tv Mad Money NBC January 14, 2016 3:00am-4:00am CST
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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. i promise to help you find it. "mad money" starts now. >> h h 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. my job is to educate and coach u through.h. tweet me @jimcramer. finally at long last we're seeing the wholesale capitulation. s&p plummeting 2.5%. nasdsd nose diving 3.4%. we're seeing real capitulation
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i'm saying for the first time since this decline began we're beginning to see the necessary ingredients that make a a ttom popoible. put simply we're at a moment where some of the biggest boxes of my checklist, some growth in china maybe, a statement from the fed d at it needs to thinknk twice about rate hikes because of the newfound weakness in the economy or a stabilization in oil were to occur then we could have a real oversold rally on our hands of descent proportions. we're the most oversold we have been in ages and the indices about bulls and bears show a remarkable increase in bears. the most since november 2011. i admit there's very little to like about this market but after today you did some amazing -- you saw some amazing carnage today. and the fastest growing techs were slaughtered. fang got taken out and it was
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no it was machine gun. as i said the other night that box has to be checked before we can bottom and after a couple of days like today i have to wonder, boom, it hahn been checked. after hours bashing of go pro. that stock had already been down so much. who would think it would go down again but we can and will go lower from here but it's almost impossible to nail the bottom which is why my charitable trust came off the sidelines and bought some stocks of excellent companies with great fundamentals and good yields. if you try to wait for the perfect moment you'll be too late as nobel ever goes off signalinina bottom. you're never going to hear that sound. all that said i recognize that this is a truly horrific environment where almost nothing works. it's brutal out there. let's consider the ridiculous case of the stock frfr general motors. ats sober reminder of how difficult it can be to speculate
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stock right now. gmgmit the trifecta. it raised it's earnings estimates all the way up to 525. it yields 5%. the nominal return versus treasuries or corporate bond with descent protection from down side with that yield. it augmented it's buy back tacking on $4 billion to its already bountiful $5 billion commitment. what happens to the stock? after being up more than $1.5 in premarket trading gm spent part of the day down. the stock closed up just 19 cents, that's insane. you dream all your life for a company that announces such fabulous news. especially a stock down 23% from where it was when things aren't nearly as good as now. gm is stand the out. gm is doing much better than they are. we hear all the time that the stock market is expensive. you hear it. i hear it but general motors
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that's less than half the average stock however it's growth is much better than many companies in the s&p 500. none of that matters. the action is the absolute definition of what happens in a bear market. the one for autos let's say it's been going for a couple of years now and it's worth investing quarterly or not investing.. gm is reminded that even perfect stock with perfect opportunities just aren't working right now. how about if things aren't perfect. let's talk about the horrendous se of csx. here's a stock of a very well run railroad company that traded $35 a year and were indeed were severely disappointing. it gapped higher. what was that saying? i think people figured all right. what the heck. it's down so much. we didn't need to hear what the
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it's just time. you have to buy it. the decline is baked in but then there was intense buyers remorse. it said that 2016 will be a hard year because of low commodity prices a strong dollar and might have caused an energy market transition. i think the first two are cyclical meaning they can change. prices can go up again one day but i don't see how until china gets up and going the fact is unless the fed comesesut and says in light of the turmoil and declining commodities we cannot get a timetable for the next rate hike. it must be data dependent and then the dollar otherwise will continue to go higher. playing havoc and making exports auch more attractive. that's what csx x facing. a freight recession. but it's the third negative. the energy market transition is truly devastating.
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most important cargo, coal. even though it still generates 34% of the power from the country. it's being replalad rapidly by natural gas and that will only accelerate if hillary clinton takes the white house. good for your lungs, bad for the railroad stocks. plus the export market for coal is declining quickly. falling precipitously, why? steal industry unraveling in front of our eyes. last year at this time they predicted double digit earnings gains for 2015. now the company is predicting an actual decline. revenues fell a staggering 13% this past quarter. cxs likes to break down revenues all for comparisons versus a year ago. but dem cals, domestic goal, metals, phosphates are all unfavorable.
