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tv   Mad Money  CNBC  June 6, 2016 6:00pm-7:00pm EDT

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mine, with lululemon. i said pete's wearing them, i'm buying it. look what the stock has done since. >> nicely done. >> i'm melissa lee. be back here tomorrow at 5:00. don't go anywhere. "mad money" with jim cramer starts right now. "mad money" with jim cramer starts right now. my mission is simple -- to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money," welcome to cramerica. other people want to make friends, i'm just trying to save you money. my job is not just to entertain you but to keep you and call me. call me at 1-800-743 hi- -- no likes to be disciplined and they don't like to follow the rules.
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i don't blame them. i was a rambunctious kids when i started managing my own money. at first i didn't know the rules then i spurned them because they cut off my upside. even if they cushioned the inevitable downside. in other words, the rules kept me from making a huge amount of money when things were going gangbusters in order to keep me from losing big money. when things went badly. >> the house of pain. >> the rules i'm discussing tonight keep you in the game even when things are tough and you make mistakes. [ buzzer ] >> they protect you against your own bad judgment or whatever is happening in the market overall. but if you're going to make money using stocks because you just can't get much of a return anywhere else these days, that's pretty much the case you are going to have to work harder with your money to do so. and that requires discipline.
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discipline because once you start buying and selling stocks, you can make more mistakes than if you just do nothing with your money. but if you do nothing with your money you will have a whole lot of nothing to show for. that's why we are doing a show tonight on how to trade and invest responsibly to make your money work for you. how to tend it, how to make it grow, what kind of gardeners of money tonight, how to keep it growing through active money management. it's not a sin and a lot of you practice it. i want to you do it right. before we dig into the ways to make it grow by being hands-on about it i want to delve into psychology of stock ownership. one question i'm asked when people stop me on the street i go back and forth from the street to "squawk on the street" and wall street or ask me @gymcramer on twitter. don't you worry about your stocks. now, it is true i don't own any individual stocks. i investor just for charity with all profits and dividends given
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away to charitable causes more than $2 million in the time since i set up my trust. but believe me, i still worry as i want to be able to give as much money to charity as i can. plus, i disclose everything i own and tell you what i'm going to do as mart of the bulletins. you bet i am concerned. it can be downright embarrassing when i get it wrong. yep, i'm always worried about the trust stocks. especially when they go down. i am doubly worried when they go down when the market as a whole is going up. that's a sign to me that something is wrong. that something -- someone knows something i don't know. and then i better find out or i won't be able to take advantage of the weakness. that's why i'm always bigging you about reading the news releases and going over conference calls that part right before the "q" and "a" and guidance and going to websites for more info. you can't be informed if you don't try to inform yourself. i know those who don't know what
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they own and can't articulate what they own and don't know what a company makes or sells don't know why it would be going down either. so they don't know whether to buy or sell into a big sell-off. however, we are talking about psychology here. the psychology of the mind when all that homework doesn't pan out, believe me, it is frustrating when we select a stock to highlight we do a massive amount of work every single time. it is really difficult to see it go down. but there are plenty of times when there is, say, something you can't detect, chicanery in the numbers. plenty of time there's puffing by management and don't know the truth. i talk about press releases that make things sound much better than they are. the ones that start by saying we are pleased to report that sales increased by 12%. and it sure sounds good except the consensus of analysts was looking for 20%. which means with that 12%, you've got a hideous shortfall.
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>> boo! >> or worse than that when you own a stock and someone out there knows the truth and you don't. maybe someone found out about the truth playing golf with an executive. you know that goes on. maybe some hedge funds paid under the table to get the truth as we've seen for years and years. even as many of these titans that ended up in jail for doing it. in other words, the insiders had the call. you didn't. they're also times when you simply own too much stock in the market versus what the market is going to do. we call this being too long. you are too long as the professionals say and you can't buy any more stock on the way down because you're so out of capital so you're going to lose money or at least on paper or worse you are borrowing money to finance your portfolio. [ buzzer ] >> which i think is a terrible idea. you can't fall back and live in them if you have a moragy by th margin.
