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tv   Mad Money  NBC  September 12, 2012 3:00am-4:00am PDT

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>> with jessica alba and howie mandell will be here, too. keep the tweets coming. >> i'm jim cramer and welcome to my world. you need to get in the game. firms are going to go out of business and he is nuts! they're nuts. they know nothing. i always like to say there is a bull market somewhere. "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money." other people want to make friends. i'm trying to save you a little money. my job is not just to entertain you, but to educate you. so call me at 1-800-743-cnbc. funny thing happens when you buy best of breed. you tend to make lots of money when best of breed stocks get hit. and we saw that writ large in today's action when the dow gained 69 points. the nasdaq inched up 0.02%. exhibit a in the best of breed category is none other than the golden arches, mcdonald's.
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we all know of late that mcdonald's has stumbled. it's been down on its luck. after a phenomenal run from the bottom of 2008, including the best performance in the dow last year, mcdonald's hit a wall a few months ago. started doing the unthinkable. it disappointed. [ crying ] and reported some really bad numbers in all areas. and the analysts, they deserted it in droves. it didn't matter the company's had a history of riding right over these speed bumps. the combination of a brand-new ceo, don thompson, who replaced jim skinner, and perhaps mcdonald's had run out of tricks caused analysts to fret and brought extensive downgrades. >> sell, sell, sell! sell, sell, sell! sell, sell, sell! >> today we got numbers for this last month that surprised, but this time surprised to the upside. >> hallelujah! >> and now you've got a real good gain from the bottom, which was in the mid-80s, where the analysts, they all gave up hope. [ booing ] >> considering just how cheap the stock is, sells for about 15 times earnings, historically
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traded at 17.6 times earnings and is selling at a discount to yum! brands, which is not a better bred company than mcdonald's, yeah, there are some analysts who stuck with it. but the downgrades, they were thick and furious. mcdonald's is a 3% yielder, and i suspect a dividend boost could be in the works later this year. that's what best of breed companies do. they always have fabulous ceos waiting in the wings like thompson and skinner before him. seasoned pros totally ready for the helm. and if the firm screws up, misses, these execs right the course asap and you end up with a terrific buying opportunity whenever they get hammered and whenever fear is driving the sellers. mcdonald's is not alone. how about this coach? coach is best of breed. it's a best of breed handbag company and produced terrific returns over time traveling from $11 in 2009 to $80 this spring. and that's where it peaked. not that long after the company reported a terrible quarter, falling from $62 down to $51.
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yeah, that is an incredible dive. now, when i reported that miss, many analysts, again, lost faith in ceo lew frankfort and his excellent management team, despite the fact frankfort admitted he screwed up in a promotion, like mcdonald's. where thompson has assured you adjustments on the way. frankfort said he would right the course. sure enough, stock is right back to where it was before the miss. and it barely blinked when a competitor, burberry, reported a terrible number and said the luxury goods sector had turned nasty. how about federal express? this is one of those companies that everyone respects, right? remember, part of being best of breed. we all acknowledge products and services are the elite of its sector. fedex has been -- it's been best of breed ever since it created the category. last week, though, federal express slashed its earnings guidance in a brutal preannouncement and the stock
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quickly dropped to $85. it would have gone lower, but it is best of breed. i told you i thought this decline would be reversed quickly, because fed ex is the quintessential way to play anything good about global commerce. and it's a given that the company can handle these kinds of downturns and will adjust as it waits for the turn. it didn't take long. fed ex is now trading up more than a buck from where it was before preannounced downside. that's the kind of thing that happens when you own and buy on weakness the best of breed. how about celgene? last june they had to withdraw a drug application from europe. they dumped the stock, taking it down to $59 from the high 60s and 70s before that. to me, i told you, i came in here and said it was ludicrous. you had to give bob hugin, the ceo and his team the benefit of the doubt. over and over and over again since we started the show, hugin has come on and told you not to worry in these dips.
