country music week. thank you for the song. it was so beautiful. you're the best. have a great day, everybody. bye-bye. -- captions by vitac -- www.vitac.com >> 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 like to say there's a bull market somewhere. >> "mad money," you can't afford to miss it. >> hey, i'm cramer. welcome to mad money. welcome to cramerica. other people want to make friends. i'm just trying to make you a little money. my job is not just to entertain, but to teach and coach. call me at 1-800-743-cnbc. when i look at the average, when i look at what the
cognoscenti call the internals, it's meant intimidate you into hiring a professional to translate, my jaw drops. as stupid as the market was the last couple of years, it's now become smart, smart about individual stocks. it's as if goofus got a brain transplant. it's as if me like 'em ugly bizaro and no longer wants to the venus de milo put the heads on a winged victory race. this market is now like bizzarro's opposite, superman. as long as it can stay away from the kryptonite, it can go higher. the only problem here is that in the fabulous world of d.c. comics, kryptonite is not from the planet krypton. superman's birthplace. it's from china. and the last three years all we ever heard from the insiders so anxious to make themselves sound so smart has been risk on, risk off. i want to throttle these guys. now i say welcome to my world. welcome to the new world. it's usa on, china off. frankly, i like this world a heck of a lot better.
i hope you do too. how long can we really depend on the lex luther of the global economy, the communist party that rules the people's republic of china? what a pleasure it is to see the market actually discern between the stocks that count on china and the ones that count on america. ever since we became a sick economy back in 2007 our market has been relying on chinese growth, but now that the chinese slowing albeit at a decent pace, superman is avoiding the kryptonite of companies that need china and embracing stocks that depend on the lead-lined united states. i don't think i've ever seen the america on/china off trade as stark as it was today. china has got that pneumonia. i don't know. coming down with not even a fever. maybe a sniffle. could be allergies. consider first the china side of the equation. let's get the kryptonite off the table before we get to the lead-lined sectors. approximate cause of today's decline at the opening came out of bhp, australian mining giant. that china was slowing faster than anyone thought.
and this huge iron ore is seeing a flattening of demand and a decline in steel production. is china really slowing more noticeably? is there a more rapid decline? something that will take their economy from 12% growth to 0%. we'll know more later in the show when we speak to one of the greatest miners on earth. but suffice it to say that bhp lowers the boom, the china plays are about to get poleaxed, and which companies are china first? we have to break out the china stock book, right? oh, look at this. under the self-reliance and arduous struggle section is joy global. yeah. that's a coal mining equipment maker. they won't need all that coal digging machinery. they're opening coal mine about one hour -- that's every nanosecond there. that is a real great leap forward for the oxygen.
joy goes down $3.44. coal itself is a china hand, so peabody, the big daddy coal company got slaughtered. gave up $1.80, but, you know, that is 5.4%. sure enough, under the investigation study section of quotations from the chairman mao, we find peabody. all right. next love of kryptonite, oh, no, under the discipline section. cummins, the truck generator and also truck engine maker and generator manufacturer. the whole world uses the company's engines, but the stock only trades off of china. when it's china off, cummins plummets $4.58. cummins comrade caterpillar said some terrible things about america this morning. but so what? they're a quintessential china play. this maker of earth movers slammed into a great chinese retaining wall crashing $2.97. how about steel? what do the chinese do when they make too much of something? stupid, they dump it here. if china is slowing, look at nucor which of course shed $1, over 2% today -- >> that was easy. >> for the chinese. i could go on and on. but you only need to look to the
stock of our upcoming guest cliff's natural resources, be wild for $1.76, 2.4% decline to know what i mean. was it really that bad there that day, today? i don't know. we'll check in. enough negative dim sum already. these days what happens in china stays in china. or at least in macaw. today we saw the quintessential america on stocks blossom. even as the s&p futures were trying to let a thousand flowers wilt. take the banks. you aren't going to see a sun trust or wells fargo, huntington bank corp. trying to crash the shanghai or beijing markets. east doesn't meet west in that group to drudge up the old latroy ad campaign. and stand it on its head. the banks fared terrifically all day. how about the restaurants? they don't serve panera's 418-calorie asian chicken salad in prc, so panera was lead shielded. you can't find a chili's in china or the olive garden. the parent company both edged up nicely.
