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tv   Mad Money  CNBC  December 29, 2016 6:00pm-7:01pm EST

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it's jacobs engineering. you've got problems with toshiba, i think jacobs could benefit from those problems. >> interesting. i'm melissa lee. thanks so much for watching us at our new desk. see you tomorrow >> 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 isn't just to entertain, but to teach and coach you. call me at 1-800-743-cnbc or tweet me @jimcramer. nobody, i repeat, nobody likes to be disciplined. they don't like to be admonished. and they don't like to follow the rules.
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i don't blame them. i was a rambunctious kid myself when i started managing my own money and at first i didn't know the rules. when i learned them, i spurned them, either because i didn't believe they could help or because they cut off my upside. even if they cushioned the inevitable down side. 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 those mistakes. [ buzzer sounding ] >> the rules protect you against your own bad judgment from whatever is happening in the market jor yawl. but if you're going to make money using stocks because you just can't get much of a return anywhere else these dpas, you are going to have to work harder with your money to do so.
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and that requires discipline. 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 it. 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. we're gardners of money tonight. how to keep it growing through what we call active money management. it's not a sin, and a lot of you practice it. i want you to do it right. before we dig into the way to make your money grow by being hands-on about it, i want to delve into a little psychology of stock ownership. one question i'm asked repeatedly when people stop me on the street, i go back and forth from the street to squawk on the street and wall street or they say, don't you worry about your stocks? it's true i don't own any individual stocks. i invest just for charity with
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all profits and dividends given away to charitable options. i will tell you and explain what i do, you bet i am concerned. it can be down right embarrassing when i get it right. yep, i'm always worried about the trust stocks. especially when they go down. a sign when a stock goes up is someone knows something that i don't know. that's the chief reason i'm always bugging you about reading the news releases, going over the conference calls, particularly that part right before the q&a and the guidance. and going to the websites for more information. you can't be informed if you don't try to inform yourself. i know that those who don't know
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what 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. however, we're talking about psychology of the mind when all that homework doesn't pan out. believe me, it is frustrating. when we select a stock on this show to highlight, we do a mass amount of work on it every single time, the same amount i would do with my old hedge fwund, if not more so. it reelsly difficult to see it go down. but there's plenty of times when, say, there's something you can't detect. chicanery in the numbers. there's plenty of times when there's puffing by management and we really don't know the truth. i talk many times on this show about press releases that make things sound much better than they are. they start by saying we're pleased to report that salesen creased by 12% and it sure sounds good. except the coop censse consensus
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was they were looking for 20%. which means with 12%, you have a hideous short fall. [ booing ] >> or worse than that is 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 stuff goes on. maybe some hedge funds paid under the table to get the truth, as weave seen time and again for years and years. many of these hedge fund titans ended up in jail for doing it. in other words, the insierds had the call. you didn't. there were also tons of times where you simply owned 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 anymore 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 were borrowing money to finance your portfolio. [ buzzer ] >> which i think is a terrible idea. stocks aren't houses. you can't fall back and live in them if you have a mortgage on them. they just get taken away by the
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margin clerks. >> sell, sell, sell, sell, sell, sell. >> so what do you do? how do you manage a portfolio under conditions where things go wrong with the stock i don't say uh own all the time and things go wrong in the market all the time, totally apart of what's going on at the 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 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.