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it's business as usual at celgene. three months have passed. the stock has zoomed from $59 to $73. it is amazing to me how people give up on the best of breed companies whenever they have a glitch. we're watching that same thing happen right now with allergan, maker of botox and other medicines shareholders are penalizing because it didn't blow away the numbers this season. even the ceo just came on "mad money" a last week, last friday. he told you things are on track. the stock is down over seven points from its high. i don't know. that seems like an opportunity to me. you ought to bank with pyott. he hasn't let us down yet. he hasn't let us down at all. starbucks, here is another best of breed player who stumbled. while its problems are bigger than mcdonald's because of a heavy reliance on europe, i'm confident that when the ceo howard schultz tells you and me he is going to turn the darn thing around, who are we to question him? started the company, got it
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rolling, and then when he stepped aside, the business fell off a cliff. then he returned. because of the stumble starbucks has retreated to $50. it isn't going to turn on a dime. given that starbucks is best of breed, i think you ought to bet with them, not against this incredible manager. here is the bottom line. best of breed stocks like mcdonald's, starbucks, coach, federal express or celgene can go down, they go to the canvas, but they jump back. that's why allergan and starbucks are terrific here. best of breed stocks, well, yeah, they can sometimes miss a step on the runway, but they never go out of style. peter in new jersey. peter? >> caller: jim, how it is going? i live in new jersey and i'm talking from high in the sky, 45 rock. how is it going? >> pretty good. i wish you were over here with me. we could knock back a few at the assembly. what's up? >> caller: amr. i know you said coal, coal, coal
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last night. first of all, the net tangible book is so much lower -- so much higher than the market value and a third of the market book, a third of the book. are hedgies now buying? who is buying? they say -- >> gunners are buying, my friend. gunners. people who just say you know what? i got to take a shot. these are people who take shots. are they banking on a turn in the business? no. they're banking on a takeover. do i think there will be a takeover? i do not recommend stocks on a takeover basis if i think the fundamentals aren't that good. i'll tell you this. i think anr is oversold. i think it can go higher. but i don't like it. let's go to gloria in pennsylvania. gloria. >> caller: hi, jim. how are you? >> real good, gloria. how about you? >> caller: i'm doing well. polypore has been pretty volatile. what is your outlook on ppo? >> took my breath away, the reversal here, a weak second half and they come right back. i have always felt this is a
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breakup candidate. as a matter of fact, i have to redo some of the parts again because i think the stock is too cheap versus what it is worth on a breakup value. now these are called best of breed for a reason, all right? can they get knocked down? yes. do they get back up again? yes. allergan and starbucks are the two that i think will join the others that got off the canvas and came back and won the fight. "mad money" will be right back. >> coming up, tarp triumph? from the depths of the financial crisis, aig has risen to return to strength. as the government continues to wind down its share, the company has pulled in a profit for the taxpayer of over $15 billion to date. tonight, cramer's got an exclusive with the man behind the sale to hear more about its future. and later, eur-okay? the market is holding its breath ahead of headlines out of the eu. but while others watch, cramer is developing a plan for action. tonight he is using the
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technicals to help find a path to profit in an all new edition of "off the charts." plus, sorority stock? school is back in session, and tonight cramer is hitting the books to find out if student housing play campus crest communities should have a home in your portfolio when he talks with the ceo, just ahead. all coming up on "mad money." >> don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com, or give us a call at 1-800-743-cnbc.
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are you better off now than you were four years ago? maybe, maybe not. but you know what is remarkable? today the treasury sold 636 million shares of aig that the feds had to bail out four years ago, which means aig is a lot better off. and the most hated of all government bailouts is actually turning a big profit, with the government's stake down from down to 15.9%, capping a remarkable turn in which the treasury and the federal reserve put in 182 billion to save the insurer and recovered 197 billion already. the government still owns shares. playing with the house's money. they're exactly where i always tell you i want to be.
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they're in a position where they can't lose. and that's a heck of a lot of money as the government's cost basis in aig is $28.73. the stock went down to $3.45 at the end of the day. i'm not going to mince words. an incredibly successful asset disposal, and others including the banks as well as what is left under the treasury stewardship is tim massad, the assistant secretary for financial stability at the treasury department and the man behind the t.a.r.p. disposal progra mr. massad, welcome back to "mad money." >> jim, it's great to be back with you. >> every single one of these secondaries worked. every single one. >> yes. >> when you exercised the green shoe last night, you have 15.8%. >> right. >> what are you going to do with the remaining stock? can you dribble it out now because it's so small? >> sure, we could dribble it out, or we could do additional offerings. the main thing is we have come an incredible distance. we have now recovered every single dollar that the federal government, including the federal reserve, committed to prevent the collapse of aig in
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the dark days of the financial crisis. $180 billion were committed. we've now recovered all of that, plus a $15 billion gain. that's a credit to the overall strategy, the work of people in both the democratic and republican administration, as well as the hard work of the people of aig under bob benmosche, who have been very committed to restructuring the company and paying back the taxpayer. it's terrible that we ever had to do this. the federal government should never have been put in this position. and that's why we need to continue with financial reform. but this is a great day that we've managed to come this far in such a short time. >> tell me how it works. last week we heard that aig was going to buy back $5 billion of their own stock when they got a chance. it was in the context we thought that it might be a bigger buyback because they were selling a stake in aia and another insurer that they have. do you talk to benmosche about this stuff?
