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tv   Mad Money  CNBC  May 31, 2012 6:00pm-7:00pm EDT

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>> murphy? >> take the profits, up 10%, sell it. >> joe? >> disney. >> all right. i'm melissa lee. see you tomorrow morning on "squawk on the street" and back i'm jim cramer and welcome to my world. you need to get in the game! going out of business and he's nuts! they're nuts! they know nothing! i always 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 save you a little money. my job is not just to entertain you but to educate and teach you. so call me at 1-800-743-cnbc. most of the time the market kind of bumps along with investors reacting to individual pieces of data on stocks or the economy. occasionally, though, professional money managers react to a very different stimuli. .
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not individual pieces of news, but actual movement in different assets. and they simply freak out. and today, when the averages got pounded before rebounding, dow closing down 26 points, s&p declining .2%, we were in full freak out mode. what are the pros freaking out about? and how can you try to profit from their panic? right now it is 100% all about the bond market. specifically the incredible and may i say almost mindless buying of u.s. treasury bonds no matter how low their yields go. no matter how miserable a return you get. james carville, the brilliant political analyst and former adviser to president clinton famously once said and i quote, i used to think if there was reincarnation, i wanted to come back as the president or the
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pope or as a .400 baseball hitter. but now i'd like to come back as the bond market. you can intimidate everybody. now, when carville said that, he meant if a government was spending like a drunken sailor, the bond market vigilantes, sharp, tough, fixed income professionals who do nothing but trade bonds all the time would sell that country's bonds aggressively causing interest rates to spike. makes sense, right? think about it, if the government's going to spend like mad, you don't want to lend it money, do you? not unless you can charge much higher interest rates. but now that very logic is totally breaking down. the u.s. government's borrowing at record levels. the demands by the treasury for more money are insane, come on, tim geithner. it's insane how much money the government needs. who would lend money to those people? you either have to be an idiot
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or a loan shark. yet today we saw the ten-year treasury, u.s. treasury trade down to 1.6%, meaning n ining i are willing to lend this government money. where's shiloc when you need him? you can have your bond. this amazing demand for treasuries in spite of these rates is causing a gigantic freak out among stock market professionals who always keep one eye on the bond market for guidance about the economy. right now, they have both eyes on it. that's how stupefying this move is. why are the pros panicking? because this dramatic rally in treasuries tells them two things and both r & d bearish for stocks. the first is a presumption that the demand for money must be much lower than we thought. remember how old-fashioned banks really earn a living. they pay you low interest rates in your deposits and loan that money out and pocket the difference. given these current low rates,
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you'd expect people to be clambering for loans, but the pros assume that can't be the case. since the demand would drive rates up, not down like they're going now. think about it. if you believe we're having a housing-led recovery in this country, you'd expect mortgage rates eventually to go higher, not lower. but the opposite is happening. if you believe the economic activity is rebounding, you'd expect businesses should take down more and more loans, yet interest rates and commercial loans are falling, not rising. and to the professionals, even though the data may be different, these are sure signs that demand obviously is not picking up. and we thought it was earlier this year. and you get those bad employment numbers and people say, wow. the professionals, i don't know. i think they're jumping to conclusions here. nobody's stopping to think, hmm, just because mortgage rates and commercial rates both are priced off of treasuries are going down doesn't necessarily mean demand is really weak. but the professionals presume
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that's the case which causes them to panic and dump all the stocks of companies that they thought might be doing better because the economy they thought was doing better. and that's direct correlation with the bond market. they don't want to outthink the bond market. they're scared to. so they want to sell anything economic sensitive. the oil, techs, the industrials because they fear business has to be falling off a cliff or else rates would be shooting up, not down, given the government borrowing needs. the second freakout. lots of professionals take one look at these rates and say, oh, boy, something's lurking out there, something terrible. it's time to be afraid, time to be very afraid. what are they so scared about? because in 2008 we saw an increase in bond prices and dramatic increase in interest rates right around lehman brothers collapsed. this time, there's been more of a surge. so lots of prognosticators say something worse must be happening in the banking something. something positively out of a stephen king novel, like that
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lincoln tunnel scene in "the stand." again, the freak-outers aren't looking for bonds in the stock market. they want to go not into the fox hole, not the bunker, be straight into the fallout shelter, the ultimate flight to safety. now you know why the professionals are freaking out. we're not bond traders, right? let's profit off their freak-out. i'm not so arrogant to say you should ignore the sirens. when i started at goldman sachs, my first teacher now works at morgan stanley. he taught us that the u.s. treasury market is way too important, don't ever dismiss it. however, when rates go down, people are always going to search for a better return. right now we're making so little in treasuries that you'd be nuts not to look for a better return away from the bond market. and to me, that's good news about some, not all, but some stocks in our market. and you know what? no, let's make that great news. because as interest rates decline, the dividend yields, i
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like, they get even juicier. if you can find stocks that aren't particularly economically sensitive and have no response to the european implosion, they're getting more valuable by the day not less valuable as the treasury pays youless and less to own the bonds. far more credit-worthy. and that's what happened today. at one point midday the treasuries had a gigantic spike. almost by magic, we saw stocks with high yield snap right back. buyers swooped in to pick up stocks like honeywell, stocks with yields that had been become more attractive. this action makes a ton of sense to me. think about it. honeywell, 3m, united technologies, they've got economic sensitivity. maybe people aren't being fearful enough with those. do you think walmart will do worse if the economy slows? frankly, i think it'll do better. do you think they'll cut the dividend? i think they'll raise it. does this get less attractive as treasury yields get crush? i say more attractive.