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one of my best forms of protection is to recognize that if you're not tough on your own decision making and you like all of your stocks equally, or at least pretend b to like them all equally, you can't be flexible. you can't 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 -- 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. remember, not all stocks are created equal. you have to circle the wagons around a few good stocks. buy them down to get a better basis or average price for our holdings. why does this matter? we must expect corrections and declines as a matter of course. more on that later in the show. we must anticipate the days when we hear the people on "squawk box" saying the futures are down and the market looks to open
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down half a percent or down a percent. come on, you've heard that so many times. we have learned so much over the years about what triggers corrections. more on that later, too. but the most important thing is to have a game plan. even when you've done all the homework, discipline dictates that you must assume there is something you don't know going on with your individual stocks, or that there is something happening in the twhoorld is beyond the control of your acumen and you're just being victimized by the events of the moment. my rachking system will indeed get you through the chaotic times. allow you to stay cool and methodical about your money when all those around you are fumbling and fretting and deciding they just can't take it anymore and just have to get out of dodge at the exact worse time. so here's the bottom line. in order to be able to deal with the decline in your stocks or in the stock market as a whole, you have to accept that something is wrong at the companies you own shares in that 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
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with a game plan that can bail you out short term and keep you 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 company goes public. but why would a company want to go private? >> particularly they want to go private because they think it's worth a lot more than what the stock market is currently paying for it. when you see a company go private, that's typically because the managers of the company recognize there's so much value and the stockholders and buyers don't. they take it private, they make it look better and then they tend to bring it public again. how about anne in california. >> caller: hi. i haven't seen any perspective on stock splits lately. is there any way to tell when a company is going to split their stocks? >> no, there isn't. companies tend to be close to the vest about it.
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when you split a stock, you only get a two for one split of the same company. 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 that they didn't otherwise. i am pro split, but it does not create any wealth and they tend not to signal when it happens. discipline isn't 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 and always have a game plan ready. i'll help you out. on "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. then headlines may be black and white, but investing on their every word could have you drowning in a sea of red. i'll help you spot the true story. plus a correction is always lurking around the corner. i'll help you protect yourself when it strikes. so stick with cramer.
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>> don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer. send jim an e-mail to or give us a call at 1-800-743-cnbc. ♪ t up to $2500 customer ch on sect 2016 and 2017 models for these terms. see ur lexus dealer.
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comcast business. built for business. >> so now we're going over the rules. the rules make it so losses can be palatable.
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rules 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 so they became second nature to me. that was years ago now, and when i think about it, it's usually in response to a tweet that asks a question that the rules answer, and they answer kind of axiomatically. that's why i kind of dust them off here. make sure people realize i'm not ducking their questions. i'm just looking for a better format to flesh them out than 140 characters where i can't be thoughtful. i want to be thoughtful on twitter, but it's really hard. this is the format. so here's a typical question. someone will mention a stock that has had a hideous decline. they 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 answer as either arrogant or flip. but what i'm really trying to do is figure outlaw if thaz bought it as an investment, which means
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it might be find for them on a longer time horizon. or if they did it as a trade and perhaps they should cut their loss losses. why does this matter? never turn a trade into an investment. if there's one concept you must take away from this 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 check you must do when you pull the trigger. when i decided i'm going to buy an oil driller, i have to just declare right up front to myself whether i am buying it for a trade or for an investment. what's the difference? a trade means that i am buying it because of a specific catalyst, a reason that will drive it higher. that catalyst might be a data point, a recommendation, a belief that things are better than expected when the earnings come out, or some news about a restructuring like we always talk about. a breakup into several pieces, or some other material event that could occur.
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in other words, there's a moment to pull the trigger. a moment to buy, perhaps because you think that oil is about to spike because of a shutdown of the spigot in russia, or maybe some problems in the northeast. and then there's 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 of you will buy a stock for a reason, then the reason occurs and nothing happens to the stock, so then you decide darn, i'll just call it an investment .. i'll buy more if it goes down. or perhaps the reason never occurs that you bought it for and you decide to hold on to it because well, what's the worst thing that can happen. the answer, of course, is plenty .and almost all of it bad. the answer is that you would have never bought it in the first place if you didn't think the reason was going to occur. so now there's no reason for you to own it in the first place. i've seen a myriad of investments turn trades into investments, developing a rationale or an alibi to full themselves that they're doing the right thing. that's because they don't make
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the distinction between a trade and an investment. if the reason i bought the oil company higher oil prices doesn't materialize then i really can't say i'll hold on to it because it has a swell dividend. for all we know, what would have saved that dividend from being cut is higher oil prices. and without them, the idea for the trade is gone with the dividend. now, if i want to 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 to start a new investing position. ideally, the stock is down already from its highs. you don't want to buy an invested stock at its 52-week high. but there's nothing like a nationwide, market wide sale to get you a better price on your buys.