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>> well, we talk. but those decisions are entirely up to him. they decide how much they want to buy back. but, you know, we have to work with the company because we can only sell during certain legal windows. and that's what we've done. we've done it very methodically, and in a very disciplined fashion. you know, we've done four offers this year. so, again, this is incredible progress. we didn't think we could get this far this fast. but it's a great accomplishment. >> okay. how did you decide -- i've known you for a long time. so i know you know the securities market. but how did you decide that this market could indeed handle without skipping a beat, because it was a great trade. >> right. >> the additional stock, 630 million, a huge offering, the biggest we've seen in ages. >> right. >> how did you decide that the market could handle it? were you in touch with the buyers? how did this process work? >> we were very, very careful and disciplined about this. and we had advice from four underwriters who are leading the offering, as well as our own financial adviser. and we study this very closely. we looked at what we had done in the past, we tested it. and so we were very careful in going out.
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but, you know, there is always some risk to these sorts of things. so we're very, very pleased that it went so well. >> and the pricing was very good and the stock is trading up. >> now, you are subject of a great piece today i thought by andrew ross sorkin in "the new york times." i've got to bring it up. there is a critic, a fellow, barofsky. he is saying you're taking a loss in every share you sell. >> it's funny. if you go back to what he used to say, you really have to look at the treasury and the federal reserve investments all together. >> really? >> you can't just measure them in isolation. so he has kind of changed his tune now. but look, the important thing is we have recovered all the money plus a gain. and that's the key thing for people to focus on. and we still have more shares to sell which will add to that gain. again, it's a credit to the overall strategy. it's too bad we ever had to do this. the federal government should never have been put in this
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place, but we succeeded. >> tim, the last time you were on, you've been on a couple of times, you say look, we're not going to bury people who buy stock. gm was an offering. i thought the offer was inexpensive, but then the european downturn, an asian downturn. gm's fundamentals got hurt. it was not what we thought. you still have about 500 million shares left. the republicans say just dump the thing. you have been committed to not burying existing shareholders at gm. can you stick by that, even as, well, you don't want to have to play the market. you said you don't want to be a hedge fund here. >> sure. dumping the shares would never make sense. we've been very disciplined and always looking at how can we exit quickly, because the government is not a hedge fund, and it shouldn't be a long-term investor, and it shouldn't hold stakes in private companies. but we also have to maximize taxpayer returns. in the case of gm, let's remember also we didn't do this to make a profit.
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>> right. >> we did it to prevent a collapse of the auto industry, which would have had huge costs. and in that sense, it was extremely successful. the stock price has been lower than what it was when we took the company public even on a multiples basis, but the company is doing very, very well in north america. they've had some issues in europe, as has the whole industry. but they're working on those. and we've made it clear we will be patient. so we'll sell when we think the time is right. but i'm hopeful that we can continue to wind down all these programs as we have. we have already recovered almost 90% of all the t.a.r.p. dollars that were expended. >> there has to be some surprise factor about what happened with aig, because mr. benmosche was on our show in march. he said listen, i am confident that the government can make a profit of what, $5 to $10 billion, and at the time he said it, we were kind of chuckling because it seemed to be inconceivable. >> sure. >> but it worked. >> it did work.