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and that's why in the midst of all this chaos, america's retailer hit a new high today. that's an astounding figure. but i don't care. i only care about the ones that will do just fine even if things get worse, much worse this country like the bond market's saying. here's the bottom line, don't be blind and paralyzed with fear like the bond market freak-outers. stop and think about which stocks are getting more valuable because treasury yields are going lower and picket them when these professionals, so-called professionals, panic. that's what worked today. that's worked this whole horror month, good-bye, may, and it'll be working for the rest of 2012. bruce in arizona. bruce? >> caller: good evening, cramer. i'm calling from the garden of eden, flagstaff, arizona. potash or mosaic? which one put more of in my portfolio? >> i think potash is a better-run company, mosaic could
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be taken over. we saw once when people tried to take it over and the canadian government intervened. all that said, i like yield, i don't like the economic sensitivity, people think potash has both. not enough yield and more economic sensitivity than we thought because a lot of people can put up fertilizer plants quickly. i'll go to bill in new york. bill? >> caller: hey, jim, boo-yah from bill from long island, new york. >> long island, i'll be there this weekend. >> caller: listen, jim, i bought nike stock about a month ago and my understanding is they sold two of their brands today. my question, jim, should i invest in a few more stocks? >> look, we know -- we know from finish line, we know from footlocker, the sneaker business is strong. we know that nike's got a ton of new products available. we know that nike, unfortunately, is up 30% year-over-year, but that said i like nike on a pullback. and i like the new device that shows how many calories, it
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syncs with your ipod or ipad. if you haven't seen this thing, it's blowing. it's blowing. i like nike. listen, guys, stop freaking out. use the freak-outs of others to your advantage and buy the stocks whose yields keep growing versus united states treasuries. "mad money" will be right back. coming up, divide and conquer. get over your first love. some breakups can provide more than heart ache. tonight, cramer's highlighting a company that split could be the best thing to happen to its stock. should you pick this one up? and later, leaving las vegas? wall street showdown on the strip is coming to a head. cramer's taking two opposing takes on one sin city stock and facing them off in a no holds barred smackdown. stick around to find out if you should hold them or fold 'em. glass half full? domestic play dean foods has
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thrived. now the s&p's best performer in may up over 25%. can it continue to protect you from european woes? cramer pores over the details in his exclusive with the ceo just ahead. all coming up on "mad money." on june 15th, we're celebrating our fifth annual edition of "mad money" it's a family affair. >> once a year only, check it out. >> want to join cramer in studio for the special event? >> we're having a bit of a brotherly dispute. >> head to sign up for free tickets. >> the family that invests together stays together.