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>> sell, sell, sell, sell. >> so what do you do? how do you manage a portfolio under conditions where things go wrong with the stocks you own all the time and things go wrong in the market all the time wholly apart of what's going on at the end of individual companies in which you own shares. there are no magic bullets but i believe that when in doubt this one principle is key, discipline trumps conviction. memorize that term. discipline trumps conviction. i stared at a yellow post-it with those words for many years when i was managing money professionally to remind myself that things go wrong and you need to have a scheme to help you deal with those situations when things go wrong as they inevitably do. yep, i put a discipline trumps conviction sign right on my personal computer to remind me of what to do in the stock market when things go awry. one of my best forms of protection is to recognize if
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you're not tough on your own decision-making and like all of your stocks equally or pretend to like them all equally you can't be flexible and change up when things go wrong. that's bad, people. that's why i've come up with a system of ranking my stocks when things are good and times are placid as hedge funds against -- these are hedges against yourself for when things get tough. you know, when it's really calm out there, you can really do some good decision-making. not all stocks are created equal. when things were kerr -- bad, around a good few stock, buy them down to get a better basis. why does this matter so much? we must expect corrections. and we must expect declines as a matter of course more on that later in the show. we must anticipate the days where we wake up and hear good people on "squawk box" saying they're down a great deal and market is looking to open down a
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half a percent or a percent. we heard what triggers corrections but the most important thing is have a game plan where you know that even when you've done all the homework and have the tremendous vick, discipline dictates you must assume there is something you don't know going on with your individual stocks or that there is something happening in the world that is beyond the control of your acumen and you're just being victimized by the events of the moment. my ranking system will indeed get you through the chaotic times. allow you to stay cool about your money when all others are fumbling and fretting and deciding they can't take it anymore and have to get out of dodge at the exact worst time. so here's the bottom line, in order to be able to deal with the decline in your stocks or in those stock market as a whole, you have to accept that something is wrong that the companies you own shares in you might not know about or maybe there's something happening in the stock market that you didn't foresee. therefore, you must be ready with a game plan that can bail you out short term and keep you
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in the market longer term so that your money works for you and not against you in a time when you need it most. frank in new york, frank. >> caller: jim, i understand why a public goes capital to rai-- to raise capital. >> they think it's worth more than what the stock market is paying for it. when it goes private that is because the owners of the company -- the managers recognize there's so much value in the stockholders buyers don't. they take it private, they make it look better then they tend to bring it public again. how about ann in california. ann. >> caller: hi, i haven't seen any prospective on stocks lately and curious if there is any way to tell when a company is going to split their stock. >> companies tend to be close to the vest about it. remember, when you split a stock you only get two pieces, two for one split of the same company so
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it doesn't necessarily create any wealth at all. it happens to be exciting and i can tell you when stocks do split, some of the smaller investors then get a chance to buy. all right, that they didn't have otherwise so i am pro split but does not create any wealth and they tend not to signal when it'll happen. discipline is not fun but it is necessary if you want to make big money in the stock market. when there's a decline, you have to accept the facts, always have a game plan ready. i'll hope you out or "mad money" tonight there are trades and there are investments. i'll explain why understanding the difference will save you from a world of hurt. headlines may be black and white but investing on their every word could have you drowning in a seared and help you spot the true story and a correction is always lurking around the corner and help you protect yourself when it strikes so stick with cramer. don't miss a second of "mad money." follow @jim cramer on twitter.