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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 can 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, not an investment, and it starts going against you in a meaningful way, perhaps a decline of 50 cents is meaningful, you may have a real problem on your hands. i'm not kidding. when it comes to trading,'men extremely disciplined person to the penny. i like to cut my losses quickly and get over them quickly. that's why i say my first loss is my best loss. all other losses tend to be from lower levels and bigger cost to me if i don't operate on this principle. if you instinctively feel the trade going awry, because of
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ego, pig-headedness, they don't want to heed the thunder and they stay in, only to panic out 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's an occasion or two when it's about to pan out and the market doesn't know it, but most of the time it does and you're going to be wrong. it's just a fact of life. the bottom line, 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 you do so, do it earlier rather than later. stop fearing the big score and start fearing the losses. because it is the latter that can wipe out all those big juicy gains you have and then some. a stock rise can be quite
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seductive, but chasing doesn't always have a happy ending. i'll tell you if it's ever right to run after a hot stock. and corrections are as certain as death and taxes. my take on how to prepare yourself for the inevitable. plus it's easy to get attached to your holdings. but holding on for too long can purn burn you in the end. isle let you know when to cut the cord. stick with cramer. burn you in t. isle let you know when to cut the cord. stick with cramer. burn you in t. isle let you know when to cut the cord. stick with cramer.
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>> we are going over the rules that have gotten me to this point in my career where i can trade for charity. the lessons of the hedge fund are very much with me. and i'm going over them tonight in the special show to help you with your portfolio. let me give you one that's always the height of silliness. if it weren't for that darn buy of -- and then you fill it in. 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's use fireeye, run against me when there was all that insider selling. darn it all. believe me, it only takes one or two losers to wreck a portfolio. i try to devote far more of my time analyzing my loser stocks than my winners. not because of some sort of mas cystic streak.
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rather, i recognize that stocks often telegraph declines ahead of time. lost control is the paramount concern for all those in the market, because the winners, the good stocks, i got to tell you something, they take care of themselves. take the loss before it gets hideous. don't buy into the notion that you can't sell until it comes back. and then you promised 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. so you want one of those people whom i answer with, focus, will you? on twitter. because you are obviously unfocused and undone by the market. of course, the flip side is true, too. you don't have a profit. listen to me, you do not have a profit until you sell the stock and nail it down. >> sell, sell, sell, sell. >> it's not a profit. it's something ephemeral. people constant confuse book gains, real gains that you can take to the bank with phony
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paper gains that are meaningless because they can be taken away in a heart beat by a tough market. most people are often reluctant to ever book a profit because they don't want to pay taxes. i always tell people if i could just rewind the tape to january of 2000 or july of 2007 when people were sitting on literally trillions of dollars in unrealized gains because they didn't want to take the tax man, we would be able to drill this point home well enough for people to accept 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 common sense 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. when it comes to stocks and human nature, i think you've got to learn to counter it. it's so often hard to resist,
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though. i get it. for example, i can't tell you how many times i've had my heart in my throat 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. you know that 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. discipline is the most important rule of winning investing. we're doing winning investing here. that's what we're teaching. and sometimes that discipline means admitting that you missed the opportunity and it is already too late. i almost always feel like i've missed something right near the top of the market. the top of the move. when i was a hedge fund manager i actually -- are you sitting down for this one -- i actually turned that sentiment into a profit center by actually betting against myself and the