and as much as the chinese want to shop at a home depot or lowe's or costco, these are american plays. sure, they got some overseas exposure, but just as a stock like cummins trades off of china, costco trades off the usa. let's not forget. how about amazon? $6.81. american as apple pie. of course, anybody who makes apple pie would be destroyed by amazon in the end. this isn't 2011. this is a market where the negatives are sequestered by the positives. china is slowing? then let's buy american. now, the china slowing story is going to be with us for some time because the chinese are desperately afraid of inflation. the secular build out of the western part of the country will continue. that's going to give the people republic hyper growth for many years, but until china can break the speculators' backs, we won't see the rate cuts we need to turn the negative of the slowdown into the positive of the stimulus. here's the bottom line. in 2012 we no longer speak in terms of risk on, risk off.
that is so 2008 to 2011. i mean, it's as dated as word up magazine. this year it's all about usa on, china off, and given the pace of employment growth, the return of construction, the replacement of the inventories from everything from apartments to office buildings, usa on theme, let's just say, it could be with us for the duration and maybe we have to retire the little red stock book of good buy recommendations. hey, why don't we go to john in nebraska. john. hey, cornhusker, speak to me. speak to me. >> caller: love the show. >> thank you. >> caller: i need to tap into your vast knowledge. >> hey, well, you came to the right place. my vast knowledge is being tapped. one of my favorite places, go ahead. >> caller: i need to know about michael kors' secondary stock offering and what its effect is on stock price and i was wondering, are these new shares or shares from the original ipo?
>> these are insider shares. now, let me just explain. when you get a stock that is as red hot as kors, i mean this is genuinely sizzling. it's got the highest growth of any of the majors that i follow. the growth hounds don't care who is selling. they just -- they don't care where the stock has been. they think, look, this stock is going higher because the company is growing fast, and they want to own it. i'm going to tell you, if that stock -- if they give you a chance to buy kors at a lower price than where it is right now, and they will take a little risk, do so. how about richard in new york, please. richard. >> caller: yes, boo-yah, jim. dsw just reported today eight consecutive quarterly, double digit growth, profits 24 up, rev 10 up and same-store sales, 5.6. cash is good. inventory is good. they're opening 35 to 40 stores of which they cherry picked 17 borders, including 34th street. >> right. >> caller: have they develop ed in your mind what i feel their own niche in the higher end shoe market, and i don't think they have any competition. >> first, i want to apologize to
the good people who run that store because i did mistakenly last time call it discount shoe warehouse. that was my daughter fooling me because i didn't know that -- i thought it was cheap. it's designer shoe warehouse, and it is extraordinary, and you are right. it's in a multi-bull market move. it's like tjx. dsw rocks. it lives. i wish it were discount because then i wouldn't spend so much there. all right. usa on, china off. china is our pocket full of kryptonite, but the u.s., it's lead-lined. from now on, china off, usa on. and stick with cramer. coming up, the vix fix? this market has been enduring whipsaw volatility for years now. we've begun to accept it as the new norm, but could we finally be settling in for a sustained rally, or is there more instability ahead? jim is going off the charts to find out. and, later, material world? apple is in the spotlight as the
best performing stock in the s&p over the past decade. but up next is the one in second place. as worries about a chinese slowdown threaten to bring its growth to a grinding halt, cramer's mining for answers in his exclusive with the ceo of cliffs natural resources. plus, ride the lightning. take a nonstop thrill ride as cramer goes stock after stock. all your calls taken rapid fire on the lightning round. all coming up on "mad money." we know a place where tossing and turning
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[ male announcer ] 5-hour energy. every day. the price of fantastic profits is eternal vigilance, so on the first truly ugly day in quite a while we got to ask ourselves have we become too complacent, right? maybe we got too accustomed to the fabulous bull market that's been raging since the beginning of the year. is it perhaps time to be more skeptical, or does today's action really represent a garden variety pullback? not unlike my vegetable garden that i'm readying this weekend. the market is simply taking a breather before making its way to ever higher levels. in order to answer that question, we need you to
consider the cboe, c-b-o-e, volatility index, also known as the vix, which i hardly ever talk about on the show. it's an indicator also known as the fear index, the fear index, vix, because it measures the perceived level of near term volatility, and, therefore, uncertainty in the s&p 500. when the vix is high, it usually means that investors are terrified. when it's at lower levels, there's generally a lot more confidence in both the market's direction and stocks in general. at the moment the vix is at $15.58. it's well below the long-term average of about $20. we're hearing all kinds of chatter about how this is a remarkably low level of volatility, but what does the vix really tell us here? it turns out it can tell us quite a bit, which is why tonight we're going off the charts to figure out what the fear index is saying to us right now with the help of scott redler, terrific technician, chief strategist -- chief strategic officer at t3 trading. my colleague rat real money,