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have a question, tweet cramer, #madtweets or send one to madmoney @cnbc.com or give us a call, 1-850-743-cnbc. miss something? head to madmoney.cnbc.com. welcome to opportunity's knocking, where self-proclaimed financial superstars pitch you investment opportunities. i've got a fantastic deal for you- gold! with the right pool of investors, there's a lot of money to be made. but first, investors must ask the right questions and use the smartcheck challenge to make the right decisions. you're not even registered; i'm done with you! i can...i can... savvy investors check their financial pro's background by visiting smartcheck.gov
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thank you. ordering chinese food is a very predictable experience. i order b14. i get b14. no surprises. buying business internet, on the other hand, can be a roller coaster white knuckle thrill ride. you're promised one speed. but do you consistently get it? you do with comcast business. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business.
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tonight we are going over the rules, the rules make it so losses can be palatable that keep you in the game when others are freaking out. i used to talk about these rules all the time when i was managing money this will they became second nature to me but that was years ago now and when i think about it it's usually in response to a tweet @ p jjimcra. liking looking for a better format than 140 characters where i can't be thoughtful. i want to be thoughtful on twitter but it's hard. this is the format. so here's a typical question. someone mentioned a stock that has had a hideous decline, they
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will ask what do i do now? i often then turn the table on the person asking why did you buy it in the first place? the followers tend to regard that as either arrogant or flip. but what i'm really trying to do is figure out if they bought it as an investment which means it might be fine for them in a longer time horizon and buy more or do it for a today and perhaps they should cut their losses. why does this matter? because one of my cardinal rules is to never turn a trade into an investment. if there's one concept you must take away from the show it's that you must never ever turn a trade into something that it wasn't meant to be, a long-term investment. so first let's talk about the process of buying a stock. the actual checkdown you must do before you pull the trigger. when i decide i'm going to buy an oil driller, okay, i have to declare right up front to myself whether i am buying it for a trade or for an investment.
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what's the difference? a trade means that i am buying it because of a specific cataly catalyst, a reason that will drive it higher. that might be a data point, a recommendation, a belief things are better than expected when the earnings come out or news about a restructuring like we always talk about up, a breakup into several pieces or other material event that kocur. in other words, there is a moment to pull the trigger. >> buy, buy, buy. >> maybe some problems in the middle east and a moment to -- >> sell, sell, sell. >> when the event occurs and you're done but you must declare first before you buy. here's why, the vast majority will buy it for a reason and the reason occurs and nothing happens to the stock so you then decide, darn, i'll just call an investment, i won't worry about more if it goes down or perhaps the reason never occurs that you bought it for and decide to hold on to it because, well, what's the worst thing that can happen? the answer, of course, is plenty
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and almost all of it bad. the answer is that you would never have bought it in the first place if you didn't think the reason was going to occur. now there is no reason for you to own it in the first place. i've seen a myriad of investors turn trades into investments developing a rationale or alibi to fool themselves they're doing the right thing. that's because they don't make the distinction between a trade and an investment. if the reason i bought the oil company higher oil prices don't materialize then i really can't say, oh, holding on to it because it has a swell dividend. for all we know the only thing that would have safered that from being cut is higher oil prices. and without them, the idea for the trade is going the dividen,. now, when i want to invest in a company, not trade, invest in a company, i buy a small amount of it to start and then hope the market will knock down the stock so i can buy more at a better price. that's right. i actually when i invest want the correction. which is always the way you want to be thinking if you're trying
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to start a new investing position. i deal with it from its highs. you don't want to invest at a 52-week high but nothing like a nationwide/marketwide sale to get you better prices on buys. trading is the opposite. i put the maximum on at the beginning because i believe the data point is about to occur. i never buy anything for a trade without that defined catalyst, that's the word we use, catalyst. i never buy anything for a trade just hoping it will go higher as there could be no hope in the equation of buying a stock. i buy down lower prices when i'm investing. i cut my losses immediately when i am trading if the reason i'm trading the stock doesn't pan out. that's why i like to say my first loss can be my best loss. if you buy a stock for a trade and not investment and starts going against you in a meaningful way perhaps a decline of 50 cents is meaningful when trading you may have a real problem on your hands. i'm not kidding. when it comes to trading i'm an extremely disciplined person to
