Transcripts For CNBC Mad Money 20141217

Beast. It is not the ultimate direction of the Interest Rates. Its the speed with which they are going eventually to be taken up. We have good news on both fronts today which is why the dow gained 288 points, the s p surged and the nasdaq rocking 2. 12 . What a day for goldilocks. That mythical figure when everything is just going right for the bulls and wrong for the bears. First, les rr deal with the Federal Reserve. We know our economy is Getting Better and better. We can see that from employment numbers and retail sales. Today the fed announced to be patient about raising rates, no hurry at all. That slow deliberate step by step, inch by inch slowly rates may go up one day sent an already upbeat market soaring. Once again, people, especially boisterous fed watchers were totally shocked that the fed decided russia, emerging markets, brazil, all of the scary boogie men could crush this market if we mentioned how concerned and scared we are. Instead they used neutral language but uncertainty. If they talked about real problems that would be like yelling fire in a crowded theater of bulls, it would pulverize the bulls instead of charming them. The fed chief is craftier than critics think. She can prod along about low inflation but doesnt have to state the obvious that the velocity in good cline in oil lets just say fed 1, bears 0. Oil took a breather. It spent most session up big before late day break down. It didnt get hammered once again. And the ramifications of todays breather are usually positive even though i know that may seem counter intative. We can agree that oils decline. We are a consumer with 70 of the growth related to spending. Lately our gushing Oil Production has mocked that 70 figure in about 16 states meaning production of oil has become so volumeinous in the states that if the price falls far enough there could be a real bust in those areas. You dont want Sun Flower Oil to be north dakotas principle export. Yes we want a selloff but want it gradually. I am going to lay out why so you can stop worrying and learn in something we hate paying more for like the spike we had this morning that brought confidence in the oil market. First, good to have you back. There is russia. We know that if Oil Keeps Falling ultrarapidly as it has russian banks could be stretched to the point of breaking and the russian economy going into severe recession if not depression because russias riches and shaky currency of the ruble depend on robust experts. It would be one thing if russia wasnt involved in warmongering over ukraine. That would put added pressure on an already slowing eurozone which is not good at anybody at this point. The situation is much worse. Its much more dire. From all accounts russian president putin is loved in his country. As much as germany and the United States want regime change it doesnt seem like we are going to get it at least from within. We could get something far more dangerous in ukraine that transcends the economy. At some point putin could decide to commit financial suicide in the name and go into ukraine guns blazing. If that happens europe could go into a depression and we are all back. If the decline in oil slows down that eases pressure on the ruble which reduces the global geo Political Risk of an actual hot war. And we know from that somewhat obscure stock stage war what is it good for . Absolutely nothing. Second positive from oil hanging in there, the sucking wound that could be petrobras. We can celebrate the fact that president obama is making nice with cuba. We could see the wholesale expropriation of petrobras. Even the possibility that crude could go up for more than a day or two takes the pressure off petrobras along with foreign holders of debt which is thought to be maybe in the tens of billions of dollars. Its okay. I need the mexican flag now. I forgot we are putting on a high school production. Meanwhile, the Mexican Government is putting on indebted to the tune of 100 billion, maybe more. This liability is so large it could crush the whole darn Mexican Government. A break in vicious decline gives the government some breathing room. Its a god send for mexico which otherwise is a Pretty Healthy country. Basically you avoid and the mexican peso and that is good news for a lot of investors. Third positive, i need the hyg, mexican flag. We come prepared here. This is an actual replicuof the mexican flag on an actual iphone. We have to watch hyg, Corporate Bond etf falling as of late. Do you mind if i go into your machine and put in hyg as a symbol . I need you to do that. Why . This index of high yielding bond that contains a ton of debt has been under severe pressure. That sign of distress often leads to calamities. I talk about this with my partner david faber in the morning all the time. This isnt a canary in a coal mine. It is a collapse occurring. A lift in oil may be the trick. The hyg was up huge today. They need that market. Finally, there are our own beloved producers. Oh, you have seen some of those stocks. You dont need me to riff on the declines of some of the more distraught oil companies, ones that used to be in the teens and now in the terrible twos. When oil is plummeting rapidly the buyer of the stocks dont attempt to bottom fish, it is too dangerous. They are not like orvis. Investors are afraid of chapter 11. Acquires wait patiently for