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only neutral. that's an incredible decline. >> no wonder management said this economy is indeed in a recession for freight. and i think it only gets worse if theheed keeps tightening. no way autos will be better taking that category out of it. i'm of a mind to put the whole federal reserve in the wall of shame if somebody doesn't come out and say we'll be data dependent. don't worry. we don't like what happened either. we see it. that's how the stock fell more than 5% today. one point down. it's including the airlines. here's the bottom line. if they have a descent rally while the worst one with the
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here. however we also have to be disciplined and because we're seeing the first real signs of capitulation a bottom can be worse than you think. joel in iowa, joel. >> with oil going down is etp a buy, sell or hold? >> subscribers to action owners plus.com we spent a quarter of the time talking about etp. the company can cover the dividend but this is a very unsafenvironment. anything can happen and as r rty brazililold us on friday thehe author of the domino effect this is the worst oil market in years so they can cover it but will they? after kinder morgan, i don't know. i think they will but i don't know. robert in pennsylvania, robert. >> hey, jim. i wanted to ask k u your opinion on valeant. >> i have so many problems why do i have to go down the food chain? that's why you have to think
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of the major farmers that i like. maybe in the 70 with the cash flow but we're talking about major fabulous american pharmaceutical companies going down. st crashing. what do we need with valeant. don. >> cramer, aloha. >> howowou doing man. >> a great year, 54 to 94. today got slammed 87 i know the aerospace and flight systems. where do we stand with defense systems. >> this is a great call. i'm of two minds of f is. a real theme for the show. there is no doubt in my mind that orb at the atk is doing better than any company that i deal with. the defense sector and number one sector in the stock market. second, it doesn't matter. all stocks are going down right now but it won't always be like that and we'll be talking positive about oa.
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don't make sense but you have to respect the bear. at least for now. and then wait for that oversold bounce because of the negativity and because of the oscillator that shows how oversold we are. "mad money" tonight. u.s. stock is partially dictated by the weakness in china. so how will it impact you at home? i'll give you the whole skinny. plus here's an interesting one. match group. weweaven't talked about t . it's up 60% since ipo in 2013 but you know what, maybe you don't know it. i'll reveal it. stay with cramer. >> don't miss a second of "mad money." follow @jimcramer on twitterer tweet cramer, #mad tweets. madmoney@cnbc.com. it's 1-80-743-cnbc.
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driving u.s. equities you need to know how we got into this situation in the first place. it's not talked about. two years ago nobody cared about the shanghai composite. that t tng you can be forgiviv for assuming it's one of the complicated items that nobody ever orders but it's no laughing matter now. this foreign index has become along with oil, the tail that wags the dog of the u.s. stock market. how did we get to this point. how did this happen? take a look at the chart of the shanghai composite from 2010 through 2013. you can see that for years while u.s. stocks rebounded from the great recession the chinese market was stuck in a terrible rut. declining from 3100 to 2100. the reason, china, well, 2010 was the year when after decades of explosive growth china's economy peaked with it's gdp from 12% to 8% at the beginning of 2014. so the market anticipated that.