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the penny. i like to cut my losses quickly and get over them quickly. that's why i say that my first loss is my best loss. all other losses tend to be from lower levels and at bigger cost to me if i don't operate on this principle, again, people, anyone watching, can you instinctively feel it going awry but because of ego, pigheadedness, they don't want to heed the thunder and stay in only to have to panic out. >> no, no. >> at lower levels when the catalyst doesn't occur and the whole reason to own the darn stock evaporated so please don't fool yourself. cut your losses quickly when you put a trade on and it starts to go awry. sure, there is ang occasion or two when it's about to pan out and the market doesn't know it. for the most part it does and you're probably going to be wrong. just a fact of life. s that a compendium of all the studies i made never turn a trade into an investment. better just to take the loss because believe me, the percentages say that you will most likely lose money and if
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you do so, do it earlier rather than later and save some bucks. stop fearing the big store and stop firing the losses because it is the latter that can wipe out all those good juicy gains you have. much more "mad money" ahead. a stock rise can be quite seductive but chasing doesn't always have a happy ending. i'll help you know when it's ever right to run after a hot stock then corrects are certain as death as taxes. don't miss how to prepare yourself for the inevitable plus it's easy to get attach to holdings but holding on for too long can burn you in the end. i'll let you know when to cut the cord. sting with cramer. cramer, you are super. you are awesome. >> i'm a first time investor. >> get in the game. >> this show is the best. i am so glad it's on tv. >> i want you to know you have transformed me. thank you cramer. , cramer.
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we are going over the rules that have gotten me to this point in my career where i can play for charity instead of trading at my own hedge fund which i retired from but the lessons are already with me and i'm going over them tonight to help you with your portfolio. if it winter for that darned buy of then you fill it in, high max i would have been up big or i would be making a huge amount of money in the market if only i hadn't let blank let use fire eye against me when there was all that insider selling, darn it all. it only takes one or two losers to wreck a portfolio. i try to devote more time analyzing my loser stocks than
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winners. not because of a masochistic streak. rather i recognize stocks often telegraph declines ahead of time. loss control is the paramount concern for all in the market. the winners, the good stocks, they take care of themselves. take the loss before it gets hideous. don't buy into the notion you can't sell until it comes back and then you promise not to do it again. how many times have i heard that one? by the way that's how losers think. you need to think like a winner not a loser. you want a people who i answer with focus will you on twitter because you are unfocused and undone by the market. the flip side is true too. you don't have a profit. listen, you don't have a profit until you sell the stock and nail it down. >> sell, sell, sell. >> it's something ephemeral.
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people take book gains that you can take to the bank or, of course, get yourself a cashmere sweater in a nice department store with phony paper gains that are meaningless because they can be taken away in a heartbeat in a tough market. most are reluctant to book a profit because they don't want to pay taxes. i always tell people if i could rewind the tape to january of 0 2000 when they were sitting on literally trillions of dollars in unrealized gains we would be able to drill this point home well enough that people would respect it. gains not taken can be losses that will be taken. gains taken, never become losses. it's that simple. i stress this point because we have all been brainwashed not to sell. somehow we think it's sinful. it's trading, whoa. it's commonsensical to sell, it's logical to sell and it may be the only way to really get rich in a choppy business. but it's just counter to human nature and when it comes to
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stocks and human nature i think you've got to learn to counter it. it's so often hard to resist, though, i get it. for example, i can't tell you how many types i have had my heart in my throat pounding, pounding because i didn't own enough stock in a rising market. i didn't have enough exposure, i can't tell you how often i felt that i had to play, i had to be big in stocks because the market was going higher and it was going higher without me. do you know almost every time i had that feeling that instinct almost every time, i had that i can't miss this action drama playing around in my head. do you know what happened? that's right. i lost money. disappointment is the most important rule. we're doing winning investing and sometimes that means admitting you missed the opportunity and it is already too late. i almost always feel like i have missed something right near the top of the market, the top of the move. when i was a hedge fund manager, are you sitting down for this one, i actually turned that