it. If oil can take a breather and stop going down so quickly then they can hedge risk in the futures market or sell off properties or acquires might say enough. Now, i am by no means suggesting that oil has bottomed eechben though i have seen a ton of bottom fishers today. Nor am i saying any of the black holes have been filled positively or that goldilocks has beaten the bears heads in. She is not giving them the business. Here is my bottom line. The Federal Reserve and the oil futures have given the world some breathing room and the bulls rejoice while the bears got cut short in a rip your face off rally that as long as Oil Stabilizes or goes higher before resuming its decline we might see more upward pressure on our markets. May i go to bob in washington . Bob. Caller love your show. A big booyah from our nations capitol. Good to have you as long as it isnt in the front page for business we are in good shape. Go ahead. Caller good luck to your eagles by the way. What about bt, british telecom. It is up to almost 63 today. What are your thoughts . My thought is this, that is one heck of a home run. Why dont you just ring the register . You came with all of this pressure on verizon and at t you dont know where that is going to be. I want you to take the gain and go buy yourself a couple of nice cashmere sweaters. Lets go to eric in colorado. Caller hey, booyah here from littleton. Thanks for having me. I was just wondering, i will admit i kind of procrastinated so im new to investing. Im 31 years old and work at dish network. In addition to 401 k that they offer with the Company Match i decided to invest a lot of my own money into dish Network Stock because i noticed they have had a good return over the last five years looks like a 30 return and within the last few months looks like a lot of good things happening with u. S. Airway and wireless specter and that big boost when that started. Just today i noticed they made an agreement with netflix. So i noticed today alone netflix stock increased by 5. 5 . I think dish is an amazing stock. I think you are in great shape and a smart guy. You are doubling down on dish. You work at dish and you are buying dish. Lets make sure that no more than 25 of your assets are in the company that you work for. But i do like the dish network very much. We can breathe again. We got some good news on the oil and Interest Rate front today and that is why we rally. On mad money tonight crude is back from the break but can we say the b word yet . Dont call bottom before catching my black gold dish. The five stocks that can make great buys if oil hits the skids again. Plus an under the radar name with over 60,000 clients. Ill reveal it just ahead. Stick with cramer. Dont miss a second of mad money follow on twitter. Have a question tweet cramer. Send jim an email to madmoney cnbc. Com or give us a call at 1800743cnbc. Miss something head to madmon madmoney. Cnbc. Com. vo watching. Waiting. For that moment, where right place meets right time. And when i find it i go for it. announcer at scottrade, we share your passion for trading. Thats why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so youre always connected, wherever you are. Because at scottrade, our passion is to power yours. On a day to day basis the market is totally enthralled to the oil futures. When oil goes lower the stock market gets clobbered. When oil goes higher everyone takes a deep breath and our stocks are able to rally fabulously. Now, there is no fighting this linkage even though it is really the opposite of what should be happening. It is counter intative. After all cheaper oil is great news for the vast majority of our companies which will see higher earnings as a direct consequence. Why you should always keep that longer term network in mind we have to deal with the fact that on any given day oil is controlling the stock markets direction. As long as that is the case i will be watching the price of crude on mad money like a hawk trying to explain the short term bearish relationship. That is why tonight we are going off the charts with the help of a technician who is senior strategist. I keep coming back to the charts here because of a situation where oil has been in free fall any commodity like that the charts are an important touch stone. Chartists and Commodity Traders are like this. Many times they are like this. Last week i highlighted the chartwork of the queen who predicted price of crude to punch down to the low 50s and catch a short term bounce this week which is what happened today as the price in crude climbed a buck and change before settling at 64 cents. He makes a compelling case that these are not to be trusted and tend to be shortlived and give way to more declines. Where does he come down . He thinks action in oil has been hideous. The recent decline in crude is not unprecedented. If you take an Historical Perspective he says it is clear this is not the end of the world. I want you to take a look at this ugly chart like paint by number da vinci. While oil is oversold at these levels lang says it could be oversold for time. He points out that rallies in oil tend to be sold aggressively after a couple of days. Where will it stop . No one really knows, but obviously the trend is not your friend here. That said, on the Positive Side massive amount of put options. The put to call ratio for crude was nearly 5 to 1 which is an