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and again, that's a credit to his efforts and all the people at aig who have worked very hard to restructure the company, to de-risk the company and to pare it down, as well as to the overall strategy. again, it's because the government acted. >> right. >> with incredible speed and overwhelming force when confronted with the financial crisis. you know, we did the aig investment. we did the bank investments. there was a money fund guarantee. we did a whole range of actions, again, across both a republican and democratic administration. that's why the strategy was successful. that's why we've been able now to recover almost all the funds we expended under t.a.r.p. and when you look at all the interventions as a whole, t.a.r.p., what the treasury otherwise did, what the federal reserve did, it's likely that we will see a profit. >> all right, tim, on maria bartiromo's show earlier today,
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the aig ceo, mr. benmosche said he is hoping treasury will be out by mid 2013 and would look to the possibility of using cash for a dividend. one, would you let him pay a dividend now, and two, do you expect to be out by mid-2013? >> dividends are up to the company and its board, but i think, look, we'll continue to sell down our position. we've never wanted to be a long-term investor. we only have a small position now. so i'm confident that we can get out in the near future. >> all right. last question. people say, jim, how could you -- it's a sweetheart interview. how could you not mention the billions of fannie mae loss? that's not your bailiwick, right? >> no, i don't manage that but let me say this about that. that's turning around also. and if you look at what fannie mae and freddie mac are doing, you know, they are improving. we're past now the worst of the housing crisis. so i think we'll see a turnaround there as well. and again, if you look at it
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overall in terms of all of these actions that the federal government, including the federal reserve had to take, they're likely to result in a gain or at least very, very little cost. and that's really the story. it's, again, because we acted with overwhelming force and speed that this was successful. >> there were people who were saying listen, you played politics because of the election, you decided to beef up the offering because it's almost the election. you could have done a smaller one. i just need you to get a comment on that one. >> sure. we've done four offerings this year. if you look at the timing, you'll see why and when we did them. we did them when we had a legal window to sell because of the company's filings as well as when our prior lock-up expired. this one was bigger because we had now prior to this deal sold down our position enough that we could do a larger offering. investors wanted to see us really reduce our position. they wanted the larger size. and we tested that very
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carefully before we did it. and we pushed the underwriters very hard on whether they could get it done. but we got it done. not only, that we got it done at a great price. >> yes, you did. tim massad, thank you for what you did for your country. thank you for coming on at last notice. tim was a classmate of mine at law school. thank you so much for coming on the show. >> thank you. >> look, i want you to make money. i said to be in on a deal. this deal is done. it's good, and it's going higher. stay with cramer. >> coming up, eur-okay? the market's holding its breath ahead of headlines out of the eu. but while the others watch, cramer's developing a plan for action. tonight, he is using the technicals to help find a path to profit in an all new edition of "off the charts." and later, gold rush? wall street's been digging precious metals this year, causing many gold miners to shine. with the fed ready to print more money, could these plays continue to glitter?
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don't miss cramer's exclusive with the ceo of franco nevada. plus, sorority stock. school is back in session and cramer is hitting the books to find out if student housing play campus crest communities should have a home in your portfolio when he talks with the ceo just ahead. all coming up on "mad money." every year we pick a new city to explore. but thanks to hotwire, this year we got to take an extra trip. because they get us ridiculously low prices on really nice hotels and car rentals. so we hit boston in the spring-- even caught a game. and with the money we saved, we took a trip to san francisco. you see, hotwire checks the competitions' rates every day so they can guarantee their low prices. so, where to next? how about there? ♪ h-o-t-w-i-r-e... ♪ hotwire.com
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hordes of investors are waiting on action from the governments around the world. and tomorrow we get some major insight into the global economy's weakest link, europe. when the german supreme court rules on whether or not it's constitutional for germany to participate in the unified european bailout, hugely important decision, people. because without germany, this program simply can't succeed, and we will give back a lot of the gains. now you know i like to follow the euro as the single best read on the european mess. other than banco santander. you can do that through the fxc, the etf that measures the strength of the euro over the dollar. when the currency bottomed in july, it was a huge turning point for our stock market, particularly the international companies that do a ton of business in europe and the global banks that remain on the hook. that's why tonight ahead of this big german supreme court ruling that i cannot underemphasize, we're going off the charts to see where the euro might be headed and what we can do about it with the help of ed ponsi,