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sentiment knee a profit center by actually betting against myself and the market when i thought i was missing the upside. that heart stuck in the throat feeling correlated with the tops of move, not the bottom ones. i actually made money saying, oh, there's that pain again, sell. i always remember that the best time to buy is when it feels most awful not when it would relieve the incessant main of fearing that you're going to miss the next big rally given that it is already occurred. you must also protect yourself against overtrading because trust me, there aren't that many great ideas there to act on. the real great guys don't have that many ideas. you always have to think about when you are -- when you're prone to this. for instance, when i go on twitter i'm amazed how people want me to opine on a stock that just happened. business wires that report these numbers are almost always wrong in their quick takea was simply business is a lot more harder and complicated than the press release which often obfuscates
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what happened to anyone who's gone through a bank quarter knows. it can't capture reality because it is in reality a jumble. headlines that present stories about such and such a number being better than expected are the types of headlines that always punish the quick draw mcgraw traders. the reality is there is something else, some other metric that might be more important tore that the quarters manufacture with one-time gains, that happens all the time. read the whole story and listen to the conference call. which part is most important, the portion right before the "q" and "a" when the company lays out its guidance for the future. that moment and not what the headline writers is responding to is what you will see will make the stock move. that's when you get the accurate move from. everything else, guesswork. we want do much with just guesswork except get in trouble. so many of you want to get in trouble because periodically one wants to be right trading the headline. the electronic trading you can move too fast and often many do.
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it's like your car goes too fast for you. learn the whole story. believe me, before you do so, be sure you know what to look for and what matters. you might want to have a grid of what all the analysts have been saying about what is about to occur. that way you won't be fooled by the first move which could be taken by people less informed than you are and less less informed enbelieve me understand that the headline for many companies' earnings doesn't even told you how they're doing on those key metric. with oil, you're looking for production growth. hotel, revenue, not earnings per share. airlines not earnings per share, many times i've seen up headline numbers only to learn it's guiding down expectations later in the conference call or that the key metric estimate wasn't beaten even though the headline says it was. the bottom line, don't let gains turn into losses and certainly never trade because you fear the market going up without you. or a stock rallying off a
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headline that maybe just maybe might be wrong as they so often are. ed in california, ed. >> caller: boo-yah, jim. a strategy i've been using and deep in the money calls going out anywhere from 6 to 12 months on stocks that you recommend. this is to avoid any possible vault play in the market swings. what do you think. >> this is exactly what i want. ed is doing exactly what i want. i talked about this in getting back to even. 100-page chapter i tried to cut back and decided i couldn't doing stock replacement. literally taking the risk out of common stock by declining -- by stopping the decline at a certain point and getting the upside. you are the man, ed. you know what i have to say about the people, you have horse sense. jacob. >> caller: hey, jim, how are you, boo-yah. >> boo-yah. >> caller: hey, jim, i love the show. i love the advice is phenomenal. jim, as an initial or first-time
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investor, what is your recommendation and how many positions one should have without going, you know, over their head? >> we can only ham 30. as soon as we do 30 and we are pros devoted to this we get hurt which means i think more than a dozen in an individual who may not be let's say as sophisticated as we are is going to end up making mistakes. try to limit it. play in my diversified. five with "mad money." larry in massachusetts. >> caller: jim, it was often said that jack kennedy's greatest strength he surrounded himself with extraordinarily bright people. sallinger, rusk, sorinson. i wouldn't do good without all your books. the folks that you've gathered at the street.com, brian and bob and regina, nicole, katie and -- >> holy cow. you are a close follower of the
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world i find myself living in. >> caller: you know i'm a cramaniac. when does a core holding look long in the tooth? what carrick ticks made it a call holding so that the bad news threshold for dumping it higher. >> thank you for all those nice things about action alert street.com and regina. everybody. when everybody knows what you know, when there isn't a single analyst that doesn't love your stock, when you constantly hear that that company is great and the ceo is great, you know what, it's long in the tooth. got fomo, yes, f-o-mo. don't trade because you fear the market going up without you. there is a thing such as overtrading. call me up. sure, you don't have to suffer when they strike. i'll show you how to peep for those painful days. >> the house of pain. >> then we all want our stocks to succeed but getting too attached can be a portfolio killer.