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in this turbulent market, you need companies that give you something extra. little extra juice. some additional catalyst that can help you make money regardless of the latest bad news from europe. that's why here on "mad money," we love breakup stories. it's not that i'm some jaded cynic that hates romance and gets a kick out of watching relationships fail. i'm talking about that kind of breakup, it was thrilling to watch that kim kardashian marriage fall apart on national tv, though. and i can't wait to find out what happens with her sister khloe and lamar odom. no, i mean corporate breakups, silly. when a company breaks up into pieces. we know that breakups have been great places to be during the current turmoil. managements are conscious that the markets aren't giving their earnings much value at all. that's the priced to earnings multiple shrinkage i talk about all the time. but a breakup changes the equation. just look at the recent spinoff of post. its quarter wasn't that good,
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yet the stock's been a good performer. then there's bean, the liquor company stub of the old fortune brands which has been hanging in there like a champ. and not just because i'm a huge consumer of the anything but cheap scotch that i like to sip on when i roll into home and chow down on my dirty linoleum floor. so i've got another breakup story. take mcgraw-hill, which is both the parent of standard & poors and a big textbook publisher. needless to say they don't really belong under the same roof. main they don't belong in the same neighborhood. >> the house of pain. >> and last september mcgraw hill agreed with me. they announced it would break itself up by spinning off the education business as a separate company. this is exactly the kind of breakup that unlocks value. because it's taking two businesses that don't really belong under the same roof and
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separating them into separate companies. they'll be more appealing to wall street on their own than they ever were together. this is the kind of breakup i like to watch on national tv. split should be complete by the end of the year, giving a growth stock that includes standard & poors and mcgraw hill education. that's a value stock with a slow and steady wins the race textbook business. now, mcgraw hill is one of the most shareholder-friendly companies in existence, unlike many other publicly traded firms. they've always done, i think, always done what's best for their shareholders. and the separation to a growth stock and value stock correctly mimics what's going on in the marketplace. since they're value oriented or growth oriented, the rubrics matter. they want one or the other, not both. the same that's willing to pay 700 times earnings for linkedin, is simply not going to be interested in a company that has
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a slow growth textbook company under its same roof. as mcgraw hill is currently structured, it doesn't really appeal to either group. but after the breakup, each company should have its own big constituency of money managers who will lap it up. i also from trust mcgraw hill to do the right thing because it does have excellent management. consider this, business week had been mcgraw hill's flagship property. but when it faltered, management has no qualms about selling it to bloomberg for next to nothing. these guys, they take no prisoners. tmp, willing to take tough actions. why am i recommending the stock now? because the stock has been going down. i always like the ratings agency side of the business. more on that in a moment. but i have had my doubts about the textbook side of things. that is until yesterday. when i read a terrific article in the "wall street journal" that got me thinking. this is the kind of things i do. i look at this story, textbook sales and i say wait a second, let's make money off this.
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apparently a new set of standards that apply to 45 states will soon hit the books. creating a tsunami of demand for new textbooks by 2014. this breakup happens at the end of the year, 2013 is going do discount 2014. this makes mcgraw hill's textbook business to me look a lot more attractive than i thought before i saw the article! okay. now, do you want to own that piece of business? i don't know, it's going to be a tax-free spinoff most likely trading as an orphan since it won't be in the s&p 500 itself. oh, cruel irony. and it can't be taken over for a couple of years. however, it will generate a hefty amount of cash and it's got this cool digital ticker as the company's partnered up with apple to release textbooks for the ipad. this is one of the last things steve jobs worked on. and i think it's going to make it so the ipad will do great. everyone's going to get the ipad
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from first grade on. it is the financial side i like the most and i think will be rewarded with a higher valuation once it stands on its own. the business model is simply brilliant. pay them to rate and pay to get the ratings. at a time when interest rates are setting record lows, that means there should be a ton of debt issuance. it's going to continue to come. so therefore, it is a terrific time to be in the ratings agency game. as companies are eager to refinance at lower rates while paying standard & poor's for their opinion. despite numerous critics who said s&p didn't do enough to call to attention with the ratings, the franchise actually remains as strong as ever, actually if not stronger. the role in the system is undiminished, even as you could make a pretty darn good argument that it deserves to be diminished. just like deserve's got nothing to do with it. >> look, i'm not making a judgment here. i just think that s&p and moody's represent one of the