paid sister site to the street.com. first of all, let's clear up some confusion. in order to understand this crucial measure of fear and complacency, you need to know how it works and how it's put together. see, the vix is calculated based on the prices people are paying for at the money options, both calls and puts on the s&p 500. what's that mean? okay. at the money call option, for example, gives you the right, not the obligation, to buy the s&p 500 pretty much at current price. the fact that people are willing to pay anything for the right to buy the s&p at a level where it's already trading indicates they believe it's going to move enough to make the option worth paying. by looking at the prices of these openings, what people are willing to pay, you can calculate what's known as the implied volatility, the level of volatility. in pidgin english, the up and downedness that they're expecting in the underlying security. in this case the s&p 500. that's how the vix is put together. technically, it tells you how much people expect the s&p will move over the next 30 days on an annualized basis, and it's calculated as a percentage. that's why the vix index is really about. we just put it out there. too much shorthand. there you go.
right now we're hearing all kinds of chatter about how the vix is super low because it's at $15. well below that historical average i told you $20. it means we were being complacent, or, perhaps, brain dead. they think that that talk is nonsense. when you look at the fear index with the lens of history, there have been times where 15 was really low, and other times where it was quite high, and it's incredibly important to understand the historical context of the vix if you really want to know where we are right now and if you don't want to cast aspersions on people who like the market. let's take a trip to the way back machine with redler playing the role of mr. peabody and look at this chart of how the vix behaved from 1992 through 1997. give you some context, 1992, the iraq war is over, and u.s. began rising out of recession. the market had an extended buying rally. in the five years from just after 1992 since that period to
1997 the vix only broke out above 20 on five occasions. it often stayed below 15, where we are right now, for incredibly extended periods of time. i mean, hey, look, did we just say, wow, i got to sell, sell, sell that period? is that what we were supposed to be doing? according to redler, and he's right about this, a trader back in 1994 would have thought the very idea of the vix breaking out to 30 is -- you got to be crazy. were they too complacent back then? no. they just had a terrific slow and steady bull market without a lot of volatility, and they were right not to be afraid. be not afraid. be very not afraid. that would have been a good mantra for the year. but in 1997, something changes. the vix finally starts to move higher, and we get our first true spike in the fear index, courtesy of the east asian financial crisis and then the implosion of long-term capital. a huge highly leveraged hedge fund that fell apart and needed to be bailed out by the fed. the too big to fail of its day. after that, everything changes. check out this chart of the vix from 1998 through 2003.
this is a period of near constant volatility. first we had the tech bubble, an unusual situation where stocks went up despite the high volatility. then the tech bubble popped, and just when things were starting to calm down, september 11th happened. not long after that we had the enron debacle. it was one thing after another, and the vix spiked over and over again. redler said mid-2002 after the dotcom bomb was going under, it would have been hard for traders to imagine that the fear and volatility would ever have ended, and, yet, you know what, that's exactly what happened. in 2003 things calmed down, and we entered a new period of low volatility and rising markets. take a look at the chart of the vix from 2003 to 2008. as you can see, the fear index stayed at very low levels for a very long time. almost never going above its long-term average of 20, and this was a very good time to own stocks. it wasn't until the wheels started falling off in the housing market in 2007 that the vix began to rise, and it really
spiked in 2008 once it became clear that the entire financial system was in danger of falling apart. now look at this final chart which shows the vix from 2008 to where we are now. again, we have a period of heightened volatility with lots of spikes as the markets are battered with crisis after crisis not long after our own domestic domestic financial crisis sorted out, the europeans have their own sovereign debt debacle that only got resolved at the end of last year. some feel it's not resolved at all. according to redler this is another period where traders think it's impossible for the vix to go below 20. it feels like the problems will never stop. investors are terrified, but as we've seen from the vix's action over the last 20 years, these periods don't last forever. no more than the kraken or space mountain or the great american dream machine or the wizard world of harry potter which i chose not to go on because i threw up all over my shoes last time i traveled upside down. roller coasters do end. they don't let you ride forever because then they would have to keep charging you. the fear index has cooled down
to 15 and change. redler thinks we could be in for another period of volatility where the market works its way higher. looking back redler points out that each of these volatility cycles lasts about four to five years, and now, well, it's been about four and a half years since the latest round of high volatility began. u.s. economy is back on its feet. our banks, which is a major source of bad volatility, are roaring after mostly passing the stress tests, and even europe seems to have its house in order. call it the old normal. here's the bottom line. the action in the vix as interpreted by scott redler suggests that we could be entering into a new period of low volatility and strong markets. the fear index seems to move in patterns of four or five years, and we've had four and a half years of fear. we just showed you that. perhaps it's now time for four and a half years of peace and prosperity. i say that from now on when you think of the vix during this era, you think of vick's vaporub.