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was entirely rational. two years ago it was easy to believe that the long march higher had finally come to an end. at least for the stock market. but then something big changed. in april of 2014 the communityist party announced the stock connect program which went into effect in november of 2014. this connected markets in mainland china with the hong kong exchange. making them more accessible to investors around the world. even though the chinese economy was accelerating it was a wash in foreign money. at the same time, the ruling party decided to create new regulations that would encourage ordinary retail investors to come back. but they also did very irresponsible things. allowing people to open multiple accounts. that truly accelerated it. by the time we got to march of last year when the composite was climbing, outstanding margin loans were at nearly
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that's up just 40% from nearly it was an explosion and people buying stocks would borrow money. as the shanghai composite climbed higher so did the number of brokerage accounts that rose from 70 million up to 181 million in 2014 with another 56 million new accounts being opened on top of that in the first half of last year with many people routinely opening now here's the thing about creating financial pollty in a regime like china. whatever they wish for they can make it happen. unfortunately it has horrific side effects to the point where you might have been better off doing nothing. in 2014 they decided they wanted more people to participate in the stock market. they got their wish all right but now it's blowing up in their face. or if you want a real life one as opposed to a fictional one it's a lot like if you study
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it's a great leap forward. he wanted to turn china into a huge steal producer. they tossed the metal into backyard furnace. meanwhile none of the farmers had any tools to grow food with because they all were down. >> i'm not saying the interventions in the stock market are on the same scale as the leap forward but the rule with big economic interventions is that the negative unintended consequences plan to outweigh the positives. put it all together, the influx of, the rising new accounts and then a genuine bubble. once they opened up in november
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the june peak. and remember all of this time its accelerating. the product of juice demand and had nothing to do with fundamentals. a lot of the investors wanted to own stocks because they saw you going higher. their own version of powerball. so when the shanghai composite peaked june 12th of last year continuing to get crushed last summer they all bolted for the xs s sof course the commununt party steps ininrying to stem or slow the sell off. their efforts range from the legitimate cutting interest rates to the extreme like the government directly buying stocks as they do almost every night now and suspending ipos and to be fair these effortsts work for awhile. shanghai composite rallied 16% in the fourth quarter of last year and these were all government methods to prop up the stocks. i've not heard of any real
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individuals and institutions. when 2016 rolled around the party decided to extend it's heavy handed efforts and play the circuit breakers like we have that would stop trading on a major decline. of course they have to be suspended to because they kept getting tripped like last thursday and now the shanghai composite is down 16.6% since the beginning of january. 16.6. a lot more than we are. look i think the chinese economists are learning as they go. this is a young market. they'll probably get better at running it but the point i'm trying to make is the chinese stock market is not representative. the whole boom and bust cycle has been artificial from the start and the whole upside move from the better beginning might need to be repealed. where does that leave us now. shanghai composite felelbelow the line in the sand and 2478
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cost stock connect program lead to that huge innux of foreign money that i'm talking about. that's the next line. personally i think chinese market probably needs to erase all of the gains since the bubble began in 2014 much like the tech bubble 16 years ago which means it might have to go all the way down. something that will be hastened if they let it fall to their levels. at this point below 3,000, the market is now cheaper than the dow or the s&p 500 or the nasdaq not to mention the ftse in hon don and stoxx 600 in europe. it's cheaper now. if the shanghai composite goes below it would be selling at 1 times earnings. that's despite the fact that even if china's economy is slowing worse than we thought, say 3% and not the 5 or 6% there
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pick them. so here's the bottom line. if you think the shang high composite needs to return to the level that it was then your target is 2500 down about 15% but if you think the whole rally needs a 28% decline coming. there's still a lot of weak handed shareholders that need to be blowing out before we get a bottom. at all times i prefer our market to theirs even if it comes down further. if their market goes lower our market is going to go lower too. in tandem with theirs. bar a spike from the oil or work from the fed that it's stepping up it's four rate hike strategy for 2016. if you call that a strategy. much more mad ahead. has the market met it's match with match group? i'm evaluating this red hot company. then one of the best performing players in bio tech last year.
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speculative stocks in a different environment. that some might describe as down right hostile. no matter how exciting a story might be if it's not airtight this market won't touch it with a ten foot pole. if gm can hit the trifecta, boost earnings, raise dividends and increase buy backs and tread water we have every reason to be gun shy. people are fearful here and they're afraid. in a bear market the negatives outweigh the positives. even if it would have been the other way around which brings me to a really intriguing story called match group. that's the number one online dating company that came public this past november. you might know these guys from their flag ship match.com or okay cupid or of course tinder which has taken the younger generation by storm. match might be the perfect example of how a stock can get derailed and have nothing to do with the fundamental of the company.