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great duopolies today. plus the litigation against s&p for the role in the housing crisis giving aaa ratings to pieces of mortgage back paper that turns out to be junk has left the firm totally unscathed since it got free speech protection. this is much ado about nothing. it's a side show. and while s&p is the largest part, it's not the only part. once they get rid of the textbook business, i think you'll see some of the pieces unlocked, like this thing called plats, the energy information service. given the commodities, hedge funds trade them in and out, pension funds, the value of plats has never been greater. since you have a whole new class of buys who need their service. we also know that mcgraw hill is coming out with major cost cuts expected to deliver $100 million of cost savings by the end of the year, they've got hundreds of people working to find where costs can be cut. buyback going on. they've got a very aggressive
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buyback since the beginning of 2011. they have repurchased 36 million shares and an average price of $4.35. that's 12% of the total outstanding shares at a price -- not a bad price considering where the stock's trading now. the company plans to resume their bountiful buyback. but the best thing about this split, it makes it easy to figure out which company is worth. you know, before this, i could never really figure out how to evaluate how mcgraw should be valued. the financial side should be valued like moody's, the textbook should be valued like pearson, there are competitors, based on that logic that it could be worth more than $38 a share, that's 30% higher than the company is trading right now. that's a ton of hidden value to unlock and boy does this matter. lately this stock's been getting hit and getting hit hard as people aren't that excited about the near term earnings picture. even as mcgraw hill did raise its forecast, the the company
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has about an 11% growth rate and sells for 12 times earnings. that tells you, again, while it isn't intriguing to most buyers, but those individual parts are. and this company is tired of the disparity between the sum of the parts and the whole. here's the bottom line. we love breakups here on "mad money." and the mcgraw hill splitting into a growth financial services firm dominated by s&p and a value-oriented textbook firm should be fabulous for you if you're a company shareholder. after the break, i'll try to make you more money. coming up, leaving las vegas? wall street showdown on the strip is coming to a head. cramer's taking two opposing takes on one sin city stock and facing them off in a no holds barred smackdown. stick around to find out if you should hold them or fold 'em. and glass half full?
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domestic play dean foods has thrived, now the best performer in may up over 25%. can it continue to protect you from european woes? cramer pores over the details in his exclusive with the ceo just ahead. all coming up on "mad money."
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♪ whenever you're thinking about buying a stock, you should always learn all the pros and cons before not after, but before you pull the trigger. and that's why we love it here on "mad money" whenever two analysts come out with dueling opinions on the exact same company. take wynn resorts that makes the bulk of its money from properties in macau. it's much bigger than vegas and what happens probably goes all over the place. wynn has been hart hid the stock falling 23% worries about potential of a gambling slowdown. it's enlightening and incredibly confusing when analysts from goldman sachs and jpmorgan each took trips and came back with
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two different conclusions. based on optimism about the business. but the very next day, jpmorgan came out and cut numbers. based on their concerns about a slowdown in v.i.p. gambling. we've got to rely on the analysts who actually had their feet on the street to make a decision. but what do we do when these analysts can't agree. let's start with the bull case. goldman sachs sees wynn as a stock where nearby controversies have obscured the terrific long-term fundamentals, accent long-term. the stock's been slammed courtesy of worries about a slowdown in china and macau in particular. and it hasn't helped that involved with negotiations with a former board member who was accused of inappropriate activity. and as a result has had his 20% stake in the company retired at a 30% discount. though that is being disputed in court. with the stock now almost 40%
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off its highs, goldman sachs thinks the negatives here are baked in. meanwhile they see these positives that they don't think are fully reflected in the share price. wynn's building a new property on the hottest part of macau opening in 2016. and could be worth anywhere from $23 to $60 a share. that's a big deal given this is a $103 stock. the goldman analyst also likes no new competitors can enter the market. there isn't any room and the authorities won't allow it. that's a big positive, especially considering there are huge infrastructure improvements happening over there like new bridges and high-speed trains bringing in more customers to the casinos. in the meantime, wynn's got a 2% yield. and goldman believes the company could pay another special dividend in the future, it's done that in the past, because it's paid $4 and $8 a share on different occasions. thad be spectacular. plus they see the stock going
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higher as we get more news on the strip development. what about the bear case? i don't want to overstate things because jpmorgan still has an overweight rating, not an underweight rating. i'm not implying they've pulled it, but they've got a lot of negatives. they seem to have a much dimmer view. and they did dramatically cut their price target from $160 to $134 after coming back from their trip. what's the problem? at least according to the jpmorgan gaming analyst, did they just not have a good time on their vacation? maybe the guy dropped a ton of dough at the tables. maybe lose at the slots, crap out at the craps? no, in fact, the jpmorgan analysts are seeing a big decline in the amount of money being thrown around by high rollers. they predict v.i.p. growth at 6% to 8% in may. that'll be down huge from april. that is very worrisome. the v.i.p. business has been decelerating since the third quarter of last year. and that is bad.