instead adopt the investing teachings of mr. spock. get long and go prosper. let's go to rhonda in kansas please. rhonda. rainy day boo-yah. >> oh, man, i'm sorry to hear that, boo-yah. >> caller: i've got a question. i recognize that china appears to be slowing and evolving, and i recognize your skepticism regarding chinese companies. >> yeah. >> caller: how do i as an individual investor evaluate the skill set of u.s. multi-nationals doing business in china? >> this is really hard. i mean, you got to go through the conference calls. you got to go through the quarterly report. let me tell you how you really want to start with this. go to the annuals. every company, even if they have like a ceo who touched base in shanghai for 30 seconds, they write about it. that's where you get it. look at the percentages. remember, don't overthink it. most of our companies do not
make enough money in china that it matters to them. most of them are just telling a tall tale. the fear index, the vix, i'm here to hold your hand. the markets are strong again. get long and prosper, and when you need vick's, think of vaporub. after the break i'll try to make you even more money. >> coming up, material world? apple is in the spotlight as the best performing stock in the s&p over the past decade. but up next is the one in second place. as worries about a chinese slowdown threaten to bring its growth to a grinding halt, cramer's mining for answers in his exclusive with the ceo of cliffs natural resources. well, online dating services can get kind of expensive. so to save money, i've found a new way to get my profile out there. check me out. everybody says i've got a friendly disposition and they love my spinach dip. five foot ten...
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this morning we got some seemingly devastating news out of china. the main reason the market got hammered today with bhp billiton world's largest mining company, saying they see signs of flattening iron ore demand from the people's republic, which indicates a slowing in chinese steel production. throw in the fact that china plans to raise the price of gasoline and diesel and the of the chinese government announced at the the
the beginning of the month, and we have ourselves a great wall of china worries that could be difficult to climb. on the other hand, we've heard lots of positive commentary from individual companies that do business in china, and that's creating one of this market's biggest conundrums. will the chinese economy have a smooth, soft landing, or are we looking at some nasty crash-landing that can be bad news for all sorts of natural resource companies that depend on voracious demand from the land of mao. take cliffs natural resources, clf, it should account for 83% of the company's sales this year, as well as coal, the two key ingredients needed make steel. if china is in trouble and the demand for iron is slackening, and cliffs natural resources has a real problem because pricing is all really determined by what the chinese want to play, even if you're not selling to them. just a week ago cliffs came out with a spectacular 123% dividend, one, two, three, yield to 3.5% at these levels and that's not the action of the company in trouble. this kind of dividend raises a statement by management that they're extremely confident in the company's future. plus, cliffs natural resources left their outlook unchanged saying they believe new iron ore can be climbed higher, and the market seems to fear. am i right? let's say long-teri would not bet against this company. cliffs natural resources is the second best performer in the
s&p 500 in the last decade. second only to apple. while everyone was focused on apple's new dividend, they should have been focused on dividend boosts that instantly turned cliffs natural into one of the top 10%. 4% yield before rally. of course, it costs them. the stock pulled back over $2 today. is this the buying opportunity? let's check in with joe carabba, chairman and ceo of cliffs natural resources, find out more about this fabulous company's recent capital allocation announcements, including the big dividend boost, and let's hear about the future of the industry. mr. carabba, welcome to "mad money." >> hi, jim. thanks for having me on. >> well, first of all, i want to congratulate you. we tried to tell companies what our investors really want is a big dividend. almost no one listens to us. they give you these buybacks or we're going grow, grow, grow, and no -- and without that much regard for the shareholders. what made you decide, you know what, it's the dividend that people want? >> well, you know, jim, in our strategy we've always said, look, we have to earn the right to grow.