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i'll explain why emotions and money don't mix. they're oil and water plus taking your tweets. stick with cramer.
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tonight we are going over the rules and disciplines that i have learned and holy cow, four, four decades of investing. rules that want you to know. rules that i want to you just kind of learn by heart like i have and, hey, not just like the usual twitter 140 character stuff. this is real stuff here. a lot of people, for instance, don't think a correction is ever
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going to occur. get lulled into the market doing -- during good times. a lot of people get involved when there's been months and months of good times and when bad types hit, they are eager to pin blame or to be shocked in disbelief instead of just expecting corrections and not being fearful of them. yeah, but a correction occurs and many decided they don't want nothing to do with the market. the corrects signifies something is wrong with the market as a whole as if these aren't stocks of companies and, therefore, the market can't be touched. that is a really big mistake that is made constantly, corrects happen all the time. they particularly happen after big runs. they're to be anticipated. i learn this in the great peter lynch years ago when he used to run magellan. he said anticipate these but you can't write off the market when they happen. i always like to tell the story, like to put things in sports analogy and tell the story of joe dimaggio. his 56-game hitting streak still
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the most amazing baseball feat of all time. when he failed to hit in games 57 should you have traded dimaggio or cut him because -- whatever. was he finished? is that smart thinking? same with the market. corrections are to be expected and accepted as a matter of course particularly after 57 -- 56 great days of the market you're going to get something like that hey, when they happen, they're not a reason to prannic. they can be great opportunities. even as people insist that they're wrecked -- that the market is dumb because the charts are bad. taking out the 200-day moving average, created a bearish cross, a death cross, behindenburg cross, whatever is or the market is unpalatable, something i hear when it has a couple of lots and put on or you read bears who come out of hibernation. they like to be right that day. now, given that so many don't expect corrections, here's something that seems pretty
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avoided by many i met. lots of people wrongly believe in being fully invested at all times. many managers do. this is nonsense. lots of time the market just stinks so you want to have cash on happened. i'm not saying go in and out of the market, i'm saying have some cash. pretty good. a lot of times there's nothing to do except have some cash, in fact, one of 9 chief reasons i outperform every manager in the business during my 14-year run as a professional money manager is that there were substantial blocks of time where i had a lot of cash, hey, i was largely in cash including the 1987 crash when it dropped 058 in one day but from a much lower level so it was a 22.6% hit to be precise. cash is such a great investment at times. even when it earns little to nothing as it has for ages. a perfect hedge as opposed to shorting the market, it keeps going higher as it did in 1999
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or the year before the great recession, 2008. you could face devastating losses as an overvalued market and continue to stay overvalued and climb and climb and climb. i think cash may be the single most underrated of investments because nothing feels as good as cash when the market comes down. i know that from my charitable trust. always great to have that when the market gets hammer. if you follow my method you will know as the market spikes i take stock off sell a little. trim here and there. yes, to get ready and reposition myself for the next correction. close viewers of the show know i sell strength and i buy weakness. when the time is right i almost try -- i almost always have that cash to put to work because i believe so strongly in cash as an option. if you don't raise that cash, here's what could happen. you might end up selling your winners to subsidize your losers. that is another common mistake people make. so many bad portfolio managers
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and so many befuddled individual investors always sell their best stocks so they can hold on to their worst stocks and always tell when you see the pattern. you'll be reviewing someone's portfolio as i used to all the time and the portfolio would be filled with junk and you will say, hey, what happened to all of your -- i'll say what happened to your blue chips, the ones that can weather the tough times, invariably they will say i had to sell those out of my more of these other stocks because they kept going down. many on twitter seem to have this problem. it's riddled with stocks that stopped working a long time ago i counseled enough that we're in trouble to know the first thing that gets sold are the best stocks because they can be sold. there's always a bid for the good stocks. ready to put up capital while the bad stocks just seem to go straight down the line and fold under any pressure. even when some of the more admired professionals have a handful of good and awful stocks they don't sell the awful ones because they're down so much. a typical alibi, nonsense.