extreme number possibly indicating the bears may have overreached. At least for the moment that is a positive. Lang says anyone trying to figure out a level trying to bounce is just guessing and trying to call bottom in oil is like catching a falling knife. You will end up with blood all over the place. So the outlook may be ugly for oil but this is a big but, that doesnt mean things will be ugly for the stock market as a whole. He does believe there is a good chance the market could shake off its recent melee. Look at exhibit a. This monthly chart from his friend which shows the s ps performance from 1981 through the year 2000. This demonstrates the s p can make new alltime highs. Oil was weak in 1986 and in 1991, 1993, 1997, 1998. Each year the s p soared tremendously to new highs. You just had to wait for the positive repercussions and not be confused by days like today where oil and the s p rally. That is because as i said at the top of the show the velocity of the decline has frightened people. When the fright is lost the confidence returns. The market rallies. To make this crystal clear, check out this table. It puts the numbers in stark contrast. In 1991 oil was down around 33 . The s p rallied 30. 4. In 1997, 1986 and 1998 oil down 32 . That is an incredible performance. In 1993 when we had a 27 decline in crude the s p 500 managed to climb 10 . The history shows clearly it is possible for the stock market to perform fabulously even when oil is getting killed down 50 from the high. That is part of the reason why he thinks this could be a terrific moment to buy stocks even after todays rebound. He also likes what he is seeing in the volatility index or the vix for short which measures implied volatility and s p 500 options over the next 30 days and used as a proxy for panic. Specifically lang wants to direct your attention to this chart at investing with options. Com which shows the relationship between the vix and vxv which measured implied volatility in the s p over a longer period. More specifically you are looking at vix to vxv ratio. Whenever the ratio is over 1 meaning whenever it is equal to or greater than the vxv that tells you a major rally is due. This ratio went above 1 yesterday. Today we caught a wonderful move higher. Every time this ratio has hit 1 or greater in 2014 the market has rallied sharply. If history is any guide you havent missed your move. Lang wants you to consider one more piece of evidence, a table from his friend. A super bowl box. This is from gracetrading. Net. I know he has done contracting out this week. This table shows you the average return after each instance where the vix has gone above the vxv like it did yesterday. Going over the last five years the vix crossed over 14 times. One month after the crossovers, in other words dont look at just the day to day. The s p 500 has been up 12 out of 14 times. The last time it happened october 9. We caught a 190 point run in roughly six weeks. If you look at the performance three months later on average the s p is giving you a 4. 63 gain. Very nice. Here is the bottom line. Yes, the collapse in the price of oil has pulled down the averages. We know that. As we saw today the inverse occurred, too. The charts is interpreted by bob lang who says in the median turn the s p 500 should be able to keep climbing even if oil resumes oil march lower. Longer term because of the super bowl box im inclined to believe him. Now, there is much more mad money ahead including my five stocks to buy if oil slams back to reverse. What do american airlines, verizon, hp in common . I will see if you can print green. Why dont you stick with cramer . Hi. Jon and Pete Najarian here. The popularity of options trading has skyrocketed. But we still hear from viewers every day who dont know how to profit from them. So we wrote an entire book to show you how we trade options. And if youre one of the first 250 people to call in right now and just cover the shipping and handling, well send you a copy for free. Look at the rates of return weve made on some of our recent options trades, versus what we would have made if wed just bought the stock. Theres no comparison. To make the best returns in todays markets, you have to learn how to trade options. And our book will show you how we do it for free. It shows you how to use options just like we do to make more money from every dollar you invest and to profit, regardless of which way the markets move. Its all right here in this book, folks. And today, you can get it for free. But only while supplies last, so call now. [ male announcer ] call the number on your screen now for your free copy of jon and petes new book. Thats. see the number on your screen call now. Holy cow, oil stable it actually spent most of the day in the black before a Late Afternoon selloff erased all of its gains. What if crude cracks again tomorrow . I think we ought to revert to what happened yesterday. The Chain Reaction where oil threatens a big roll over so traders panic and russia will collapse. We have to at least in this market get used to the idea that we are shadow boxing with an unknown, unseen foreign enemy that lurks at all times. We can call it mexico tomorrow or brazil. Of course, we have to understand that the world isnt set up as poorly as it once was and shouldnt expect it is a modest positive for the world and a Huge Positive for a country like ours. The lower price falls to the bottom line. Some countries control the price and it is not falling. We know that for the moment traders fear lower oil because of the consequences i laid out at the top of the show. What wins in this scenario . I like history and i like patterns. The best thing to do is go over what worked in yesterdays tsunami of selling. The first is cvs. Here is a company on an unbelievable roll not even blinking when put in a huge competitive advantage. Cvs health is an expensive stock. It is 505 to 519 earnings per share. This is a premium multiple situation and revamping that is so perfect for a time when oil has come down in price. You spend your spare change there on the way to the pharmacy at the back of the store. Next up is clorox. 