we have to earn the respect of our shareholders. our shareholders have really hung in there with us in the last half of a decade, if you will. with the growth we put forward with the m&a that we've put forward, taking the risk, you know, paying the premiums for the deals that we've put together, and now it's time to work organically the growth pipeline that our shareholders have paid for and to give some of that back, as we have this strong cash performance in the future. >> well, i know companies do buybacks somewhat oddly. they can drop away. but obviously if they're doing a big dividend boost, they must see a clear future. there was a company, bhp, i mentioned at the intro. they were talking about what sounds to me like a real slowing from china. clearly, if things were real bad in china, where i know the iron ore price said if you don't sell all that iron ore into them, you would not have taken this aggressive action and boosted the dividend, right? >> that's right, jim. you know, i just so happened -- i was in china last week, and talking with customers and taking my own view. i mean, i think you have to remember just the enormity of the base. last year the estimates on
chinese steel production was 680 million tons. if you get high single digit flattening growth in that -- you know, you're talking 40 million or 50 million tons of additional growth per year of iron ore just to cover that. that's a pretty healthy industry, and that's what really gives us confidence for our growth perspectives in the future. >> now, one of the things that was amazing to me is i knew you as cleveland cliffs. okay, i actually bought your debt. as a hedge fund manager i bought your receivables. i knew this was a great american company. you have made this into a great global company. you have made a series of acquisitions. how does that position versus just being reliant on the american steel industry? >> well, you know, diversification has always been important to derisk the portfolio, and it's not so much where the minds are. we always tell people you have to think about where the markets are and just where we're not china-centric as well as u.s.-centric like we used to be. we are comfortable that we have different places to go with our products and build a great customer base to carry the load
through these commodity cycles. >> but it's very clear that the era where you have those -- the m&a work is being paused right here because of that -- of your capital allocations. >> yeah, we feel like we've got cash to service our pipeline and growth in the eastern canadian assets that we purchased last year as well as the assets on the discovery that we had several years ago as we bring that project forward, so we feel that we've got a great organic pipeline that we can finance easily as well as secure this nice dividend for the shareholders. >> i'm not a political guy, but as among you, you have therma-coal mining in queensland, australia. you've got latin-american operations and canadian, united states. which is the best place to operate? i put it that way because of this 30% tax on iron ore that the australians are putting through. >> well, we really like canada. as you know, we did our large $5 billion investment last year up
there when we purchased consolidated thompson. we like the proactiveness of the government. we work very hard and very closely in the relationship. they like mining where they work. they're very responsible in their environmental care and in their community care just as we are. so it's a good partnership, but canada certainly is the right place for us right now. >> all right. i want to circle back to china because it's so in the news. in your terrific conference call from -- not the one -- you -- people should go read the conference call for the dividend boost because people usually don't do conference calls for dividend boosts. this one did. but you say that you believe the world's emerging economies will continue to urban iize specifically in china. fundamentals of urbanization, household formation and labor growth remains strong. can you just talk about the endemic nature of growth because people seem to think that one day we're going to come in and china is going to be shrinking or no growth, but you're talking about a secular trend towards growth here. >> well, that's right. you know, if you go over to china, and i think more or less you really got to get out into the communities and talk to the people, even the folks in our
office, you know that are very open about the growth, the prospects they have for the future. they all want better homes. they want larger homes. they like the goods and services that we in the west enjoy so much. i mean, you know, jim, the genie is out of the bottle. you know, people have experienced a better lifestyle, and it's going to continue as the urbanization comes on. there's also an upgrading taking place as well as people move into -- from one apartment to the next and into having nicer consumer goods, which are all based off of steel products. >> would you compare it to, say, the industrial revolution in this country where there's a rural to urban and if you got in on that, it was obviously one of the greatest investments in the world? >> no question. when you talk to the people, they're very excited. those that got in early in the big cities like beijing where we were, they talk about, you know, the base price that they talk about their homes and what they're worth today, it's no different than in the u.s. or any other, you know, stable economy. people are excited about the wealth that they're creating individually and they're going to keep that going. >> one last question, joe. when i look through the assets that you have been able to accumulate -- again, i'm so
thrilled you're doing the dividend because i think you have a lot of the assets -- i see things like chromite. you've got a chromite ring of fire -- do you have years of assets that you accumulate that literally i don't have to worry about you running out of things to be able to dig in for many, many years? >> no. our pipeline is very strong, jim. i think, you know, the -- one of the best problems that we really grapple with is the prioritization of our pipeline as things come on, our exploration group has been very, very successful in what they develop, and the chromite, for example, is a niche into the stainless market, which follows the carbon steel era, if you will. as china, you know, flattens out as bhp says in their carbon era and their infrastructure, the stainless steel industry follows and we're going to follow right in with a strong iron ore component as well as a chrome deposit component. >> thank you, what you did. i wish more executives would listen to you because the buybacks just tend to be able to make it so that they can offer as many options as they want to their executives. they don't really shrink the float.