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market when i thought i was missing the upside. that correlated with the tops of moves, 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 pain of fearing you're going to miss the next big rally, especially since the rally as already invariably already occurred. you always have to think about when you're prone to this. for instance, when i go on twitter, i' always amazed at how people want me to opine on a stock that just reported and they just want me to do it in one headline alone. i find that business wires that report these numbers are almost always wrong in their quick takeaways, simply because business is a lot more harder an complicated than the press release, which often obfuscates
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what's happening. the reality 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 punish the quick draw mcgraw traders. there's something else, some other met trick that might be important. i think you have to read the whole story and listen to the conference call. which part is most important? the portion right before the q&a when the company lays out its guidance for the future. that moment, and not what the headline writer is responding to, is what you will see will make the stock move. that's when you get the accurate move from. everything else, guess work. we can't do much with just guess work except get in trouble. so many of you want to get in trouble, bautz periodically, you want to be right trading a deadline. -- headline. you can strait too fast and many of you do. it's your car goes too fast for
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you. if this is a great opportunity, you will not miss it by taking the time to inform yourself, believe me. before you do so, make sure you know what to look for and what matters. you might want to have a grid of what all the analyst lists are saying about what is about to occur. that way you won't be fooled by those who are less informed than you are. and most important, understand the headlines for many company's earnings doesn't even tell you how the company is doing on those key metrics. within oil, what are you looking for? production growth, not everybodyings per share. airlines, lef knew per seat model, not earnings per share. i have seen headline numbers only to learn the company is guiding down expectations later or the estimate wasn't beaten even though the headline said it was. bottom line, don't let gains turn into losses. or worrying about a stock rally when the headline might be wrong, as they so often are. ed in california.
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>> caller: boo-yeah, jim. i would like your opinion on a strategy i've been using in deep in the money calls going out anywhere from six to 12 months on stocks that you recommend. this is to avoid any volatile play in the market swings. what do you think of that? >> this is exactly what i want. ed is doing exactly what i want. i talked about this in "getting back to even" a 100-page chapter i tried to cut back but decided i couldn't. he's taking the risk out of common stock bystop stopping the decline at a certain point. big percentage gains. you are the man, ed. you have horse sense. jacob in california. jay zmob. >> caller: hey, jim, how are you? boo-yeah. jim, i love the show. >> thank you. >> caller: i love the advice, it's phenomenal. as an official or first-time investor, what is your recommendation and how many positions one should have without going, you know, over
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their head. >> as soon as we do more than 30. and we are pros, who are devoted to this. we get hurt. i think more than a dozen in an individual who may not be, let's say, as sophisticated we are is going to end up making mistakes. so try to limit it. when we talk about diversified, it's five with "mad money." larry? >> caller: it was often said that jack kennedy's greatest strength is he surrounded himself around extraordinarily smart people. i wouldn't be in the game at all but for your teaching through the many books, action alerts and the show. i have to tell you how much the folks that you gathered at the, and those at the show. >> you are a close follower of the world i find myself living in. what's going on?
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>> caller: when does a core holding start lookliing long in the toout to be ditched. >> first of all, thank you all the nice things about action alert,, here's what you look for. when everybody know what is 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. don't trade because you fear the market without you. there is such a thing as overtrading. i'm here to help you out. sure corrections will come, but you don't have to suffer when they strike. i'm going to show you how to prepare 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. i'll explain why emotions and money don't mix. they're oil and water. plus, i'm taking on your tweets.
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stick with cramer.