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my colleague at realmoney.com. first we need to figure out whether the euro is in bull mode or bear mode. take a look at this chart versus the dollar. ponce thinks this is a great-looking chart. as you can see thanks to the recent rally. the euro has finally broken out above its long-term downtrend, a downtrend that kept the currency pinned for over a year. it's also trading above its 200-day moving average for the first time this year. these are just gigantic indicators to people. put it all together and ponce believes you have a pretty darn bullish case for the euro to go higher. that doesn't mean you buy it right now, not right here. even though the euro has been breaking out, ponce thinks the rally is currently overextended. you can see it from the relative strength indicator, the rsi, a tool that measures directional momentum. at the bottom of the chart, this
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is the rsi. the euro rsi is overbought for the first time in over a year, which is the sign that it's strong, but it could be time for a pullback. when it goes up to this level, i usually expect it to pull back a little. and then you have to factor in german supreme court's decision tomorrow which is a black box. if it's bad, the euro will get crushed. even if it's good, we know the euro has had a big run so there might be a sell the news reaction, even good news that could take the euro lower. that's probably a reasonable scenario. so let's get this straight. based on the interpretation of the chart, ponce believes the euro is headed higher, but first might have to do a little pullback for a brief pit stop and that could be prompted by tomorrow's news out of germany. by the way, if and when the euro pulls back, ponce says buy it. here is another chart that helps illustrate how he would play the action if we get any mild euro weaknesses. these are giving you targets to enter. if europe comes down tomorrow or any other day, ponce will not be freaking out. he'll be looking for an entry point because he believes in the long-term power of this chart. specifically, he thinks the euro becomes buyable when it is
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trading at 1.26. 1.265. that's a two-cent decline from where it is right now. that may not seem like much to you but it's a significant move in the world of currency trading. why that level? because it represents the old ceiling of resistance, okay, the breakout ceiling of resistance that had been holding the euro down, remember, for over a year now. it's broken out above the ceiling. ponsi believes that that ceiling will now become the floor. if we get that pullback, as long as the euro doesn't dip below 1.2475, this is really important, guys, it's got to not go below that because ponsi has a stop loss situation. ponsi's stop loss level is he thinks it could rebound from anything other than that. and when it does rebound, he thinks it goes to 1.30. nobody is looking for that, nobody. so maybe it will. now i don't endorse currency trading here on "mad money." too risky for most of you. you want to play the euro
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directly, use the fxe, stop loss here, but otherwise this, the bottom line. as we head into tomorrow's big german supreme court ruling, based on the charts as interpreted by ponsi, the euro not only has upper momentum, it's actually overbought, meaning the euro could have gone up too far too fast because people are too excited about it all of a sudden. could you imagine that was even possible a few months ago when the average hedge fund knucklehead thought it was going to go through its 119 floor from back in july if it was going to survive at all? i realize this is a binary situation that hinges on the german court, but the action is signaling that they'll do the right thing. unimaginable six months ago. not only in the realm of possibility, but the odds-on event to happen. robert in north carolina. robert? >> caller: hey, jim. how you doing? >> real good, robert. how about you? >> caller: i'm doing fine. listen, i'm really close to retirement. as a matter of fact, the fiscal
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cliff is going to happen right near my birthday. i'm concerned about that coupled with what is going on in europe. i'm mostly in a domestic play in bonds. and i'm wondering whether a european play makes sense in light of what is going on this week in europe. >> we've just had a gigantic rally in the european market that almost nobody participated in. and i'm not going to recommend buying any european stocks now. i hope that -- look, you have to hope that there actually is a sell the news situation between the federal reserve and the german supreme court that will allow you to be in higher yielding dividends, dividend payers, which is what you need for your age at this stage of life. we've come a long way. it is so hd to believe, but the euro has moved up with alacrity. and depending on tomorrow's ruling, hey listen, this thing could go much higher. stay with cramer. coming up, gold rush? wall street's been digging precious metals this year, causing many gold miners to shine. with the fed ready to print more money, could these plays continue to glitter? don't miss cramer's exclusive
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with the ceo of franco nevada. and later, sorority stock? school's back in session. tonight cramer is hitting the books to find out if student housing play campus crest communities should have a home in your portfolio when he talks with the ceo just ahead, all coming up on "mad money." you know, ronny... folks who save hundreds of dollars by switching to geico sure are happy. and how happy are they jimmy? i'd say happier than a bodybuilder directing traffic. he does look happy. get happy. get geico. fifteen minutes could save you fifteen percent or more on car insurance. the falling leaves. the perfect inspiration for air wick's fall collection. when i smell that, i know fall is in the air.