you want to reward shareholders and you want investors. you give them dividend boosts like the one, two, three that you did. thank you so much, joe. president and ceo of cliffs natural resources. >> thanks, jim. appreciate it. >> guys who want yield, you want growth, you want china, you want to be levered to the comeback of our country, clf is a pretty darn good way to do it. cliff natural resources. joe carabba, chairman and president and ceo. stay with cramer. >> coming up, the clock is ticking. call cramer at 1-800-743-cnbc to find out how to fire away at cramer on the lightning round. can he withstand your thunderous onslaught of stocks? plus, piping hot? domestic drilling has been heating up, but is u.s. energy independence within reach, or is it just a pipe dream? cramer is going one-on-one with the ceo of western gas partners to see if it's time to open the bell. all coming up on "mad money."
it is time -- it is time for the lightning round. cramer's "mad money" -- ♪ >> buy, buy, buy. >> sell, sell, sell. >> play this sound, and then the lightning round is over. are you ready, skee-daddy? it's time for the lightning round. we start with chris in texas. chris. >> caller: big boo-yah to you
from texas, mr. cosmo. hey, let me get your thoughts on corning, symbol glw. >> guys who can't shoot straight and can't get a handle on their own business. if they can't get a handle on their own business i got to tell you -- >> don't buy, don't buy. >> i want to go to jesse in kansas. one of my higher picks. jesse. >> caller: rock chalk boo-yah, go k.u., jim. i have my sleeves rolled up in your honor right now. >> thank you very much. it's a very handsome and becoming look. go ahead. >> caller: what's your take on lynn energy? l-y-n-e. >> i like it. i like it. i think the stock has had 7% yield. it's safe and a really well run company. i want to go to jackie, oh, boy, show me state, kansas people. jackie from missouri. jackie. >> caller: hi, jim. can i get your take on intuitive surgical, isrg? thank you. >> absolutely. i think isrg is going -- i lost a lot. my brackets were destroyed by missouri, i just want to say. isri i think is a very solid story. multi-year growth.
i continue to believe in it. >> buy, buy, buy. >> i think it goes higher. let's go to sorry in missouri. it broke my heart, as it did to you. let's go to jay in texas. >> caller: b, b, b, b-boo-yah, jim. >> boo-yah back. >> caller: what's going on? >> caller: hey, i want to ask about l-u-s-k, lusk industries. it was one of your halloween picks way back in 2011. >> right. >> caller: also wells fargo. where do you see these? >> i like wells. we have made a lot of money in lufkin, and i don't mind if people do a little ka-ching. those are the donkeys that go up and down that we saw when the bakken was rocking. let's go to carlos in tennessee. carlos. >> caller: boo-yah, jim. how are you? >> i'm volunteering. how about you, partner? >> caller: i'm doing good. look, the company that i'm calling about is american company, mrk is the symbol. >> let's take the yield and wait for them to develop some blockbusters.