13 billion company isnt shooting the lights out. When you can get it on a sell program down more than a point it is proven to be an excellent reach for. Clorox doesnt have the growth or big buy back but it has consistency. Only buy it down a buck. Third is hain celestial. Ceo has a terrific thing going. Every time the sellers come in and bombard hain that is proven to be a terrific time to buy. The secular theme is in tact. Fourth is monster. Here is one people claim i hurt them on along with keurig green mountain. I love it when im land basing for the winners. Just admitting to the obvious fact brings it out. Stock is up a phenomenal 54 since i recommended in july. It is not nearly as expensive because the earnings estimates keep rising. Using 3. 51 to 3. 66 earnings estimates for 2016 reasonable especially if you dont believe monster will be independent by then. Finally, there is an annoying stock. It does come in it always stops just like clorox at a 3 dividend yield. This one ad heres to a bottom in just about every selloff. Not a fast grower but magnet for capital and almost always gives a nice pump off a couple of points. I find these stocks mildly irritating. They never really go down a lot. If you cant beat them during the next sell off related to the decline in oil or stress overseas just join them or buy them. Steven in california. Caller hey, jim. Before i ask about cnq, heart felt condolence to you and your family from all of us, all of us, your dad together with you on the show. What a trade. Im going back and forth with my sister. She is helping. She may take over the family business. Caller good man. Go ahead. Caller my question would be about cmq. Should i buy it now or maybe somebody transporting the other company. Look, i think that these popped. There was relief. I know nordic American Tank and the rates are up. Every time a stock goes up seems to buy more ships. I say lets you got to catch these when they are down and not when they are up. You dont chase. Stephanie and i had the exact same dialogue today. Jeremy in oregon. Caller booyah. Condoleiances to you and your family. Thank you. Caller i am trying to take advantage of the oil slump. I bought bp around 41 a share thinking it was at its low. It dropped a few points since then. Should i buy more or hold on to what i had . Lets say oil goes to 54, we didnt get a big buy signal yet. We have to wait. The queen says it has to go up six bucks from where it was. I want you to hold off and let it come in. You have to let it come in to buy more. Got to make the average down worth something. Daniel in indiana. Caller this is daniel. My beautiful 9yearold daughter and we are calling from the great state of indiana. We would like to say booyah. Caller thanks for having us on. Our stock question is about clnt, indianapolis based company. Your 9 year old has horse sense. We are not going to buy it. It is way too risky. 11. 5 yield it is just too dangerous. I know calumet will say we are fine. I dont like to reach for yield. I dont like to reach for anything. That means i think it is a red flag. If you cant beat them, join them. Sure they are annoying stocks but they work, cvs, clorox, monster beverage and kimberlyclark. It is a printing giant with a growing digital clicker but going through the wall street shredder. Can the stock turn the page . I have the ceo. Taking a look at a company that will probably end up under your christmas tree. All your questions answered because im taking calls in the lightning round. Stick with cramer. Is it possible for an old dog to learn new tricks . Thats what im wondering about ord, worlds number one commercial printing company, just turned 150 this past october. Happy birthday. The stock has come down more than 20 year to date less than two points above the 52week low. Commercial printing may be in long term secular decline it is a fragmented market. The top dog can make lots of acquisitions. The company has a presence in packaging and labelling. You can see cool stuff behind me as well as logistics. Done a fantastic business preparing financial statements. After a string of disappointments managed to deliver two better than expected quarters in a row most recently on november 5. The stock has been slammed because the company is fairly cyclical. And got a ton of debt on the balance sheet. The stock is really cheap here. I think the massive decline in the oil prices could give the world a shot in the arm. Lets check in with president and ceo and learn more about where his company is headed after 150 years. Welcome back to mad money. Good to see you, sir. Thanks, jim. I have to admit im a little perplexed because you are doing so many new things. When i read the research all anyone keeps coming back to is the debt load, debt load. How is it that that is the story and not the innovation . It should be. We have gone public and said we want to keep our leverage ratio 2. 