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it is time for the "lightning round." cramer, you say the stock -- >> buy, buy, buy! sell, sell, sell! >> you play the sound -- [ buzzer ] -- and the "lightning round" is over. are you ready skee-daddy? i'm starting with rob in alaska. rob? >> caller: jim, a great big alaska-sized boo-yah to you, the biggest ever. >> done your way, robert. >> my ticker symbol is bgs. i bought that when you had them on the show in may. >> this is a combination of man o'war, seattle slew and secretariat, and i don't see it slowing down yet. sure wouldn't ask you to pull back when i took out 30 -- >> buy, buy, buy! >> thank you so much for bringing it to my attention when the stock was at 12. let's go to ryan in michigan. ryan? >> caller: hi, jim. my stock is hban, that's huntington bank. >> and i want you to stick with huntington bank. it's in a breakout mode. this is one we liked when they changed the management. we stuck with this through three and four and three and four. it's paying off and it's going >> buy, buy, buy!
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>> -- higher! tyler in pennsylvania, tyler? >> caller: hey, cramer, what's going on? >> i want to get my dad to be able to vote. what is up? >> caller: i'm looking for a dividend that can grow. how do you feel about boardwalk pipeline partners? >> boardwalk empire pipeline partners. i think it's very good. i remember when this came public. it has been a winner. and i continue to believe that this is one of the better ones out there. i got to tell you, some of them have been very, very weak. but this yield is 7.8%, and i like it. let's take another call. let's go to ryan in ohio, ryan? >> caller: boo-yah from the buckeye state. >> nice! >> caller: how are you doing? >> not bad. how about you? >> caller: pretty good. how is arena pharmaceuticals doing? >> love like the cincinnati bengals. i want you to sell -- >> sell, sell, sell! sell, sell, sell! >> people are going to hate me. on twitter @jimcramer. be my guest. pat in new york, pat?
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>> caller: hi, jim. genworth financial, gnw. what do you think of it and how high do you think it will go? >> i'm of two minds. one is they're my insurer, and i write them a check every year. what do i know? and the other's that i don't want to own the stock because there is another insurance company out there, an insurance company that was able to absorb over 600 million shares today and come out smelling like a rose. and i'm talking about "a," i'm talking about "i," and i'm talking about "g," aig. >> buy, buy, buy! >> and that's the insurer that is going to be i think my play for 2012. and that, ladies and gentlemen, is the conclusion of the "lightning round"! [ buzzer ] >> the "lightning round" is sponsored by td ameritrade. [ male announcer ] your mouth is cleanest after a dentist visit. ♪ but between check-ups, it goes through a lot. ♪ tartar builds and that feeling fades. with new listerine® ultraclean™,
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lately the price of gold has been on fire, which should be good news for regular viewers of "mad money" since i've been telling you constantly that you've got to own some gold. and i think it could have a lot more room to run as governments around the world race to base their currencies in a way to get the jams they're in off the table. however, when it comes to playing the precious metal you don't have a lot of options. etf that attracts the actual i always recommend the gld, the etf that attracts the actual commodity, but i also tell you to avoid the miners. one of the happy mediums is franco nevada. we just got a question on it the other day, fnv. it's a business that offers commodity operators up front in exchange for a share of cash flows down the road. 90% of the revenues come from
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precious metals, mostly gold. the other 10% includes oil and gas assets. franco nevada spun off from newmont mining in december of 2007. since that time it's actually outperformed the price of gold. plus it pays a dividend, and while it might seem meager at 1.15%, this could be an intriguing opportunity. i've got some questions as ever time we have trade away from the gld, it's been a big mistake. so let's talk to pierre lassonde, the chairman of the franco nevada corporation to learn more about his company and where he is headed. mr. lassonde, welcome to "mad money." >> thank you very much. it's a pleasure to be here. >> okay, now, you know my position is that i've always said that the gld is the best way, the etf. and that's because every time we have recommended a mining stock, something has gone wrong at agnico eagle, goldcorp, randgold. why is this company a hedge against those miners which have disappointed us so? >> well, first of all, i will
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correct you on the length of time that this company has been public. in fact, we invented the business model called the royalty companies in 1983. and we sold the company to newmont in 2001, and in that 19-year period that we were a public company, we gave the shareholders 36% per year compounded rate of return. we bought the company back when newmont decided to sell it back in 2008, and in the now almost five years that we've been back as a public company, we've averaged 30% per year compounded rate of return to the shareholders. which is far better than gold has ever done. so we say our company is a gold etf on steroids, and that's why you should own it. >> okay. i think that our viewers are conservative by nature. so i think what they would say is okay, if you have that much better return, you're taking on more risk.