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terrifying of owning even some what risky stocks i bet their stock would be on fire here and i would certainly be recommending them. who doesn't want their hands on the company that owns tinder? but in this market what might have been a positive has become a negative. people don't fret about whether match can monitize. they wonder if the plan will work. they even fear that the competition could displace match and it's many subsidiary brands which would make it much less valuable. now in a less doom and gloom oriented market we'd be imagining the incredible growth opportunity. total addressable market. huge that they might represent if they get it right. after all this app is the future of dating although maybe dating they tell me is too strong of a word. this kind of thing makes me feel
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a booty call facile at a to? have my fingers crossed my kids aren't on it. maybe they're just hooking up which means they hook up for a nice dinner and netflix. but back to the real point here. in a bullish or even a neutral stock market i would say you know what, i might feel pretty good about that. however this market is far from neutral. match came public last november at $12 a share. soared 20% on the first day of trading. since then it's come right back down to 13 and change. today as traders and investors just leave a mess. and it's come downespite the fact that the vast majority of analalts are overwhelmingly
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the company had some 59 million monthly active users whohoelong to subscription based company. i mean this company could be gigantic on top of that match was spun off by barry dillers iac interactive and his spin off have a long track record of making you a great deal of money. one of my favorites is up 200% since it spun off in 2005. it's live nation more than doubled since it merged with ticket master in 2010. if match followswsn their footsteps it could be a long-term winner. i think it could happen again. plus match has a proven track record of making smart acquisitions which has left the company with a diverse portfolio including plenty of fish in canada.
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player in the industry with a market of 511 million single people with internet connections. it's not like online dating is something people are embarrassed about anymore. in north america a third of all dates relationships and even marriages now begin with this kind of dating product. i was just getting used to zillow. even though the bulk of match's users are more interested in hooking up than starting a relationship they still leave e harmony in the dust when it comes to match making. they lead to 2 million in it's whole history. they produced them over the last four years. don't forget the rise of mobile changed the game here entirely with a new crowd of younger uses that flock to nder. bank of america, bmo barclays all rush to recommend the stock with overweights or buy ratings.
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bullish notes were coming out roughly a month ago goldman sachs ruled out a sell rating: now i have givenenhe case. the fact that match has seen nice sales up more than 90% last year. the araising growth opportunity has over 9.5 million daily active users. and perhaps by offering a higher quality subscriptiti version like tinder plus. a service ten minutes ago and already has a half million subscribers or maybe they can advertising and make a fortune. however the reason i'm not founding the table is there is a bear case. any bear case is terrible right now. seems to carry a lot of weight. goldman poinin out that the enormous scale and much of the revenue growth they look impressive. only 4 million of them came from
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it's organic growth. the point goldman hammers home though is that we don't know if match can monetize it's user base as well as they're hoping. it's much easier to add free users than paid subscribers and in particular gogoman worries that match won't be able to monetize tinder. at the end of the day we don't know how they're going to make it possible. it's goingo be trial and erroror and they f fr the process will be costly and ineffective and in this market that will be deadly. i actually finthe bull mark much more persuasive. especially with match trading at less than 20 times e enings. 15% growth rate. but this is the point of the piece. it doesn't matter. even with an attractive stock. here's the bottom line. no matter how much you might want to own match in order to get in on the tinder action and this is one of the best ipos.
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risky to sculate. as long as you rececnize to ways go lower. the market stops being. how about andy in california. >> my question is with the recent downturn the tech sector is it still buy? >> now here's what we are gogog to do. have been weighing in and talking about it i want to give you two answers. fundndentals good at sales force? yes. they are tererfic. does that mean anything right now? no. it's an expensive stock. it comes down. we need the environment to change. the fed can change. china can get some growth. we get a clarity on what t on what the earnings are during this earnings period and we're
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but the fundentals are good. therefore e ng-term it has to be good. joe in new jersey, joe. >> hello cramer. i loved your show and thanks for all that you do for us. >> thank you. >> i have e en considering buying paypal. there's been talk of google taking them over. and they have earnings with a large market cap. >> we think this is a company with a great future but we're not buying on a take over basis. in this market that is completely the wrong thing to do. buy it because you like the fundamentals a we like the fundamentals of paypal. if it weren't such a hostile market i would be getting some match hand over fist but what i'm trying to do by using this very sexy name is show you that it doesn't matter. much more mad money ahead.
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balance and the all powerful drug approval process but is the way to play it the guys doing the testing? you're about 246 times as likely to get struck by lightning than win the powerball. good thing i'm lucky. i'll tell you what i'll do with my winners. >> a hump day edition of the lightning round with cramer.ut unlike ordinary diapers, pampers to stay up to so your baby can sleep wishing you love, sleep and play.
