Transcripts For CNBC Mad 20240703

It wasnt done tightening. Then we had some banks collapse in march. Then we stopped worried about the fed because we figured the economy had it. That led to a wholesale shift into tech. A multimonth run into tech, especially the magnificent seven. So the consumer situation coming together now after weeks upon weeks of pain . That may be what we saw today. The nasdaq jumping 1. 35 . It was a total shakeoff of the endless selling. It didnt happen until later in the afternoon. It is hard to believe the system can repeat itself, i have to say the setup is very similar, even if the starting point is different. We had a replay from march where recession from demand destruction overwhelmed those by inflation or spiral growth that seemed impervious to all the fed rate hikes. Maybe it is the start of something bigger. Hey. Come on. After what we have been through, a few hours of larger prices looms larger than it should. To give you some connect here, lets rewind to spring. We had the collapse of highly visible banks which started off a wave of fear that all of the regional banks might be going down like dominos. That caused a collapse in treasury yields, a run towards the most solvent companies as a recession appeared imminent. As the bank crisis dragged on, treasury yields plummeted, and it seemed like the fed might be done tightening. At the very least, they caused. That is when the magnificent seven were born. They were born out of dec desperation. Now, we all know whats happened since then, the economy didnt staal. In fact, it accelerated. The feds started a new round of rate hikes. We use this phrase over and over, higher for longer. In response, a quick but near bull market turned into a wide and horrifying bear market, best by tech as rates climbed ever higher, piggybacking off the rally in oil. The most physical sign the economy had become a runaway train with stocks looking like a bunch of School Busses on the tracks. To today, oil which had been hanging on by its figure prints, some just got annihilated falling more than 5 to 84 and change. This thing was 94 a couple days ago. It was a breathtaking decline. But by the collapse in demand. Simply seasonal demand, the lowest in 25 years because of high prices at the pump. Thats right, gasoline, it got too expensive. And that collapse caused longterm treasury yields to plummet. Very refreshing after watching it go up. Makes perfect sense, too. The rates were soaring. We were constantly told it was goint to bottom. Today we realized it is possible that the turbo charged oil rally may have been nothing more than a charade, a sham even. Something brought on by a short squeeze that ended with oil, couldnt take out 95, let alone 100. Actual sellers came in the market and their buyers seem to be begging for more oil because gasoline is drying up. It happened overnight. There are a host of indicators showing a mixed picture. We still have robust job growth. According to john gibson we had on, the largest payroll processor. The manufacturing economy is certainly humming. Maybe thats infrastructure money. There are parts of the country where companies cant find enough people to hire. Plus, between the fed and the treasury, way too many bonds are being sold, which sends those treasury yields higher. It is a market. There is too much supply. But for a brief momento day, we saw a division between the flush and the naked and the money ran to the companies that are flush. Thats just like the march bottom. Is today complete with Cascading Bank stocks being clubbed to new submission . I know you dont want to hear me say this, but we cant be sure. We have an auto strike that threatens to get out of control with billions being lost in this country. Orders are a meaningful part of the gdp. The spread can throw a lot of people out of mark. The fewest Mortgage Applications since 1996. Mortgage rates are almost at 8 . Of course thats going to matter. Three and change a couple years ago. Are these symptoms of legitimate slowdown that would make the spike in longterm treasury yields a chance to get a much better rate or is it all fools gold. Again, you dont want to hear this, but i dont know. Isnt it better just to own that . I dont know. But here is the good news. We dont have to wait that long to find out. On friday morning at 8 30, we get the september payroll support. Thats the single most important set of government statistics out there. Thats not just my opinion. Its the fed. The only one with true staying power and influence with stock and bond prices is the payroll support. If it shows more layoffs than expected, it will be hard to justify the relentless rally in interest rates. And the fed is more likely to stay and stand. What do we do . Because this stock market is as oversold as it was in march, i certainly cant count on selling. It could be a better bond market with earnings reports pretty good. In particular, back in march i think tech will shine, especially the Semiconductor Stocks that arent connected to cell phones. Somebody downgraded apple today, and the stock went occupy. What does that tell you . At the same time, the economic woes could change the feds approach will hurt plenty of companies. Here is the ones you have to think about, retailers, banks and housing. In march it was really just the banks. Now there are far more sectors that are, lets say, on the