25 to 2. 75 on a sustainable basis. There will be times where we have done the acquisition to graphics where we have gone above that. With the cash that we can generate we will be back below and within the guard rails sometime next year. What i always tell people when i see a yield that is unnaturally high versus what you can get on bonds or the higher yielders like at t verizon i get nervous. I say it is a red flag. Why is it north of 6 yield not a red flag for you . We have gotten together in 2004 and given almost 14 billion back in capital deployment through acquisitions, capital expenditures, dividends, paid bond holders and bought back stock. We generate a significant amount of cash each year somewhere between 4 million and 5 million we have averaged. We continue to think that will be strong for us in the future. You are very conservative when you talk about projections. A lot of projections are things that will be flat. Im thinking if oil comes down you are not hurting in the interim. If oil comes down they all say we see better gdp growth. If we have better gdp growth dont we use more product . We certainly do. As we have evolved from 150 years where we were just a printer and then a print Services Company and now an integrated Communications Services provider we go ahead and are making end roads in the instore marketing and Retail Business as oil comes down consumers will have more disposable income. That will be able to be applied to these things here. I think chairman yellen said housing is not going as well as she thought. Housing starts to pick up, all of the communications, the impact that we have on peoples communications is significant to what they do with their customers. And i think what we have seen, too, from a print is the door way to digital and digital is a door way to print. In that case a nation like china, that for a company like yours with a lot of business in china is still pretty great. Our dna has been able to do really well putting ink on paper. As we go forward we can put liquid on substrates and some things you have here. Why dont you show me quickly . I think people keep thinking it is the telephone pages. These glass here, if we can print this in an economic Environment Friendly way it is humg. As you look at some of the instore marketing capabilities here, captain crunch, these are all items as you think about health care and censor labels we are not looking to say how much is your vacuum cleaner filled up . This tells you have you taken your medication . Where are you with your Blood Pressure . All of these things our job is to continue to get the word out that we are different. Printing is never going to go away. Its not. That is really pretty much the story. I think as long as you continue to consolidate and take share it is a terrific story. I think the yield is a real one and the growth can be there in 2015. That is tom quin, president and ceo of rr donelly. I know normally im nervous about a 6 yield. This one has the cash flow. Im not. Mad money is back after the break. Lightning round is sponsored by td ameritrade. It is time. It is time for the lightning round. And then the lightning round is over. Are you ready . Time for the lightning round. Joe in michigan. Joe . Caller booyah, jim. I have a question for you on avent s. Absolutely. Caller i bought it some months back. I remember you had the ceo on about a year or so ago and had a good recommendation on it. And the last three months or so its been in the house of pain. They fired that nice man. I liked him a lot. I thought he was doing a good job and they i think he decided to spend more time away from the organization. That makes me more skittish on it. May i suggest you buy abv. Caller cramer, you are my [ inaudible ]. Booyah to you. Booyah back. Caller the question is, ddd should i buy at 32 . Dont buy. No. That is because the system is saturated. I like stratus more. A year from now we will be watching hewlettpackard spinoff that we really like on 3 d printer. I need to go to ohio. Caller how are you doing . Thanks for taking my calls. Of course, im delighted to, earl. How can i help . Caller i have interesting p j energy services. They had a great q 3. They are positioned for about all aspects of completion but with the price of oil today could you give me your opinion . I think you have to wait for numbers to come down. My favorite in that group is baker hughes. If oil were going much higher i would recommend it. I need to go to harvey in my home state of new jersey right now. Caller booyah, jim. Booyah back. Caller thank you so much for all you do for us home gamers. Im doing my best here. Whats happening . Caller annally. I know that yield seems tempting but i do not want you in the stock. Im going to kristin in colorado. Caller hi, jim. Hey, kristin. Caller booyah. I wanted to thank you and your staff for inviting me on the show. I have a cracker jack staff although they keep eating the good food we have been getting. Caller i waunt to ask you about a stock we had bought. Bcrx. You know what, i got real high ones like celgene and regenron. I will steer you towards those. I feel