i think it's terrific. i want to go to chris in the illini. chris. >> caller: hi, jim. how are you? >> real good, chris. how about you? >> caller: great. a kankakee boo-yah to you. >> booyah right back at you. >> caller: thank you for taking my call. >> my pleasure. >> caller: i have a position in little fuse, lfus. >> undervalued, overlooked company. absolutely terrific nuts and bolts. when i get -- literally the guts, it's the guts of business. it's the guts of machinery, and i like little fuse. buy, buy, buy. and that, ladies and gentlemen, is the conclusion of "the lightning round." >> "the lightning round" is sponsored by td ameritrade. but then i discovered hotwire. now, i use all my vacation days. i can afford to visit my folks for the holidays. and reconnect with my girlfriends in vegas. because i get ridiculously low prices on all my trips. you see, when hotels have unsold rooms,
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when it comes to the pipeline plays, one of my favorite groups out there, we got ourselves a real high quality problem. you know i like these stocks because they offer high yields with the security of a toll road-like business model. getting paid fixed fees to gather, process and transport both oil and natural gas. i'm sure you've heard by now. i don't care. i got to drive it home that these are the right places to be. man, the pipelines, the stocks, they have run, and they have run big. take western gas partners. wes, w-e-s, a natural gas gathering and processing master limited partnership that does most of its business with its parent, anadarko. you had jim hackett retiring on the other day. it provides both growth and yield. 14% long-term growth. 4% yield. the company operates in liquid rich shale plays and gets 95% of its revenues from
stable, fixed fee-based contracts, no fluctuation. very little risk, lots of reward. pretty much unheard of when it comes to common stocks. thanks to the growth, they've been able to raise their distribution by 16% over the last 12 months, and they plan on double-digit payout boosts for years to come. there's just one problem, and it's the best problem you can possibly have with a stock. western gas is more than doubled since i first recommended it two years ago. 124% return with reinvested dividends. at the time it had a 6% yield, and even with repeated distribution increases, the payout hasn't been able to keep pace with the rising share price. so now we got to wonder. has western gas run too much, or is there more upside ahead? and that's why i'm thrilled to have don sinclair, totally delivery man, ceo of western gas here with us tonight to talk to us about where it this company is headed and what's going to happen next. mr. sinclair, welcome back. welcome back to "mad money." great to see you. >> great to see you. >> have a seat. you came to us on the show and said, look, i got -- this is something that doesn't have a lot of risk. it has good reward. basically laid it out.
how was it that most of the companies that are in your industry say they're toll roads, but actually have a lot of fluctuation, and you have been able to make it so that it literally is pretty much as risk-free as you can get. >> jim, if you think about the way our portfolio sets up, about 70% of gross margin is just pure fee-based business that we get paid straight fee, no commodity component to it. the residual part, anadarko provides us commodity swaps for that direct commodity risk. that allows us to headset risk and show our unit holders that direct cash flow source from those assets. >> now, you have two sources of growth. you have expansion, and you have drop down. i'm sure many of our viewers understand the notion of expansion. i still find the drop down eludes them. we had mr. hackett on last week. if you could just quickly, the 30-second description of drop down. >> if you think about where we are, anadarko midstream owns assets outside western gas. that inventory is available for western to acquire over time.
that's been the ipo since may of 2008. >> now, there's plenty of properties. on page five, there's an unbelievably vivid and exciting even though you're -- i -- relatively risk -- less risk portfolio that you have. there is a chart on page five. it's liquid rich versus dry grass basis. i have always prided myself in thinking i know about some of these fields, but i see this greater green river basin. you went to -- i mean, it sounds like even though you have some great properties, there could be many big ones ahead that could drop down. >> if you think about those particular fields, you go back to us acquiring the granger assets from anadarko, our latest acquisition has been mountain gas resources, which is the green river basin. it's been a great basin for us for a long time. these assets came from original western gas. we've got a lot of third party producers back there. in fact, what's interesting about mountain gas, it's only 5% through anadarko, so the rest of it is third party. you mentioned we're in the
middle of our train three expansion. it will go into service this year in september. >> train three, people think it's locomotive. >> exactly. >> we're building a cryogenic facility up there. we built the refrigeration plant. we built the first cryogenic plant, and we're now building the third cryogenic plant. it will go into service in september. the plant will be full the day we put it into service. >> so just added it the moment it opens. >> yes. >> okay. now, el paso, there have been these divestitures because of kinder morgan. i know people link you to anadarko. are you able to get in there and bid? is it something you can do, or is it not worth it? >> we absolutely do. we've looked at a ton of third party transactions. if you remember, last year in february we did the plant -- fort lumpkin right across from the fort lumpkin plant. we will look at all third party transactions. we think we have a very competitive currency out there.