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these v.i.p.s are a big deal. they account for 40% of the earnings before interest, taxes, depreciation, and amortization. a little more than 40. jpmorgan doesn't see this v.i.p. slowdown as a blip either. they're up against tough comparisons of macau. at some point, the v.i.p. growth was going to have to slow and jpmorgan thinks that point is now. and that's why jpmorgan sliced that ebitda outlook slashing numbers by 10% in the second quarter and 4% for both 2012 and 2013. not good. my view. all right, look. i love this management. i've got tremendous confidence in them, especially steve wynn, the founder, chairman, ceo who is an amazing man. incredible operator. every detail. nothing's too small for him. i think this stock seems incredibly cheap here, selling for 14 times earnings with a 14% growth rate. i think the long-term story in macau is just fabulous.
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plus, i don't know if you're following this internal fight among the political leaders in the communist party, but right now looks like the capitalist rotors have -- and the crowd has advanta vanquished those who prefer a lot of blooming flowers. too many things have to go right with a story on a market punishing companies viciously. there's the shareholder lawsuit and the fact wynn is dependent on china at a time everyone's terrified by the slowing in the chinese economy. if china has a hard lending, something socgen suggested today, then wynn would get crushed like a tin can. i don't want to own wynn right here, right now. the most important part of my calculation, the big catalyst of this company, their new development on macau's strip i mentioned, hey, come on, it's four years away. macau's been experiencing major
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wage inflation, maybe the project will take longer than expected to finish. maybe the chinese communists who have become very, let's say, inconsistent, do something against the company. the fact is, even if wynn executes perfectly on this, there's no reason why you need to own the stock right now for a catalyst that's four years down the road. you've got all the time in the world. why not wait for a better moment when we have better clarity on china and wynn's on a firmer footing than it is right now. here's the bottom line. when analysts fight, you're the one who wins. goldman sachs makes a pretty solid long-term case, but jpmorgan gives us too much to worry about. about these short-term casino issues in macau. you know what? let's compromise. i think they're both right in their own way. wynn has a fabulous long-term story, but this is a horrendous moment to own the stock right now. wynn is a battleground, and in this market, battlegrounds get you killed. don't be a hero, take a pass and
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step away from the gaming tables, at least for now. i want to start with samuel in california. samuel? >> caller: yeah, this is samuel. >> yo, yo, what's up? >> caller: hey, thank you so much for taking my call. i'm a big fan, but listen, i had some stock in entertainment when it first came out, but i sold it. and i've been watching it. and i've noticed a pullback of about 20%. and then i noticed yesterday there was a change, is this a signal for me to buy again? >> there was a terrific trade here. and i think the trades occurred. and let's have it go back to $10 and we can start over. the casino group is not a great place to be in right now. but they're delempveraging. that's a fabulous long-term strategy. gary loveman, the chairman, president, and ceo is always welcome on the show because he's a great manager. rob in florida, please, rob? >> caller: hey, cramer, i want
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to give you a florida state boo-yah. >> boo-yah right back at you. >> caller: my question is about coin star, they're signing a streaming deal with verizon, do you think the stock can go higher? >> this stock leads a charmed life, it's up big for the year. that said, i see netflix coming down, i see competition everywhere in that business. i say -- >> sell, sell, sell -- >> all right, no one is showing a poker face when it comes to wynn. both goldman sachs and jpmorgan are playing with open hands, okay. and they are actually both right in a way. i like wynn for the long-term most definitely. but for now, i want you to step away. there's a lot better situations out there. stay with cramer.
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it is time. it is time for the "lightning round" on cramer's "mad money." you say the name of the stock, i tell you whether to buy or sell. play until you hear this sound -- and then the "lightning round" is over. are you ready skee-daddy? it's time for the "lightning round." start with mike in california.
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mikey? >> caller: yeah, boo-yah, jim. thanks for taking my call. mike from pittsburg, california. >> refinery area. >> caller: i would like your expert opinion on the stock pcs -- >> no, its time has come and gone. i think the business is not doing well. i'd rather own some sprint bonds. norma in my home state of new jersey. norma? >> caller: hi, how are you, jim? >> real good, norma, how are you? >> caller: i'm great, honey. i love the show. i love the show. i'm a new investor, i just ordered "getting back to even" on audio. i'm asking about chimera. >> you know what? i want you to own the company anoly capital. it's been money good and i think that's the better play. very, very good manager. let's go to dave in california. dave? >> caller: hey, jim, boo-yah from southern california. how's it going today?