ropes. Having watched videos of the usual billionaire suspects telling us on air the regular litany of negatives about the coming collapse of our great nation on the order of the national debt. I watched hedge fund managers, many of them are likely short bonds telling us to get out of bonds now because its too late because bond rates will get crushed because of hyper inflation. Ask anyone with anything remotely positive to say calling them out as charlatans. I did not hear one person, certainly not billionaire, say it was time to buy anything. Now, uniform negativity isnt always true. Let me put it this way, we certainly have plenty of tinder for a rally. You had a weak payroll number on friday, then i think we can get a rebound of what we saw in march. Bottom line, maybe all that needs to happen is for the frantic bond sellers to slow the pace of their sales. They dont even have to stop. They just have to be less desperate. Once that happens, we can finally focus on the myriad of stocks that have been crushed for weeks now. Many dont deserve it. No need to jump the gun now. We will find out soon enough. Zach in texas. Zach . Caller jimmy, jimmy, how is it going, man . Reporter not bad. How about you. Caller having a case of the mondays, but well get through it. I think its like wednesday. Thats all right. Caller i might be wrong. I might be wrong. Let me check. Oh, apple, sell, sell, sell. Isnt that what they say . Go ahead. Apple is only down 30, time to dump it. Whats happening . Caller look, man, i have been trying to pull the trigger for years, but here is what im on. In the next five years, where do you see target stock going . Five years . Wow okay. I think that target is a very good company, but i only really like it in the Retail Business i like tgx. I like costco. I like amazon and i will throw in walmart because im a forgiving judge of retail. All right. Whoa nice shot hey, take that. Now, it might be too early to tell, but the bond market stabilize from here, we might be able to focus on some of the stocks that have gotten hammered over the last few months. On mad money tonight, highlights how many shoes my wife has bought. No. A host of longterm growth targets. With the stock drop announcement. And breaking up is hard to do, unless you are danaher. Hey, you got some interesting stocks here. This year has been volatile. A year for the bear stocks. But could coors buck the trend . Im checking in with the companys cfo. So far i like what i see or taste. So stay with cramer dont miss a second of mad money. Follow jimkramer on twitter. Have a question . Tweet cramer. Send jim an email to madmoney cnbc. Com. Or give us a call at 180074cnbc. Miss something . Head to madmoney. Cnbc. Com. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to help keep our Online Platform safe from cyberthreats . Absolutely. Can we provide health care virtually anywhere . We can help with that. Is it possible to use predictive monitoring to address operations issues . We can help with that, too. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Since my citi custom cash® card automatically adjusts to earn me more cash back in my top eligible category. Suddenly lifes feeling a little more automatic. Like doors opening wherever i go. 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Cmon, were right there. Cmon baby. Its the only we need. Go, go, go, go ah touchdown baby touchdown are your neighbors watching the same game . Yeah, my 5g Home Internet delays the game a bit. But you get used to it. Try these. Theyre noise cancelling earmuffs. I stole them from an airport. Its always something with you, man. Great solid greek salad . Exactly dont delay the game with verizon or tmobile 5g Home Internet. Catch it on the xfinity 10g network. What in the world happened to the stocks today . A popular swiss sneaker maker best known for its running shows is known. But the stock has been clobbered, along with Everything Else for the past couple months. 37 at its august highs down to 25 now, including 4 declines today. See, they had a chance to reset the narrative at its investor day event today, but wall street didnt like what they had to say. They rolled out ambitious targets and said they could trouble their sales by 2026. I think thats a shortsighted reason. But do not take it. Earlier today, we had a chance to catch up with the two ceos. Take a look. Gentlemen, welcome back to mad money. So glad to be here. Martin, let me start with you. I think it was very encouraging, but you put out some incredible targets, doubling net sales between 2023 and 2026, exceeding 16 gross profit margin. How can you do that . Yeah. We had a great day here. It was so good to finally be able to bring our investors here to really experience it. It was a day full of innovation product, but also the numbers that you mentioned. So we continue to dream on. We want to double our sales in the next three years, reaching 3. 