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>> in this unforgiving market what kind of stocks might be worth buying into weakness. how about something like quintiles transnational holdings. the number one contract research organization that helps drug companies manage their clinical trials. pecially the late stage trials that they spent so much money on. here's a definition of the growth play. no matter how weak the economy gets people still buy medicine and thth'll plow billions into bringing new drugs to market. that's why the last time in late october they had a bigger earnings beat and raised the guidance. it's down from $80 in late july to 63 and change today. some of that is because of the whole drug pricing fire storm but i think that's a smoke screen because it really doesn't hurt quintiles. a lot is because the stock market is hideous.
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nce the beginning of january. so let's chehe in with the ceo company is doing and where it is headed. welcome back to mad money. this is a a y where a lot of people feel it crashed. it just went down big. does that mean that we should be thinking that quintlies a a quarter or two from now will not get a lot of new work because the bio tech industry is not going to be funded as well. there's been 74 billion dollars of fds put into bio tech companies and that fund needs to come into clinicalalevelopment. if you think about it, these companies really aren't worth much unless their products are in the clinic so for companies like us we expect to see that $74 billion of funding spent.
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then? is this company in phase three? we're going to see their drugs? when i see the big pharma companies they are not spending as much money on testing. so they're doing partnerships with quintiles. >> if you lolk last year we had 45 new drug approvals and you lookokt that versus the year before it was 41. most new drug approvals in the united states since 1996 so for us that means that innovative drug development i ialive. you talked about the tremendous science that we have driving things like immunotherapies and it's hard. you think about oil every day and issues that companies have in different sectors but in our market we have tremendous
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science well and have innovative drugs coming and because of that we're seeing an attractive approval environment and because of that we think 2016 for a business like us can be a strong year. >> how do we balance that against the political backdrop? ? they all think that the drug companies make too much money. don't they have to spend a fortune to get a drug to be able to be so we can use it? >> well, it's a good question but really the way we see it, a lot of the focus right now is on pring and a lot of that pricing is around mature products but companies in our industry are largely valued on the innovative drugs in their pipeline being developed now. as long as the country stays interested in innovative drug
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the patients do and patient advocates do there's a tremendous opppptunity for this industry. >> one of the great things there's over 10,000 investors meeting companies out here that are registeredednd thousands more waund of the great things is that you meet companies with new mechanisms and new rare diseases being targeted and i think if we just keep on this path with the great science we will continue to have more drug velopment and that will mean companies like quintiles and pharmaceutical firms will continue to be very successful. >> very early y ey seem to be go and no go. are many drugs now succeeding where it mht have been a much worse ratio five years ago.
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statistics published on this other numbers around but let's say it's a number r ke that. what we are seeing given the targeted therapies, precision medicine, the quality of the products that are being developed right now is there's evidence that there's a higher rate of approval and more success and this is because we understand betetr than we ever have before the science and given that even a small movement from 7 to 8% or 7 to 8.5% is a really significant movement. now for us i ithe industry we're really about dealing with an aging society, a lot of scourges ke cancer that we have not had enough cures or really therapies for and i think this industry is laser focused on trying to take this understanding of the science and drive it into better cures. >> but you always feel like wait a second.
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companies lower thinking about the bigger picture. thank you so much, sir. all right. the boi techs crashed.d. it doesn't mean that it's the end of the world for what they're doing. "mad money" is back after this.re in the city, parking is hard to find. seems like everyone drives. and those who do should switch to geico because you could save hundreds on car insurance. ah, perfect. valet parking. hello! here's the keys. d, uh, go easy on my ride, mate. hm, wouldn't mind some of that beef wellington... to see how much you could save on car insurance, go to geico.com. ah! (car alarm sounds)
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holding. >> accounting issues, a slow down going on. that's the last thing you want to buy. bob in new y yk. >> >> with moderate growth and low interest rates -- >> i'm worried. not enough ratings. that's not going to be good for business. bill in florida, bill. >> my question for you is given that you have been recommending etp the last couple of months what is your position n the parent company? >> i think the parent company is not nearly as good as the drop town. the drop down offered a bigger distribution the last time around. there's a very tricky situation. let's go to kevin in virginia kevin. >> l lg-term investment. i use days like today to add to the position. i think that's righ won't always be this bad. one day we'll have an ipo market
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that's a good d ea. >> how are you doing? i was wondering about apu? >> this is propane retail. it's down in the dumps and that doesn't necessarily mean that it's going to be bad but i know when i see a 9% yield i do get suspicious. let's be carefef. how ababt kevin in california. >> booyah, jim. >> booyah. >> hey with getting that downgrade is nordic american a buy here. >> i don't know who sold that stock k day. i think they're making a mistake. peter in california, peter. >> jim i appreciate your market prediction. thanan so much and they were upgraded today are all sells because they won't stop producing commodities. if you want to be in that business go buy alcoa. at least they're splitting. kevin in indiana. >> hi jim, byah.