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>> real good. how about you? >> caller: well, i can't complain. i can't complain. jim, i've been doing a tremendous amount of homework on reits, and i decided a while back on realty income corporation. i have a combination of the preferred and the common. it's a heck of a dividend and pays monthly. and looks like they're going to have explosive earnings in a couple of years. >> and i totally agree with you. i think it's a great call. domestic play with a good dividend. great growth prospects. well played, well done. let's go to keith in new york. keith? >> caller: boo-yah, jim. how are you? >> i'm real good there, partner. how about you? >> caller: good. my question's about office depot, i've lost money in it. what do you think? >> i think you've got to stay away from office depot, $2, i don't care, it's not even a lottery ticket. home depot is the depot i like to go to. let's go to will in california. will? >> caller: mr. cramer, red hot
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boo-yah to you. >> area 51 to you, what's up? >> caller: two weeks ago you got brocade communications, down 10%, is it good? >> yeah, there was one guy at my reunion who was running brocade. no, i don't like the stock, i don't like the segment either. but how about gary smith doing that good number for cnn? how about jason in massachusetts? jason? >> caller: jim, i have a hypothetical stock pick if there is such a thing on that. next week spain is injected with 30 million euros and greece is awarded the prize money for winning the continental anthem contest, virgin media has an aggressive buyback, is 52% growth in its p.e.g. ratio is zero. >> why do you need that craziness? if you want to get into craziness, go buy some vodafone. i like verizon because i like to sleep at night. >> buy, buy, buy! >> and it's a good thing to do.
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well, and that, ladies and gentlemen, is the conclusion of the "lightning round." >> the "lightning round" is sponsored by td ameritrade.
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there's no doubt it's been a terrible month for most stocks. s&p down over 6% for the course of may. as i tell you every night, there's always a bull market somewhere. and right now it's in defensive companies with domestic security. meaning they do little or no business overseas. how do i know this? well, consider the best-performing stock in the s&p 500 over the last month. it's dean foods, df, the largest purveyor -- numerous other brands including the white wave opera, a lot of interesting products under that. in part thanks to the spectacular earnings beat and up nearly 9.3% since i recommended it monday of last week. okay, full disclosure, i did tell you to wait for a pullback, but the stock doesn't look back. the phenomenal performance of dean foods practically leaves me speechless. what can i see other than, of
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course, got milk? that's why i'm thrilled, just thrilled to have grey ingalls to talk about his company's prospects and give us a blow-by-blow of what will be the turn around of the era. >> thanks for having me. >> honored to have you. the best-performing stock for the month -- i mean you shot the lights out. this was also the best quarter versus expectations of 2012. and i wanted to read a quote from a deutsche bank report that says after over two years contending with significant input cost pressures, a struggling economy, and irrational competition, dean's first quarter '12 results suggested the company may have finally found its way back. can you parse this for me? how is it possible that you've had cost pressures, pricing, and just an explosion in earnings? >> well, first of all, the challenges of the last 2 1/2 years were largely reversed. so we had 33 out of 36 months to
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have milk prices marching up, gas prices, diesel prices, which are huge for us, marching up. that turned over, rolling back. >> just like a gambler losing every single time. >> we had a tough hand. and the macro situation has gotten much better. natural gas is helping, that's all tail wind for us. but really, i think the biggest story for dean foods is we had a spectacular beat on the top line in our white wave outpro business. >> you've got to point out -- >> absolutely. the white wave businesses is the silk plant based beverages. and then, of course, a fabulous coffee creamer business riding the coffee trend with international delight. so in the coffee business, we are up net sales 20% for the quarter period over period. in -- in the silk business, net
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sales up almost 25% of net business. >> 25% for a product that is organic milk. >> well, it's -- >> well -- >> organic milk, but really the plant-based businesses and the coffee that's driving -- >> because what really was amazing and i think you're too humble. the rest of the industry did not do well. >> well, the milk business, volumes are soft, right? and we're taking share -- >> not your volumes. your volumes are up huge. supposed to be a commodity business. it's not commodity anymore, is it? >> this white wave outpro segment is the value added dairy and dairy-like product segment is just huge. it's healthy and wellness -- >> right. >> it is lower calorie, it is plant-based, it's on trend, it's just a huge opportunity for us. and i think we have years of growth ahead of us in that category. >> i pick up the paper today, bloombe bloomberg, very progressive mayor is going against soda.