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they're probably going lower. please do not subsidize loser stocks with winners. if you own companies with deteriorating fundamentals as opposed to good companies with deteriorating stock prices please sell the bad one, take the loss, reapply the proceeds to the good ones. move on. don't feel bad for yourself. lots of times the circumstances are simply changed for the stock market. the company in which you have invested might do a lot of business in russ which could have been great before sochi but with the fight the profile changed maybe dramatic. you may have to sell it for one that's domestic and slow down the economy and caused shoppers to stay away from expensive goods and happen in the depantrying of america. one of the largest trends that blindsided many of the food stocks seriously thought to be safe or perhaps a terrific drug company like pfizer making fortunes until they went off patent and generic competition crushed their margins. they were so often kept because they had gong down and investors
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bought more of these and subsidized these losers with the sacrifice of winning stocks. let me give you the bottom line. get ready for the correction. have cash on hand. when it happens don't sell the good ones to subsidize the gad. you will end with a terrible portfolio that won't bounce back. "mad money" is back after the break. jim cramer, you're one of my heroes. >> i watch your show every weeknight. >> thank you so much for helping beginning investors like me. >> when you talk about the market, i just believe that you're spot-on. >> oh, i love it. thank you so much ef. every night we watch you and i have learned and earned.
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uh, maybe we should call i.t. rules are a drag, aren't they? i hate rules but they will keep you from getting blown out and help you navigate the tougher types that come up when you least expect it. if you aren't prepared mentally, you won't be tough enough to handle these moments and you will flee instead of thinking about what's really right to do
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or you'll be paralyzed with fear and self-doubt instead of mindful and opportunistic. emotions have to be checked at the door. i often hear people say i hope a stock goes up or ask cripple cramer on twitter doesn't it have to go up and imply a question like doesn't a team have to win a game sometime? people, this is not a sporting event. we have no room for hoping or rooting. we are buying stocks that we believe should go higher because of the fundamentals and we're avoiding stocks where the underlying business is bad and getting worse. where should hope fit? nowhere. people treat this business at times like a religion. like an ideology. then if they pray things will work out or they fall in love with miserable pieces of paper that the idea that love will be requited. be realistic, hope, pray, love, rooting, these are all enemies of good stock picking. i can recall the ringing in my ears when i would get off the trading desk with karen our head
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trader and say what's the deal with memorex that got crushed back in the '9s. i would say i am hoping it gets a big contract. she would scream, hope? hope? we need hope to make this work? sell it and get me something where we have more in our favor than just hope. man, what i beatdown. many times she didn't even ask. she just sold it after i used the word hope to see if i would buy it back. invariably i didn't buy it back hoping something would happen and once it was sold i felt relief. sometimes the stocks of good companies don't do nothing and you want to sell them. i remember when berkshire hathaway did nothing for like ages. if you're a professional investor in a hedge fund this can be unnerving. you have partners calling you regularly asking what you're doing with their money. they don't want to hear you own a whole bunch of stocks not moving up at once but individuals have no such pain.