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>> tonight, we are going over the rules and disciplines that i have learned in holy cow, four decades of investing, rules that i want you to know. rules that i want you to just kind of learn by heart like i have. not just like the twitter usual 140 character stuff. this is real stuff here. a lot of people, for instance, don't think a correction is ever going to occur. they get lulled into the market
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during good times. a lot of people get involved when there's just been months and months of good times. and when bad times hit, they are eager to pin blame or to be shocked in disbelief. instead of just expecting corrections and not being fearful of them. yep, when a correction occurs, many investors decide they now want nothing to do with the market. the correction signifies that 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's made constantly. corrections happen all the time. they typically happen after big runs. they are to be anticipated. i learned this from the great peter lynch years ago. he said anticipate these. but you can't write off the market when they happen. i always like to tell the stories, i like to put things in sports analogies. i tell the story of joe dimaggio. his 56-game hitting streak, still the most amazing baseball feat of all time, isn't it? when he failed to hit in games
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57, should you have traded dimaggio? should you have cut him because of a -- well, 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 56 great days of the market, you're going to get something like that. when they happen, they're not a reason to panic. they can be great opportunities. even as people insist that the market is dump because the charts are bad, taking out the 200-day moving average, created a bearish cross, a death cross, a hindenburg cross, whatever the heck that is. or the market is unpalatable. something i hear every time the market has a couple of losses. bears come out of hibernation. given that so many don't expect corrections, here's something that seems common sense but lots of people wrongly believe in
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being fully invested at all times. lots of managers think they're supposed to be fully invested every day. i have to tell you, this is nonsense. lots of time the markets just stinks. it to have cash on hand. i'm not saying 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 the chief reasons why i outperform pretty much every manager in my business during my run as a money manager is there were substantial periods of time when i had cash. cash is such a great investment at times. even when it earns little to nothing as it has for ages. you know, what i regarded as a perfect hedge, as opposed to shorting the market, because the market keeps going higher as it did in 1999 or the year before the great recession in 2008, you could face devastating losses as
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an overvalued market can 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 nice to have a big cash position when the market gets hammered. you will know that as the market spike, 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 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 and that is another common mistake people make. so many bad portfolio managers and befuddled business investors always sell their best stocks so
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they can hold on to their worst stocks. you can always tell when you see this pattern. you'll be reviewing someone's portfolios -- 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 blue chips? the kind of stocks that can best weather the tough times? allow you come out smiling on the other side? invariably they'll say i had to sell those and buy more of the other stocks as they were going down. i've counselled enough professional investors that were in trouble to know that the first thing that gets sold are the best stocks because they can be sold. there's always a bid for the good stocks, a ready buyer that's willing to put up capital while the bad stocks just seem to go straight down the line and fold under any pressure. but when even 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 for not taking action. nonsense. they're probably going lower. please do not subsidize losing
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stocks with winners. if you own companies with deteriorating fundamentals as opposed to good companies with deteriorating stock prices, go to the good ones. move on. don't feel bat bad for yourself. lots of times the circumstances has simply changed for the stock market. the company in which you invested might do a lot of business in russia, which was great for sochi, because may be different after ukraine. one of the largest trends out there that blind sided many of the food stocks, previously thought to be safe. or perhaps a drug company like pfizer made fortunes with very big drugs until they went off patent and the generic competition crushed their margins. these kinds of stocks were so often kept because they had gone down and investors bought more of these stocks and subsidized
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the losers with the sacrifice of the winning stocks. get ready for the correction. it's coming. have some cash on hand. when it comes, don't sell the good ones to subsidize the bad. you'll end up with a terrible portfolio that won't be able to bounce back when times turn better. "mad money" is back after the break. my business was built with passion... bui keep it growing aking every dollar count. that's why i have the spark cash cardrom capital one. th it, i earn unlimited 2% cash back alof my puhasing. th it, i earn unlimited 2% cash back and that unlimited% cash bk from spark mns thounds of dollars each year going backnto my business... ich ds fuel to my botm line. whn ur wal
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>> rules are a drag, aren't they? i hate rules. but they will keep you from getting blown out and navigate the tougher times 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'll be paralyzed with fear and self-doubt instead of mindful and opportunistic. emotions have to be checked at the door in this business. i often hear people say that i hope a stock goes up. or they ask jim cramer on twitter, doesn't it have to go up? doesn't a team have to win a game sometimes? people, this is not a sporting event. we have no room for hoping or rooting. we are buying stocks that we
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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 in? nowhere. people treat this business at times like a religion. like an ideology. they believe if they pray things will work out and they're chapting maybe they will. orhey fall in love with these miserable pieces of paper with the idea that love will somehow be requited. be realistic, hope, pray, love, rooting. these are all enemies of good stock picking. i can still recall the ringing in my ears when i would get off the trading desk with karen cramer and she would say what's the deal with this memorex, a now defunct company that went out of business in the '90s. i would say i'm hope they get a big contract. she would scream. hope! hope, sell it and get me something with more than just hope. many times she didn't ask.