55 billion net sales by the end of 26, and we want to even accelerate in our profitability targets. So our aspiration is to reach 18 plus adjusted ebida target at the end of 26. We have a lot of momentum in the business. We talked a lot about what are the Growth Opportunities that we have, and i think everyone left super excited. Well, i got to tell you, i know i was. Im a big supporter of yours. Comes down to 25. It seems cheap, but people understand, mark, when you talk about elevate, expand, establish, what do you mean . Look, elevate, were speaking about what we have already been doing in the past. So we speak about the opportunity that we still have been running. We speak about the opportunity that we still have. We speak about the opportunity that we have in geographies like the u. S. Or the u. K. The next vector is we just started. So, for example, we feel were just Getting Started in markets like china. We feel we still have huge room for growth in home retail, so this will be a key growth vector going forward. And then there is, you know, elements that were just starting. This is the third element. Here i want to point out trading. So we have observed more and more people bearing on, especially in the gyms of this world, and we feel we need to give them more apparel, more footwear and we very much feel that entering training will allow us to significantly grow going forward. Yeah. I thought one of the most telling pages in your debt mark was the actually lack of awareness that people in the u. S. Have and other countries that the runway seems so big given the fact that many people have never even heard of you. Yeah. In switzerland we have 47 brand awareness, which means we still have 53 left to 100 . In the u. S. Were not even close. Were investing a lot in athletes. We want to create bigger moments. One of those was around the u. S. Open where ben shelton made it to the semifinals. And it really shows, basically, that investing in these big brand moments, for example, our search on tennis apparel and tennis brand was up by 1,000 in the u. S. Through the u. S. Open. So these are some of the big steps that well continue to enter. So, martin, it is confusing to me. I was in a stock picking contest. I said i went on. And there was someone who was critical of me that said, are you not aware about the inventory problem. Four of the analysts asked about inventory. I came back and said i think i want good inventory, not bad inve inventory. They said, jim, you dont know how to read the Balance Sheet. Can you explain to the people that your inventory situation is not a detriment to your progress . Yeah. So our inventory situation is that our inventory levels are a bit elevated because of the disruptions that we had in the aftermath of covid. But it is all fresh and good inventory, which we expect to sell at full price, which will drive the growth over the next quarters. So we feel we have work to do in getting that done, but we dont have a risk to our profitability. Okay, very good. Thats important because a lot of people tell me theyre short the stock or whatever. I say good inventory, i want it. Bad inventory, were fine. Now, there is a page in your debt, mark, that i thought was very good having gone to law school. But i want all the people to understand. It is called the fourth pillar. What do you mean . Yeah. Were creating new silhouettes that the world hasnt seen. Where were coming from is basically, you know, you can protect technology. You can patent what we call cloud tech, but what you cant patent is design and looks. We want to establish new silhouettes, new franchises like the cloud nova that the world hasnt seen before. So were going to bring more of those products to the market. And, you know, were also very, very happy to very soon, actually in a few days, be launching a new product called the cloud tilt together with pretty famous fashion company. So this will be another example of the product. Lets talk about fashion. One of the things that astounds me and i was talking to my executive producer. Even my wife, who has too many pairs in my closet, martin, what everyone seems to be coming together with is that you are a fashion shoe, not just sports. But worn with nice clothes. Highly unusual. Now, im not talking about worn with jeans. Im talking about worn with dressup. Ive not seen other brands be able to do that. Yeah. Actually, the mission that we have is to be the most Premium Sports brand, rooted in sustainability, performance and design. And those are the ingredients that drive what you are describing, so it is a premium product that goes very well with other products. But it is rooted in performance. And its really all about having products that are also used for performance. And this is why we are doubling down on the athletes that mark was just describing. Were significantly increasing our share on running around the world. But we really love to see the product also being used in the daily environment. Good. Im glad you mentioned that. I also think you are part of the firm. Ive got to wrap things up here, mark. I think we could be wrong not to talk about cyp cyclon. Yeah. We launched cyclon because we have a simple mission. We want to make all our products ready for circularity. Cyclon is the first one. It comes in a subscription model. If used, we could basically take it back and recycle it. So this is a very, very important part of our sustainability strategy, and the other important part is that were basically getting out of fossil fuels. We launched a product out of carbon emissions. You can expect that to come to the Broader Market as of 2025 as a technology. And most pillars really allow us to, you know, execute on what we believe is so important to this world that were making the holdings be way more sustainable. This is notjust saying, listen, we like the environment. Youre