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alth. >> no. it's done. we don't want it. we want pharmaceuticals that have good yield. how about louis in pennsylvania, louis. >> jim, thanks for what you do. >> thank you. >> i'm calling about 100 shares of williams. >> david talks about it everer morning on squawk on the street. he is talking about the problems in closing that deal. i see the deal closing. i'm more worried about et. the company has been solid. i think that k ksey warren should come on "mad money" tomorrow. kelsey warren should come on and talk about what is happening in energy transfer etf and williams. and that's how we're going to get to the bottom of it. charles in new jersey, charles. >> teacher cramer. pleaue teach me why spectra energy symbol se paying a dividend of $1.48.
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dividend to $1.62. and is only $24 a share was the high of 38. >> because look if we have him right now as the ceo and we talk to him a lot, we know this company is doing well but it's cohort is bringing everything down. it'she etfs bringing it down. a fine company. at 7% i'm going to pound the table because they can pay that dividend even if it comes down further. >> what effects will the class action lawsuit against sun edison have for future earnings. >> she writes about this every day and all i can tell you is you don want to touch that thing. and that ladies and gentlemen is the conclusion of the lightning round. >> the lightning round is
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>> memo to eveveone in america that's salivating over winning the powerball l ttery. i'm sorry. no reason to bother playing. why not? because i'going to win and i'm t just saying that because i ve delusions of grandeur. although that's part of it. my guy spits out the finest tickets in the world. i have the highest confidence in my numbers but that's not saying much. given that i'm fated to win, what would do with the money?
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as an annuity. the power of compound interest. what albert einstein called the 8th wonder of the world. if by some miracle you win instead of me you should put your money to work and grab that compound. second y y only need to get rich once. after winning the lotto my goal would not be to try to make more money. i get to pay the taxes. that's a lot of money to go through. once you're that wealthy there's noeason to ever roll the dice again so i'd be very conservative. extremely consnsvative with my investments. because of the time lag i want to keep my powerball money short. i want to stay in fixed income that's short-term to avoid locking myself into the current low rates and take advantage of the possibility that rates wl
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with $750 million n the bank i would shy away from pretty much any stocks, really. except for the steady utility stocks. you only need to get rich once. never forget that. i do it among a diverse identified group of utility stocks but that's all the exposure i would ever want. fourth i would give most of my winnings away. write a check to a trust. do a great deal of homework. find deservivi charities. i would beg my kids to get involved so i can have the support i need and the nature of their views on everything from sustainability andndhe need to preserve the environment and health care and education. and they're critical for the next generation. you can always buy l lislation.
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my kids. powerball doesn't watch the show. i'm able to accumulate the wealth. i have been able to accumulate wealth. it's well in excess of whatever i imagined living during the bad d days of 1970 and 1 18. i don't want`to go back to those days but want to give up my edge fund at the end of 00. there was more to life than raising money. and finally best for last. i would buy an island. my own island. or i would take advantage of the strong dollar and buy a castle island where my wife's family is originally from or a villa in italy. why not? you only live once. or as the kids say, yolo. stick with cramer. even if she gets a stain she'll wear it for a week straight.
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downy to get it fresh and soft. and sincnci'm the one who has to do the laundry, i do what any expert dad would do. i let her play sheriff. i got 20 minutes to life. you are free to go. tide and downy. great on their own even better together. your baby's chubby little hand latches onto your finger so hard, it's like she's saying i love you. that's why aveeno's oat formula is designed for your baby's sensitive skin. aveeno .
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