried to alert walgreens to the fact that this, you know, could become a major fiasco. and the executives at walgreens just ignored him they were so afraid that

theranos would turn around and strike a deal with their rival, their arch rival, cvs, that they just ignored their own in-house consultant. >> okay, now, there's an element of jonestown here. when i was a reporter, i covered jonestown, and the people that drank the kool-aid for the most part were not that educated and worldly. how could these con artists convince so many brilliant people so many. is it the plaques? is it the black shirt? is it the deep voice is it the steve jobs i mean, these were -- these are brilliant thinkers and they were all conned >> right and i think the answer to in is she's a very smart woman, very charismatic. one aspect of her is that she really did believe in her vision she really did believe that create this machine that would be able to run every test known to man off just a pinprick of blood, that that would really be good for society. >> right. >> and that it would do good

and so, i think she has this condition called moral -- sorry, noble cause corruption, which is that she ultimately believed that what she was going to achieve once she got there was going to be a good thing for humanity, and therefore, every lie and every corner she cut along the way was justified. >> well, you know, one of the things that i think is astounding is this puppeteer, sunny! seemed like people didn't even know who he was until you wrote the book. >> right i mean, if you try to look him up on the web, you can't even find a photo of him. >> it's incredible. >> i think he's had the internet scrubbed but to people who had been at theranos from the beginning, and there are a few employees who did manage to escape the massive purges that went on there all the time, they knew that he was her longtime boyfriend they essentially started living together in 2005 in a condo he owned in palo alto for the first five years or so of the company, he was behind the scenes he didn't actually work there.

and then in 2009, he joins and at that point, this culture of fear and paranoia -- >> set in. >> -- constant turnover, all that goes into overdrive and from that point forward, they really run this company as a couple, and they perpetrate this fraud as a couple. >> all right, one last question. what is her next or last act and is black the new orange? could this woman end up in prison >> well, she's facing 11 counts of wire fraud. the indictment by the u.s. attorney's office of san francisco describes two schemes, one to defraud investors of more than $700 million, and the other to defraud doctors and patients and make them believe they were using accurate and innovative technology and you know, the potential sentence is, if she's convicted by a jury, is 20 years behind bars recently, the prosecution has handed over all the evidence as part of the discovery in the

criminal case, and it's contained in a 2-terabyte hard drive. so, i mean, that's more storage than you have on your average computer that you buy nowadays so, that gives you -- >> not a nanotainer. bigger than that. >> much, much bigger. >> john carreyous, author of "bad blood: secrets and lies and the silicon valley." it read like a fast-paced novel. you must read this book. "mad money's" back after the break.

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>> welcome to the shark tank, where entrepreneurs seeking an investment will face these sharks. if they hear a great idea, they'll invest their own money or fight each other for a deal. this is "shark tank." ♪ of a 5,000-year-old invention. hello, sharks. my name is david patrick, and this is my business partner, zack fleishman, and we're here today seeking $100,000 in exchange for 5% of our company, shark wheel. this is the wheel,