doing something about it. I want to thank you of on holdings. G gentlemen, it is really great when you come on. I really appreciate it. Thank you. Mad money is back after the break. Coming up, spinning and winning . Are these Companies Worth more apart than together . Cramer makes the pieces fit next. Unnecessary action hero missing punches . Unnecessary check reversals . Unnecessary time sheet corrections . Unnecessary unentered sick time . Unnecessary go unnecessary go unnecessary when you can take this phone, youll be ready. Make the unnecessary, unnecessary. Let your employees do their own payroll. On monday we got not one but two long awaited breakups. Danaher spun off its Environmental Supply Solutions Divisions for alto. While kellogg spun off in a growth oriented snack business. None of them has gotten much love here, thanks to the take. I think it is worth taking some time right now, though, to go over these postbreakup companies because both could open up value. Danahers spun off early last year. It is a straightforward story. This company spent many years unloading to focus on fast growing Life Sciences and diagnostic divisions, but they had unrelited legacy operations. These things just dont really belong under the same roof. So they created two. The idea here is that the new danaher will get a higher priced multiple as a life science and diagnostic pure play because they will have faster growth. Meanwhile, veralto could get more growth as a stand alone company. This is about quality testing and product identifiers. Veralto is good at what it does. Including right here in new york city, which has some of the best tap water in america. You know, i never understood pay you pay for expensive flat water in new york when we have the best water there is in country. They disinfect two billion gallons of water a day. Also a whole lot to like here. But those that dont remember, they spend decades acquiring businesses and making them more efficient. Then they went out of style and they decided to become more focused. Businesses like veralto no longer fit in. They spent 20 years benefitting from danahers management. It comes from recurring sales, which is not as high as the old 70 recurring rate before the spinoff. But it is still pretty impressive. The business is capital intensive. Going forward, veralto expects to maintain a modified version, which is not only focused on constant selfimprovement but mergers and acquisitions. They can take the cash and use it for product identification spaces. At an investor day event last month, they will have greater flexibility to make smart acquisitions. They werent going to get within danaher. For the remaining slimmed down danaher, i wont go as deep here. Although its been a real dog of late, we can talk about that next week when we go to our investing club conference, it is a supplier of everything from big ticket items to common consumables. They also offer all sorts of services. But the key point to understand is that danaher is a pure play on Life Sciences and diagnostics. Their overall growth rate should improve and get more of a boost when they complete the 5. 7 billion acquisition. Thats a british Life Sciences company focused on antibody treatments. The last couple years have been real rough. This stock set a high in 2021. It has been drifting lower ever since because the diagnostic business made a fortune from covid testing and the equipment they sold for vaccine development. Thats why it split at the end of 2019 so its alltime high of 296 and change in september 2021. Well, like all the other covid winners, there was a postpandemic hangover as they lapped the high numbers and customer inventory numbers became elevated. In response, the stock got clobbered. Its been difficult to own. More recently, they have had another problem, the dead ipo market. When you make life science equipment, many of your customers are smaller biotech companies. And they cant operate unless it is able to raise money. Normally they become public, which they then spend. Even the private funding markets have dried up over the last couple years, though, because most Venture Capital funds have been beaten into being more cautious. They have a hard time raising money. That means danaher lost an Important Group of customers for a year and a half. Heres the good news. Their last quarter delivered in july was fine. Although the Third Quarter is a little guarded. Im talking about a low single digit core revenue stream. Thats not that good for the danahe rr i know. But danaher rallied in response. There is a sense that the equipment may actually be worked off. He was saying in his july conference call, but he said his team is closely working with customers to normalize inventories as quickly as possible and they intensified the efforts in order to get that process done by year end. Inventory is bad for these guys. Theyre getting rid of it. Im confident they could get over their postcovid hangover. At the same time, it is coming back to life, meaning smaller customers can raise capital again. What should you do with shares . Were holding on to both stocks for right now. Trading at 77 and change. If you look at xylum and zebra technologies, they pay 90 a share, 13 above where it is. It doesnt hurt thats much better margins. So were talking about the potential for Something Like this. Thats Worth Holding on to. As for