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individuals can sit on stocks as long as they want. unfortunately, when i cancel patients many individuals get antsy and want a netflix or the gains and want it now, i say some of the best stocks require some incubation. do you know how patient i was owning intel one of the greatest stocks of our generation for 18 months i watched it do something, paint dry, nothing at all in the late 1980s but i believed and held on to it because i had only a few partners and none needed to know every minute how much they were worth. a common stream of those that called regularly to ask how i was doing, later when they handed me daily input, i hated it. lots of stories take a long time to incue bait and develop. lots of turnarounds take 18 months to two years. when you buy a stock and recognize it could take a long time to turn, market is such in your mind so you don't get tired of it and just sell it. you give up and here's something really important to remember. stocks that are stuck in the mud a long time try to romp like
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thoroughbreds when freed from the gate. mudders. do you have the patience. if not let someone else invest your money. fondly i like to say no would have, could have, should have. one of the most despicable traits is second-guessing. make a call, buy some celgene and it has a patent or sell dupont before a noted activist takes a stake and accepts it soaring and then you're filled with self-doubt. that's nonsense. get it together. the market requires you to have the right head on at all times. you have to be ready to see the ball right for the next pitch. okay. there's no "time" to get down on yourself. do that for fantasy if you cut brady. if you want to be introspective. brackets at the end of the month are a quarter to assess your strategy and your stock picking abilities. but to second-guess your strategy is to out yourself in a loser mind-set. i want pain felt. when i felt one of the younger people in my office made a mistake costly to me i made them
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wear the symbol of the stock that they skrud up on as a post i have it on their forehead for the day. i sent them outside but i insisted any time spent saying if only i, karen cramer always believed women were much better because they lacked the second-guessing instinct. she thinks men have far more than women. i'm putting it out there. whatever, she did teach me to steel myself and come in without the mental baggage of a screwup to swing at the next big pitch. this business is not about hope but the fundamentals. don't road for your stocks to go higher. pick them and good companies and they will unless circumstances change dramatically that cause you to sell. they're go higher but be patient on the good ones and try to keep the self-doubt to a minimum. clear your head. get out there immediately and find out the next big winning idea. there's just no room for should have, would have, could have and stick with cramer.
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favorite part of the special we go for what you want. that's right. we got some tweets that you've been sending me at --.
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mark richard, divided reinvestment or take cash and buy selectively. your take? >> many come from dividend reinvestment. very few no-brainers. compounding is the secret behind great wealth. reinvest. here we have @jamiedevries. who came up with how you say brist bristol myarrrsqq a trader always said it that way and i thought that must be the way it was pronounced. next tweet from @kraig boo. add to a holding recently hurt or initiate a new position. #madtweets.
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just sell it. because if you liked it higher you should love it lower so the answer is buy more of the lower one or get rid of it. up next, @no to l, whatever asks at what percent for profit should we sell shares. @no2. this is very important. no firm rule but what i like to do when it goes up 50% i like to sell some of it and then a little bit more and i sell more but the ultimate goal for all great investing, you play with the house's money. that's the way to do it. always try to fight to get to the point where you're playing for the house's money and, yes, stay with cramer. >> jim cramer, you're one of my heroes. >> i watch your show every weeknight. >> thank you so much for helping beginning investors like me. >> when you talk about the market, i just believe that you're spot-on. >> oh, i love it. thank you so much. every night we watch you.
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♪ i like to say there's always a bull market somewhere. i'll promise to try to find it just for you right here on "mad money." i'm jim cramer and i'll see you next time. lemonis: tonight on "the profit."
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lori: hey. lemonis: two years ago, i bought an interest in mr. green tea ice cream. young man: this is actually amazing. lemonis: and while we've been able to increase sales by nearly 100%... -is that your car? -michael: that's my car. lemonis: ...success has spawned a whole new set of challenges. michael: the entire future of the brand is based off of my vision. richard: that's something i'm not so sure of. lemonis: the owner's son is pushing for a piece of the pie. michael: i think 7% to 10% would be more than fair. lemonis: but his cavalier attitude isn't helping his case. michael: who cares about a $10,000 up-front cost? lemonis: i think we all kind of care about the $10,000. and now a family feud is brewing in the business. richard: what's important to me is the most important thing. michael: you're not making any sense. you're making stories up!

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