more comfortable recommending those. Im going to new york. Caller nice talking to you from long island. I love the show and love you. Thank you. Caller i am a long Term Investor in ge. I saw you on the interview today with mr. Immelt. I would like you to explain about the dividends. I thought he did well this morning on squawk on the street. I think it is a good stock with a good yield. Thats what im saying. Im not going to pound the table. Im not going to tell you to sell. I think it is a good stock with a good yield. And that ladies and gentlemen is the conclusion of the lightning round. The lightning round is sponsored by td ameritrade. We are always trying to take the pulse of the economy here on mad money. There are few better ways to do that than talking to a paper company. Take cap stone paper and packaging. Formed in 2005 as special purchase acquisition forum. Since then made a series of smart purchases. Saturating craft paper and carton board. While it missed wall street estimates when reporting the latest quarter the company made positive commentary at a conference earlier this month. Yesterday did something extremely bullish initiating a Quarterly Dividend of 10 cents a share. You dont start paying a dividend in this business unless you know the future is good. And that payoff could get larger. Cap stone talking about doing something with a Master Limited partnership. Lets take a closer look with the chairman and ceo of cap stone paper and packaging who happens to be a legend in the paper industry. Welcome to mad money. Good to see you, sir. Have a seat. My late father sold stone corrugated pretty much all his life. I always thought it was like kleenex. I always knew when he was doing well he was selling a lot of container and not so well selling little. Right now you are selling a lot. Yes, we are. This is a good time for the business. It is an amazingly strong period given the issues in the economy. One of the things i always learn about container board is as soon as it gets good usually a bunch of guys come out and your terrific cfo saying you taught her they were going up or down. It doesnt seem like that price competition which im so used to is happening. Its not which im so used to, as well. And there has been a lot of stability in pricing. That is because supply and demand have been balanced. You know, my philosophy is if you cant sell it you shouldnt make it. Historically the industry made it without selling it, built inventory and then to move it created price competition. How is it possible in an industry undisciplined for so long finally got disciplined. Is it consolidation . Cost of opening a new mill . Actually, it is both. Clearly consolidation has been an enormous help. And the most aggressive players were essentially consolidated out. To build a craft paper mill today of any size or scale would cost a couple billion dollars, take about three years to build it and two years if you were lucky enough to get a permit. By the time you bring it in you have no view as to what the economic value is. You didnt have to come back. You had just an unbelievable career. Why come back after all the money you have made for investors and yourself . I came back because i really love the business. I had a passion for the business. I love to build things. And i was when i was retired i was looking into roll ups and i got introduced into a special purpose acquisition company. You got that one very inexpensively. People were bearish at the time and didnt realize the prospects . Longview is a company with great assets that was under managed overcapitalized and under managed. And nice people. And as a result it was poorly maintained. I think my story on that news when my partner visited there several years before we bought it when people were trying to introduce us to get into that. It was the worst looking paper mill i had ever seen in my life. And brookfield did an amazing job changing that. And when i visited the next time then you knew. My old friend richie perry buying on the stock. I know you cant talk about that or you havent. It seems like when you put the dividend in you recognized it could be good for a long time and not just short term. Fair enough . Well, the business is good for long term fair enough. The structure we like the structure we are in. We are still studying and it is an interesting kind of thing. We have not heard from the irs. Fair enough. I got to tell you, a legend in this business. I know it from my late dad. He knows this business better than anyone. Mad money is back after the break. Oracle good numbers. There is always a bull market somewhere i promise to try to find it. Im jim cramer, see you tomorrow. Lemonis how are you doing . Tonight, on the profit. Richard what do you think . Lemonis oh, my gosh. A progress report. This place looks great. Over the past 18 months, ive traveled the country, trying to help small businesses, everything from pie shops to usedcar lots. Wow. Look at this place. To clothing stores. Some were in desperate situations. Michael [ voice breaking ] do you think i like to stand next to a man like you and admit that i cant be successful . [ sighs ] lemonis others just needed some guidance. Come on. Youre a smart guy. You do the math. And i offered my money and my expertise for a stake in the business. Do we have a deal . Hank deal. Pete yes. Alan yes. Lemonis a few of the deals went south