danaher, were sticking with it for the long haul, especially now that the stock has been hit hard. It has come down from 240 to 216 right here. I think it is a steal. Jeff marks and i, my partner in crime, we talked about maybe buying some danaher today. I think it makes sense. I think this situation is a textbook example of the kind of breakup that can create a ton of value for shareholders. It is something we really like and constantly talk about in the club. These are two High Quality Companies that didnt belong in the same movement. I think they will get higher valuations on their own, especially once danahers business finishes bottoming. We know its in a similar business, they were very close to it and thermofisher, tmo, says the same thing. I think that danahers time is at hand. Lets go to eddy. Caller how are you . I am good. How are you . Hows those cardinals doing. Its kind of early. Caller well see. Well see. Very early. Caller before i ask my question, i want to thank you so much for everything you and your team do. Im 36 now, but i grew up watching you with my mom. And mad money. Thats great. Eddy, that means a lot to me. I feel like if we get people young, they could be with us for the rest of their life. Were doing it right with this, financial information. How can i help you . Caller yeah. My question for you today is about xpo. Im a charter club member. I took the lessons from you, and now ive got rxo and gxo. I dont know as much about them. And i feel like theyre probably great companies, but it is more homework and research on my hand and more things to keep track of. I felt the same way. I said, wow, rxo. The gxo is logistics. Its pretty good. I think you can let them run. I think theyre both really good companies. Thank you for those kind words. It means a lot to me. Guys, i think danaher and veralto are great companies. I think we should be thinking about buying more danaher right here ahead of my club meeting next week. Much more mad money including coors. This is an interesting stock. After announcing growth targets and the same strategy day, im thinking the announcement is becoming top brass. And having stocks in a volatile market like this, i have an important algebra lesson. And we have the lightening round. So stay with cramer. I think im ready for this. Heck ya with e trade youre ready for anything. Marriage. Kids. College. Kids moving back in after college. Finally we can eat. You know you make me wanna. And then we looked around and said, wait a minute, this isnt even our stroller laughing you live with your parents, but you own a house in the metaverse . Mhm. Cool. I dont get it. Heres to getting financially ready for anything and heres to being single and ready to mingle. Whos ready to chacha . yeah, yeah is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Meet gold bond daily healing. A powerhouse lotion that moisturizes, heals, and smooths dry skin. With 7 moisturizers 3 vitamins. And. New gold bond healing sensitive. Clinically shown to heal moisturize dry, sensitive skin. Gold bond. Is. This has been a crazy year for the alcohol industry, especially where bud light made some marketing missteps that opened the door for its competitors. One of the biggest winners has been molson coors. A very savvy ceo has had a terrific analyst dailying out what was established and what can be accomplished still. We have fortunate to have him with us to talk about the strategy. Welcome back to mad money. Thanks very much for having me, jim. It is great to be back. I think, wow, you have taken advantage of a fractured beer market. But you have been growing numbers for several years now. This strategy meeting fueled the way. What is fuelling the turn that did not start this spring but has been going on for several years . You are 100 right, jim. We started three and a half years ago, and we laid the Building Blocks to make our Organization Ready to go. We are built for growth. We laid out our plans to grow into the future for two, three, four years time. Last time you had me on the show, jim, you predicted that, and you were right. I also know because you have a finance background. You decided to get that Balance Sheet right. Those are the two things i love to see. Talk about them because you established them in a short time. We did. Four years ago when this team came together, i think it was close to five times, and we got it down to just below two and a half tons by the end of june. We laid out our algorithm to keep it below. We announced a 2 billion Share Buyback program which will go into place immediately. People should know your company is 13 billion. You are buying a ton of stock back from whats publicly traded. Yes, we are. We will do that every five years, jim. I think thats fantastic. I read a gallup poll. Younger people arent drinking as much as they used to. Can you see that and also these gop1 drugs making people not want to drink as much. Have you seen any impact from the change in habit or the change in medicine . Jim, we havent seen them. I think there is a lot out there thats still unknown. It is an expensive thing. Reporter or path to go down. It plays into this whole health and wellness drive that increasingly consumers are moving along, particularly 21 to 27 years old. That playsright into our overall strategy. Were moving into energy drinks, nonalcoholic beers. One of the bigger innovations is the