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you are part of the anti-trend, right? when you look at this, this is like whole foods. this is where the country's going. >> absolutely. look, these businesses are small compared to the milk business today. >> okay. >> if you take this plant-based beverage category, it's $1 billion plus category? milk is a $25 billion category. so we're going to, i think, see a continual shift into these healthier forms of beverages. and we're just so excited about it. >> it's important, though, you say yes, but in terms of the profits of your company, this is gigantic as a percentage. >> it's gone from about 15% of our profit couple of years ago to in the latest quarter 31% of our operating income. >> amazing. now, there was some weird thing going on at the supermarket for a couple of years where they were giving your stuff away to get you in the store. that must not have worked out because it's not the case anymore. >> you know, when we went into this deep recession, milk prices
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fell with global commodities. you saw retailers get really promotional around this. the gallon of fluid milk -- >> the regular. >> in many cases selling it well below their cost to drive store traffic. that hurt my local brands like tuscan, because i was on the shelf at $3.50 a gallon against a 99 cent promotional price. that was a difficult period for us. i think at the end of the day, we didn't ultimately drive a lot of traffic by deeply discounting milk. that seems to be unwinding. and that's a much healthier environment for our liquid milk business. >> so you're fixing that balance sheet by the day, right? >> absolutely, we're deleveraging steadily. >> and these analysts may disagree with this though i favor breakups, they want to unlock the value by having this division spun off. but this is one where it really does all work together, right? you talked about the fuel, the cost to get to the stores. i mean obviously that would -- it would make it so your cost would rise if you split the company up. >> well, probably not, jim, actually in our case.
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>> okay. >> because this stuff. silk, horizon organic goes through a warehouse distribution center. this short shelf life product, it rides on my own trucks. these really don't travel together. >> you're telling me it might make sense to do? >> yeah, i think you've got to z yourself the question, relatively low margin business, relatively low growth business, relatively capital intensive, high margin, high growth -- >> this would get a 30 multiple, right? a whole foods-like multiple and the stock would be worth in the 20s the moment you did this. is my view. >> i appreciate your view. i think that's -- >> let's leave it at that. >> i think that's constructive. >> gregg engels. there's so much more upside, i feel badly for telling you to wait for it to pull back because it's worth a lot more than the stock price. stay with cramer. thank you so much. >> thank you.
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them versus us. isn't that what it comes down to? why are we so willing to buy domestic stocks but don't want anything with european exposure? i think it comes down to the differences between our political systems and central banks. i hear tons of criticism all the time about the federal reserve and ben bernanke in particular. what's he guilty of? creating an environment where people aren't afraid of their shadows? giving us confidence he has our backs? recognizing deflation not inflation is the boogie man.
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understanding that europe could pull us down? or how about our political system? sure very few people like it, most will tell you it's broken in some way or another. but let's face it, there's no rioting in the streets. when we hear the term occupy wall street these days, we think about an ad campaign. our political party, democrats insisting one thing, republicans insisting the other, but neither of them going to storm the palace. now, contrast that with europe. they have a central bank that inspires no confidence whatsoever. it hasn't even taken back the second rate hike from last year unlike our fed where there are many voices and really only one matters. they're always being quoted saying different things. why should there be any confidence? they have some people signaling that the currency should be broken up, some love it. some want bonds printed by the central bank, others think that's preposterous. but the banks survived. they keep going. at least we have standards. they've got nothing. no real rules at all.
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which means that no one really knows what's going on in europe. and when nobody knows what's going on, you have a situation where you don't want to put money to work because you have to be afraid it will be instantly for not. better to go by u.s. treasuries. we're not perfect here. our system has tons of flaws. when you compare us to europe it's night and day. i would fear any investment over there confiscated at this point. i would fear an imminent outbreak of class warfare in several of their countries. here we just debate the merits of private equity and don't reach many conclusions of any gravitas. even we did our gridlock government wouldn't be able to do anything about it anyway. it doesn't matter how well a company's doing in europe. the fact that it is in europe means it's subject to these political politics. stick with cramer. next on the "kudlow report," the congressional budget office says obama's stimulus cost an outrageous $4.1 million in jobs
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seconds away on the "kudlow report," why isn't president obama worried about massachusetts ten years ago when we could be in the front edge of a recession right now? and all of the important wisconsin elections, governor scott walker is pulling away union membership is fading away dropping 50%. and what


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