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tell us about the risk so we're not blindsided. >> we're not taking actually any risk. if you look at our company, our business model, we have no capital costs. we have no operating costs. we have no reclamation costs. we are purely a royalty company. what we are taking on, why we are giving the shareholders an outside return is because of the optionality value that is embedded in every one of our projects. so when we purchase a royalty, for example, on a mine, the property may be 50 square miles, but the mine is only let's say half a square mile. but anything that is found on that 50 square mile accrues to franco nevada. and guess what. over the last 25 years, we've had incredible luck with many, many of those properties, discovering hundreds of millions of ounces of gold. barrick at goldstrike was a perfect example when we bought
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that royalty, there was only 500,000 ounces. today there is 50 million ounces of gold. that royalty that we paid $2 million has paid out over $800 million to our shareholders. that's the kind of return that we provide to the franco nevada shareholders. so it's not risk, it's optionality value that is embedded in our business model. >> okay. you made a gigantic deal august 20th. tell us how that will benefit shareholders of franco nevada. >> well, that's a beautiful deal. the cobre panama, where essentially we're going to get 100,000 ounces a year. we're going to pay $400 an ounce for those ounces. and the mine has currently a 35-year mine life. but that only uses less than half to the resource that is in place. so our view is that property is going to go on for well over 50 years. so think about it. our shareholders are going to
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get 100,000 ounces a year for which you pay $400 an ounce, and you're going to have that optionality for 50 years. we don't know what the gold price is going to do over the next 50 years. but i guarantee you at some point in time in those 50 years, it's going to be a lot higher than it is today. and not only are we going to get all our money back, but we're going to keep on providing shareholders more return. >> all right. mr. lassonde, the one thing that seemed out of whack with me is that you do have oil and gas assets. do you need those? >> well, you know, this company was started, as i said, like back in 1983. and back then we were a bit agnostic as to whether or not we were -- we own 100% gold or we would have other assets. and we were able to buy some very, very cheap oil and gas assets in the '90s when oil was like, you know, $10, $12 a barrel. and those assets keep on giving. so why sell them? i mean they've already returned
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like ten times their purchase price, and they have a 20-year life, again. so we keep them. >> wow. i got to tell you, you make a very convincing case that this is a better deal than the etf. i thank you so much for coming on the show, mr. pierre lassonde, chairman of franco nevada corporation. good to meet you, sir. >> thank you very much for having me. >> we had a question on it. i didn't know it. it's a very enlightening interview. it's difficult. i want you to go to the website, okay, if you're interested go to the website. they have all this stuff broken down. and i can see how people would think that this is an etf on steroids. stay with cramer. we put a week's worth of bad odors in a home. some aerosols may just mix with them. can febreze really remove them? we asked real people what they thought. take a deep breath for me. describe the smell. it's very pleasant. fresh. some kind of flower maybe? remove the blindfold... awww, oh yuck! i didn't smell any of that! febreze air effects doesn't mix,
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even in today's terrific action, we know we're running a real gauntlet this week. a german supreme court ruling coming down tomorrow and ben bernanke expected to pull a rabbit out of a hat on thursday. even in the worst case scenario there are some things that should keep on working regardless of what goes wrong, although they might get dinged a bit at first, and the most important are the dividend stocks with the notoriously b-i-g yields. we know rates on bonds and certificates of deposit are going to stay ridiculously low for years to come. if you're looking for yield, dividends the best game in town. that's why i wanted to talk to you about campus crest communities, ccg, a small reit that owns and manages student housing.