it's just got to meet our metrics. it's got to be fee-based and low risk. we'll use our currents if it makes sense. we just can't put our model at risk. >> i look at where most of your properties are. we're talking about a particular area around -- you have clusters in, say, chicago and wyoming. do you need to be like williams, which made a huge acquisition today in the marcellus, or are you just happy with this area that does it for you? >> if think about one of the growth projects we announced in 2012, it's going to be our plant in south texas. so we're starting to expand our footprint beyond the rockies. we'll be in the eagle ford part of south texas supporting anadarko building a 200 million a day cryogenic facility there as well. >> where is the ultimate destination of what you're putting through your pipes, because we are hearing a lot of -- all the candidates are talking about it. on this show i talk about it all the time. natural gas. where is your natural gas going? is there enough demand for it? because you know the price has come down. not that that affects you. i understand. only 5% on hedge. just trying to think globally about where the united states is in terms of using its resources.
what do you see happening? >> today anadarko has a phenomenal marketing department. they take all the off take whether it's ngo's or dry gas residue from the plant, and they've been very successful in making sure they have found premium markets for those reserves. >> right. now, do you think that we will be in a world where three, four years from now trucks will -- a lot of the big trucks will use natural gas and maybe even cars, or is that just a pipe dream put out by oilmen? >> you had clean energy on here a week or so ago. >> 52-week high. >> i mean, you would think so. >> common sense. >> the economics, the math works. you would think so. >> well, i got to tell you, don, you have totally delivered and delivered in a quiet way. not a showboat. the showboats tend to crash and burn in the end. i like what you have done. this is don sinclair, president and ceo of western gas partners you want some yield, you want some growth, you're afraid about big fluctuations? look into wes. that has what you want. stay with cramer. thank you, don. is amazing.this italian b..
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longer hurt their bottom line that hard. the idea is disney explained it was because the movie business was so episodic that they were going to make fewer and more reliable pictures and keeping with what has already worked. was there anything about "john carter" which fit that bill? was this epic flop supposed to be the beginning of the next "pirates of the caribbean" franchise? did anybody recall that pirates started as a theme park ride? the spectacular, colossal failure of "john carter" did send a chill up any spine about "the hunger games" given that i have been recommending lion's gate since i heard they were going to turn the trilogy into movies. the chill hasn't come from what i have seen so far. i hated the "john carter" trailer. i love "the hunger games." i devoured all three susan collins' books. i think this series has real staying power. kind of for you guys out there a running man meets robin hood if you were a teenage girl, that is. no. the worries come from the rampant second guessing and i told you so's that i'm hearing right now about the failed "john carter." it seems that everybody is a critic and everyone on earth with the sole exception of disney ceo bob iger seems to have known what a bomb this
"john carter" was going to be. it's almost as though everyone on twitter university recognized that it was going to be a national flop the moment this international flop the moment the story originally came out off the presses 95 years ago. even though they haven't even been born yet. that's why last night i went on twitter @jimcramer and asked if anyone thought "the hunger games" would be a bomb. because unlike disney, lion's gate lives or dies based on the success of its films, and i'm including mad men too. thinks big. i think that a lot of people who want "hunger games" to fail now, they're sick of the sub rosa hype. there are a lot of others who will sell lions gate if somehow it doesn't do north of $100 million this weekend. given the number of seats available and the times and the price of tickets, i don't know what the max is. i don't know if they can do $100 million. i initially told you to buy lion's gate back on february 14th and the stock was then at $11.35. the stock has not looked back since. jp morgan recommended it today. got a 34% gain. that's a terrific rally. even up here i would still own lion's gate into the weekend because i think the hunger games will live up to the hype.
now, if the buyers gap it up on monday, we might have to turn this investment into a trade. i would definitely ring the register on half the position. 100 shares goes to 50 on monday. however, the trilogy is as big as i believe it's going to be, you might have a sustained run on our hands, and i bet this victory will have 1,000 fathers, even as "john carter" was clearly orphaned by the wonderful world that is disney. stay with cramer. not financially. so we switched to the bargain detergent and i found myself using three times more than they say to
>> remember, it's no longer that gibberish, that nonsense, risk on, risk off. some hedge fund creation that seeped into the media lexicon. what it is is right now at least china off, usa on. notice the companies that did well today. they are based in the usa. they sell into the usa, and they are doing terrifically in the usa, and that's why they weren't able to be brought down by some errant comment by an australian mining company that at one point would have sent the s&p down 2%. welc