launch of blue moon nonalcoholic which were bringing in december just in time for dry january. I think that will play right into this. Im so glad you brought that up. You and i both know because i did some background on the liquor business. I am shocked at how, after many years of people not liking these beers, they now taste good. And i think that you were the one who told me this could happen. I always said there is no way these beers would taste good. But you have seen it. And people like them. They do, jim. You are absolutely right. If it tastes good, the consumers are going to drink them. I think our brewers have done an amazing job getting blue moon nonalcoholic to taste very similar to blue moon belgium white. And we sampled it yesterday, and they loved it. So im looking forward to getting that in the market in december. You and me both. All right. The socalled browns and the clears, the vodkas, the gins, you have been in some of the browns. Are they tapering off . I know beer is still growing. Are the hard spirits not growing that much . No, theyre growing as well, jim. Theyre still an increasing share of the alcohol space. Certainly our acquisition of spirits is playing right into that trend and its brought premium product. It is a great product. It has a great team thats working behind that acquisition and were very excited about it. Okay. How about at the store level . I know a lot of people drifnk i at a bar. But are you taking shelf space in the last year or two from other beers . Were taking a ton of shelf space, jim. That was one of the big points we landed yesterday. We have seen it now for six months. I know there has been a lot of question marks around is that going to stick. Weve now got six months of data to show those are not changing. Were gaining a ton of shelf space, which is very unusual. That doesnt normally happen. And were expecting to take a lot more in spring. Not only are we getting thousands and thousands of handles, were getting thousands of extra Square Footage of retail. And that is one of the big underpinners for us as we head into next year to drive the continued momentum. I felt like when you take shelf space, it is incredibly sticky once you got it. It is highly unlikely it will be rolled back and more likely it will be gaining more space. I completely agree with you, jim. Once your brands are as healthy as our brands are, it sticks. All right. You have been doing some personalization. I happen to be a flyers fan. Ive got in my refrigerator all these flyers buds. You seem to be making good stuff where the labels matter, i think. We do. We do. Tell me about it. Tell me what people like to drink. I think the consumer loves it, jim. They love seeing their Favorite Football Team or their favorite Ice Hockey Team or Baseball Team showing up on the packaging, the secondary packaging of their beers. We do that with miller lite in particular and were introducing it to coors light next year. I would be remiss if you werent an international brand. If i were to go over to europe, would i not see your brand be the number one in almost every country . Yes, you would. Number one and number two, jim. Thats our brand. If you were in the united kingdom, you would be drinking coors, blue moon. Youd also find probably the best innovation weve ever had in europe which is madrid. It is already one of our largest brands in our portfolio. It is a machine. Dont these travel . I mean, i would like to see some of those. Look, you and i talked about how much we like european drinks. I used to drink it. It is great beers. Bring them back we have peroni for you now, jim. Thats a great european beer. But, yes, its a winner. I am sure you will see it at some point in time in the future. All right. You and i will knock back down. Hes done a remarkable turn. Not in six months but in multiple years. Thank you, sir. Great to see you. Thank you, jim. All right. Mad money is back after the break. Since my citi custom cash® card automatically adjusts to earn me more cash back in my top eligible category. Suddenly lifes feeling a little more automatic. Like doors opening wherever i go. [sound of airplane overhead] even the ground is moving for me yall seeing this . Wild and i dont even have to activate anything. Oooooohhh. Automatic sashimi earn cash back that automatically adjusts to how you spend with the citi custom cash® card. [mind blown explosion noise] sfx stone wheel crafting the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . Announcer lightning round is response arer sponsored by charles schwab. Own your tomorrow. [ bell ringing ] it is time. It is time for the lightning round. You say the name of the stock. I dont know the calls or the name of the stock ahead of time. I tell you whether to buy or sell. When you hear this sound [ buzzer ] then the lightning round is over. Are you ready, skeedaddy . Well start in texas. Caller hi, jim. How are you . I am good. How are you, sir . Caller im good. Upstart holding . Yeah. It is a little too risky for me. Its losing money. I have not liked it. I dont like the stocks that are these faux banks where there is too much risk. Lets go to zach in new york. Zach . Caller hey, jim. Booyeah. Booyeah to you. Caller i want to ask your opinion about a stock. Okay. Caller ticker mo. Yeah. You know what, im too old and ive seen too much destruction in my own life for me to recommend a tobacco