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think of it as the ultimate back to school play. campus crest sports a spectacular 5.8 yield, larger than any other student housing reit. i like it as demand should outstrip supply for years to come. campus crest was solid, 91% occupancy rate. it's real cheap on an asset basis. but there is concern. they have debt coming due over the next few years, and i'm worried about students paying off loans. is this 5.8% yield a fabulous dividend play, or maybe it's too risky for you? let's take a closer look with ted rollins, the co-founder and ceo of campus crest communities. mr. rollins, welcome to "mad money." thank you so much for coming on, ted. >> thank you. >> this is obviously a growth market. but i know having just dropped off two kids at college that there are a lot of people talking about not having enough money to go, people scaling back. you're in what -- you call them target tier 2 schools. why should we want to be levered to a cohort that is so worried
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about money right now? >> well, i think it's interesting. we've seen continued increases in enrollment. it's projected to increase continuing through another 2.3 million up through 2020. and even through the recession in 2008/2009, we still had an increase in enrollment. we still had an increase in tuition. so this is almost an indispensable thing if you're going to be out there in the workforce of tomorrow, you have to have a college education. i like to say it's the new high school education. >> okay. now occupancy rate 91%. if that's the case, can we see that go up over time? a lot of the real estate investment trusts we like have been 94%, 96% occupancy. >> keep in mind we have a very young portfolio. so the younger ones haven't stabilized. as they stabilize, our properties come into the mid-90s, even 100%. you can expect that to stabilize as the portfolio matures. >> okay, now, will that mean that we could see dividend increases as the portfolio matures? would that be, say, the business plan that you would expect us to see? >> i think as the business grows
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and we have more cash, we'll increase the dividend. for us, we are very focused on increasing cash and in growing the business. in fact, we grew our gross asset values since we went ipo in 2010, we've grown 82% in assets. we've grown roughly 46% in revenue and roughly 59% in noi. >> i went over your financials. a little more difficult for me to understand because you have interest rate swaps. is that because you have variable debt? >> if you look at our balance sheet, we're 36% leveraged. so a reasonable amount of leverage. we have a line of credit we use to finance operations and to grow the business. we don't own a lot -- we don't have a lot of that outstanding, but what we do have outstanding we swap so we manage our interest rate risk. >> some people feel that you have taken on a little more debt. that ratio seems to be pretty reasonable. >> it is squarely in where we like to operate, between 30 and
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40%. >> why target tier 2 schools? i'm thinking about university of arkansas, university of wyoming have not necessarily worked to your standards. >> well, the whole portfolio is opening this year. fayetteville and laramie are brand new. they're just opening. we give them two cycles to get up to speed. two academic years to get up to speed once they open. we feel great about those markets. >> okay. >> for us, it's growing that pipeline. >> all right. now, rising student debt. i read about it endlessly in the papers. even if it's indispensable, there are people who are defaulting. do they default on campus crest too? >> no and let me go back and hit your earlier question about tier 2 markets. 39% of the students in america go to those schools. and that's 47% of the undergraduate population. so that's where the kids are going to school, the bulk of the population. our average tuition is $8,000. >> $8,000? all right. so these are people that this is
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not make or break. >> that's right. >> people walking away. you have a very high rate of people not walking away from student loans at these schools? >> that's right. and i would also say this, jim, that if you look at our population, most parents are tending to go to the value in education. and that's where we are squarely playing. >> right. now you are projecting -- you're projecting the strong growth. but sometimes you have some versus the other guys construction risks. do i have to worry about your building when there is other players in your end, in your business, where you just live off the already done and not have any building risk? >> well, i think we all build. so all the three publics construct. i would tell you that our program is that we're vertically integrated enterprise. we own the development company. we own the general contractor. we own the supply companies. we own the whole valuation chain, and that really gives us a competitive advantage for two reasons. one is we control risk. two we control product quality and three we control the cost. we're about 15 to 20% less cost for that asset than somebody
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using a third party general. >> i feel because the chute it did not feel well. i feel good about what you're telling me. thank you so much, that's ted rollins, co-chairman and ceo of campus crest communities. we don't have many 6% yielders left. if you like the risk appetite here, this might be the one for you. stick with cramer. thank you so much. where do the world's most powerful ceos turn to be heard? >> we truly believe we should be great citizens of the community. >> you got to listen to the consumer and be responsive to the consumer. >> we are really fighting for the soul of american manufacturing. >> they turn to cramer. "mad money" at 6:00 and 11:00 eastern, only on cnbc. ♪ [ snoring ] [ male announcer ] introducing zzzquil sleep-aid. [ snoring ] [ snoring ] [ male announcer ] it's not for colds, it's not for pain, it's just for sleep. [ snoring ] [ male announcer ] because sleep is a beautiful thing.
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