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she just sold it after i a said the word hope. i was hoping something would happen, and once it was sold i felt, well, relief. now sometimes the stocks of good companies do nothing and you get frustrated and you do want to sell them. good stocks at times can do nothing for ages. i remember when berkshire hathaway did nothing for ages. if you're a professional investor, you have partners in your fund calling regularly asking you what they're doing with your money. they don't want to hear you own a whole bunch of the stocks that move up at once. but individuals have no such pain. individuals can sit on stocks as long as they want. unfortunately when i counsel patients, many individuals get antsy. they want a tesla, they want a netflix. 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 1 months, i watched intel do nothing. paint dry, paint dry, paint dry. nothing at all in the late 1980s. but i believed.
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i only had a 23wu partners and none of them needed to know how much they were worth. when i had people hounding me daily, i never would have held on to intel that long. lots of turnarounds take 18 months to two years. when you buy a and recognize it could take a long time to turn, mark it in your mind so you don't get tired of it and just sell it, you give up. and here's something important to remember, stocks that are stuck in the mud a long time tend to romp like thoroughbreds when they're freed from the gate. do you have the patience? if you don't, let someone else invest your money. finally, i would like to say no would have, should have, could haves. you make a call, you buy some celgene then suddenly has a patent issue that causes it to get hammered. the next thing you know you're rum nating and filled with
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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 or something. you want to be introspective, bracket the end of the quarter to strategize. mind you, i want the pain felt. when i felt one of the younger people in my office made a mistake that was costly to me, i made them wear the symbol of the stock that they screwed up on as a post it on their forehead for the day. i even sent him outside. but karen cramer, by the way, always believed women were much better traders because of men because they lacked the second-guessing instinct she thinks men have far more than women.
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here's the bottom line. this business is not about hope. it is about the fundamentals. i don't root for your stocks to go higher. just pick shares in good companies and they will, unless circumstances change dramatically. that cause you to sell. they'll 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.
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>> favorite part of this special, we go for what you want. that's right, we have tweets that you've been sending me. so let's get right to them. our first tweet comes from mark richard auto dividend reinvestment or take cash and buy selectively? your take? easy call. dividend reinvestment, this is a no-brainer, and there are very few no-brainers and free lunches in this business. compounding is the secret behind great wealth. reinvest. here we have at jamie de 2k vries. who came up with the way you say
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bristol myers? we had someone a long time ago who used to say we recommend bristol myers and we thought that's how it was said. if you do not want b to buy any more of that stock slower then you should sell it. if you don't like it higher, you should n't love it lower. at what percent for profit should we sell shares? this is really important. there's no firm rule. what i like to do is when a stock goes up about 50%, i like to sell some of it. and then a little bit more. 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.
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always try to fight to get to the point where you're playing with the house's money. and yes, stay with cramer. ♪ we' drowning in information. where,n all of ts, is the stuff that matters? e stak are so high, your finance your future. how do you solve ts? you don't. you partner with a firm that advises govements and the rtun0, and,an deler insight pson to perso
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on what matters to you. morgan stanl.
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>> i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money." i'm jim cramer and i will see you next time.
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>> in this episode of "secret lives of the super rich," $65 million makes you the king of the hill in aspen. but even just to see this castle, you need to prove you're worthy of the crown. how do you know who's rich enough to really be able to buy this house? luxury armor for the million-dollar s.u.v. >> the clients that come to approach us, they're scared for their life. [ gun cocks ] >> welcome to my closet. >> inside the mega-closet that's bigger than a house. >> oh, my god! i'm home! >> you're the first guy that's said that to me. maybe other people don't have the balls to say that. >> [ laughs ] and who's got the super rich wrecking balls to tear down this pricey penthouse? you're telling me this is


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