stock, including people in my family, so im going to take a hard pass on that one. Lets go to kyle in wisconsin. Kyle . Caller hey, jim cramer. You know i like yeah. I didnt know it until just now. Caller you know why . Because youre a guy with some guts. Booyeah thank you. Thank you. How can i help . Caller im a Retail Investor Holding Quite a few of sofi 8 call options, which expired three days after their earnings. About the contract at 47 a piece when the stock was at its lowest in june. Spill your guts, jim. Tell us what you know. Hold up. I dont. Im not a big buy call ahead of quarter guy. But i will tell you think. I voted for her son. You can go on my twitter page. I seen that the company had a really huge move and then a big pullback, but i think it is a steady hand. So im in favor of owning the stock but not trading the stock. Go to brie in massachusetts. Caller hey, how are you . Im okay. How are you . Caller im doing well. Markets are tough. But i have a quick question for you. Sure. Im available. Caller so i know that you talk about nap earlier in the fact and that fact that it revised its dividend. Nee dropped significantly this week. They crushed this thing. I heard an analyst today talk negatively here about it. But it only yields 3. 6. Im still not sold on it. And that, ladies and gentlemen, is the conclusion of the lightening round. The lightening round is sponsored by charles schwab. How do we value stocks in this terrifying market . At the cnbc investing market we call it solving with m. What the market is going to pay for a companys future earnings. Dont freak out about this, please. It is just a bit of algebra. You all took it. If you want to know where a stock is headed, you want to figure how much a company can earn per share in the future. Thats the e. And what wall street is willing to pay for it. Thats the m. E times m equals the price of the stock. We mention it all the time on the network, it is the multiple. So let me give you an example. Lets say you have a stock, an airline. It looks like it could earn 6 per share for next year. How much confidence do you have in that number . A subjective number. Remembers, stocks are what is known as long dated assets and they compete with bonds. It makes the stocks future earnings less enticing. All this factors into how much people are willing to pay in the future. In a calm buying market with travel looming and tame oil prices, it will be a no brainer to buy a stock at ten times earnings, roughly the current multiple. Right now the s p sold at nine times earnings. At the point the airlines are getting pummelled, along with the whole transportation index. Fuel costs are high, even with the big breakdown in oil today. I dont want to pay ten times earnings for delta. Why dont we do this . They dont we slash it to five times earnings. Now you multiply six by five, the multiple, and you get 30. Down six from where it is currently trading. Meaning delta stock is likely headed lower based on the pe analysis. Last night we had macys on the show. Right now the analysts would cover macys on average thinking they could earn less than 3. This is an 11 stock, meaning it sells for less than four times earnings. Staggering low. The average stock is 19 times earnings. Now since the stock of macys isnt cheap, no way. When you see it that low, only 150 p. M. Is multiple, it is, though, a vote of no confidence. It says Money Managers are all betting macys cant make the numbers. They will have a weak christmas and wont be able to refinance this considerable debt load because rates go higher and things will get worse for the customer base. The market is saying they will keep the yield in the 30. Thats why the price earnings multiple is so low. The multiple says a lot. And it is very worrisome for macys. But lets say the outgoing ceo and his replacement spring that we had on the other night are right. Then some good holiday season. Lets say they mix it up and have more bloomingdale else and well off shoppers with their highend cosmetic line. Lets say tourism comes back and there are arent too many credit card defaults. If they hit those numbers, the stock will get a much, much higher multiple. If you have more copies, why not give macys the same multiple than you were willing to give the airlines. Lets say you pay five times earnings for this one. You would have the 15 stock up from 11 and change right now. Lets go back to what we said about the investing club. We say the market is paying too little. That, again, is the m for the earnings estimates. Estimates will feel good about it, so the stock is too cheap. We trust management. It should rally four points from here once they make the numbers. This is how you solve the valuation equation. And you can do it, too, at home. After all, it is just eighth grade algebra. Dust off that part of your brain. It is that straightforward as long as you factor in those variables, the variables you talk about every day on the club and right here on mad money. See you tomorrow. Last call starts now. \s right now on last call, labor unrest spreading to health care. One big bank says it woman fuel recession. Surging rates, renewable projects. Will the fed kill the clean energy dream . Canaries in the coal mine, well should you the underthe radar stocks that may hold the secret to the true state of the american consumer. Theres a shock pick to help design the n