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tv   Mad Money  NBC  January 14, 2016 3:00am-4:00am PST

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u through. tweet me @jimcramer. finally at long last we're seeing the wholesale capitulation. s&p plummeting 2.5%. nasdaq nose diving 3.4%. we're seeing real capitulation now. i'm saying for the first time since this decline began we're beginning to see the necessary ingredients that make a bottom possible. 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 that it needs to think 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
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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 just shot today. 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
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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 signaling a 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 from general motors. ats sober reminder of how difficult it can be to speculate and let alone invest in any stock right now. gm hit 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.
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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 sells it six times earnings. 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
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just aren't working right now. how about if things aren't perfect. let's talk about the horrendous case 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 company says. 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
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unless the fed comes out 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 much more attractive. that's what csx is facing. but it's the third negative. the energy market transition is truly devastating. a true secular decline involving a wholesale shift away from the most important cargo, coal. even though it still generates 34% of the power from the country. it's being replaced 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?
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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. phosphate and fertilizers were 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
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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 worst news flow can fall further we have to respect the bear 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
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anything can happen and as rusty brazil told us on friday the 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 you 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 about it. this is not even in the league 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. just crashing. what do we need with valeant. don. >> cramer, aloha. >> how you doing man.
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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 this. 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. sure a lot of these declines 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. we haven't talked about it. it's up 60% since ipo in 2013
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don't know it. i'll reveal it. stay with cramer. >> don't miss a second of "mad money." follow @jimcramer on twitter. tweet cramer, #mad tweets. send an e-mail to madmoney@cnbc.com. it's 1-80-743-cnbc. miss something, head to mad money.cnbc.com. your clever moves won't stop the cold and flu. but disinfecting with lysol can. because lysol wipes and spray are approved to kill more types of germs than clorox.
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>> so far we have been joined at the hip with the collapse in the stock market. if you want to understand how a communist stock market has become the most important force 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 thing you can be forgiven 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.
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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. in short, that earlier decline 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
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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 1.4 trillion. that's up just 40% from nearly three months before. 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 four and five accounts. now here's the thing about
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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. 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 history. 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
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>> 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 of 2014 more than doubling to 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.
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continuing to get crushed last summer they all bolted for the xs so of course the communist party steps in trying 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 efforts 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 concentrated buying by 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
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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 fell below the line in the sand and 2478 which is where the shanghai hong 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
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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 might be bargains but i wouldn't 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.
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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. i have the exclusive with the ceo. plus feeling lucky, join the crowd, powerball, i'll tell you what to do with your winnings but of course i'm getting them so you'll just have to learn by example. stick with cramer.color wants to help you keep on being you. nice'n easy. we only make the most real natural looking color. so even in revealing sunlight,
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try to keep the themes here day after day until things get a little clearer. last night i talked to you about the dilemma of owning 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.
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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. i mean, if people weren't 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.
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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 my age: what do we call tinder? 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
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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 down despite the fact that the vast majority of analysts are overwhelmingly positive on the stock. the company had some 59 million monthly active users who belong 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
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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 follows in 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. these guys are the dominant 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
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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 tinder. bank of america, bmo barclays all rush to recommend the stock with overweights or buy ratings. at the same time as all of the bullish notes were coming out roughly a month ago goldman sachs ruled out a sell rating: now i have given the 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.
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quality subscription version like tinder plus. a service ten minutes ago and already has a half million subscribers or maybe they can do 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 points out that the enormous scale and much of the revenue growth they look impressive. only 4 million of them came from match groups legacy platforms. 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 goldman 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.
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and they fear the process will be costly and ineffective and in this market that will be deadly. i actually find the bull mark much more persuasive. especially with match trading at less than 20 times earnings. 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. and for now i think it's too risky to speculate. as long as you recognize to always go lower. the market stops being. how about andy in california. >> my question is with the
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is it still a buy? >> now here's what we are going to do. have been weighing in and talking about it i want to give you two answers. until this clears up are the fundamentals good at sales force? yes. they are terrific. does that mean anything right now? no. it's an expensive stock. it comes down. we need the environment to change. the environment can 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 going to want to buy sales force but the fundamentals are good. therefore long-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 been considering buying paypal. there's been talk of google taking them over. and they have earnings with a
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>> 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 and 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. success in bio tech hangs in the 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
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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. especially the late stage trials that they spent so much money here's a definition of the growth play.
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gets people still buy medicine and they'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. that's how the name is down 6% since the beginning of january. so let's check in with the ceo and find out more about how his company is doing and where it is headed. welcome back to mad money. this is a day where a lot of people feel it crashed. it just went down big. does that mean that we should be thinking that quintlies a quarter or two from now will not
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going to be funded as well. there's been 74 billion dollars of funds put into bio tech companies and that fund needs to come into clinical development. 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. >> what will be the drivers 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 look last year we had 45 new drug approvals and you look at that versus the year before it was 41.
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united states since 1996 so for us that means that innovative drug development is alive. 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 science we really understand the science well and have innovative 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 ?
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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 pricing 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 development. as long as the regulators do and the patients do and patient advocates do there's a tremendous opportunity for this industry. >> one of the great things there's over 10,000 investors meeting companies out here that are registered and 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
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will continue to have more drug development and that will mean companies like quintiles and pharmaceutical firms will continue to be very successful. >> very early they seem to be go and no go. are many drugs now succeeding where it might have been a much worse ratio five years ago. >> there's all kinds of statistics published on this other numbers around but let's say it's a number like 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
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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 in the industry we're really about dealing with an aging society, a lot of scourges like 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. the guys want to crush the drug companies lower thinking about the bigger picture. thank you so much, sir. all right. the boi techs crashed. 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!
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it is time, it is time for the lightning round. and then the lightning round is over, are you ready? it's time for the lightning round. i'm going to start with jack in texas, jack. >> jim, booyah. this is jack from texas.
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holding. test test >> there's always a bull market somewhere. i promise to try to find it for you here on "mad money." i'm jim cramer. see you tomorrow. it is thursday, january 14th. and coming up on "early today." newly minted millionaires. three winners of the world's largest jackpot in history. with three lucky tickets sold in california florida and tennessee.
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