you know. some of us embrace it. good sweep at shea this weekend, tim, that's extraordinarily well done. i think lennar holds this 150 level, as chris said, earlier in the show, melissa. >> all right, thank you for watching "fast money." see you back here tomoowt 00rr a5:. "mad money" with jim cramer starts right now. more "fast." "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 make you a little money. my job is not just to entertain, but to educate and teach you. call me at 1-800-743-cnbc newsom. tweet me @jimcramer. you want to know the single most useless thing you can do in this business?

oh, that's easy. the most useless thing you can do as an investor is to worry about what everyone else is worrying about. the flip side of this is also true. there is no point in getting excited about something that everybody else is eagerly anticipating. why? see, because when the vast majority of investors agree that something's going to happen, that thing is already priced into the stock market, priced in. while the real economy moves at its own sedate pace. you to borrow money to build out equipment, then use that equipment to manufacture goods and transport them and wait for the customer to come along and buy them. the stock market has no such limitations. stocks don't quite travel at the speed of thought, but they come pretty close. so the moment a hedge funds decide the economy is slowing or speeding up or flat lining, stocks start trading like that's already the case usually it takes some time to build that kind of consensus

which is rarely why you see the moves happening instantaneously. once they're on the same page about something, you can be pretty darn confident it's baked into the averages. this is some basic economics 101 stuff. now i don't have a ton of use for economists as a professional on this show. they tend to take an ivory approach to this one. meaning all sorts of molds for how the world is supposed to work, the economy is supposed to work, often very boring, but they let the empirical facts get in the way of the economy. the economists have a bad habit of throwing away the data and not the model. however, as long as you keep that caveat in mind, some are incredibly useful when trying to manage your money. we'll get this together. what's known as the efficient markets hypothesis. this theory says at any given moment, stock prices already reflect all the relevant information that's out there. and when some new piece of data comes out, stocks immediately adjust to reflect the new

reality. you often hear index fund purists citing this theory to explain why it's impossible to get any kind of a edge because it should already be baked into a share price. according to their theory, it's so efficient that it's basically the same as gambling. if everything you possibly know is already priced in, that means your homework is meaningless, and the only thing that can push a stock higher or lower is some random new piece of information nobody knows. it has to be something totally unknown, because anyone did know, they would have acted on it already, ergo, it would have been baked into the share price. that means under the extreme condition hype this, the only thing that can move stocks are unknown unknowns. and if you're merely betting on unknown unknowns, you may as well be play roulette. it's more fun. that's why they adore the markets hypothesis. this theory tells them it's impossible to pick averages. so if you want equity exposure, the only smart way to do it is

putting your money into a nice low-cost index fund that mirrors the s&p 500. as anyone who watches this show regularly nose, i have no beef with index funds. in fact, i think they're the best way for the vast majority of people to invest in the market. i've held that position since the year 2000. even if you got the time and the inclination to pick individual stocks and manage your own portfolio, you should still direct a big chunk of your savings, if not the plurality into cheap s&p 500 index fund. it's the cheapest way to give yourself equity exposure. it's not that easy to be a good individual stock investor. it takes real work, which is why we try to help you if you join the cnbc investing club. but it's an incredibly easy thing to be an index fund investigator. an 401(k) or ira? that's index territory. as long as you belief the u.s. economy can keep growing over the long haul, you can park that money in an index fund and check in on it maybe once or twice a month. to get back on track, this idea

you can't possibly beat the averages because of the efficient market hypothesis tells us stocks are always perfectly valued. and you know what? that's just totally bogus. [ buzzer ] putting aside the fact that i did consistently beat the averages nearly every year at my old hedge fund, giving my clients a 24% compounded annual return versus 8% for the s&p, the simple truth is markets are not perfectly efficient. in fact, frankly, they're often irrational. they ignore things, make mistakes, ignore valuable information every day. that's why anyone can make money picking individual stocks. these anomalies are everywhere, and they can be great for your portfolio. this corn dog of free market economics is a lot like communism. it makes a lot of sense in theory. it doesn't necessarily work in life. why the heck did i bring up the efficient markets hypothesis in the first place if it's such a boneheaded idea? because even if the most extreme form of this theory isn't true, and it's not. >> empirically we know from a

fact that markets are all kinds of inefficient. it's still a useful idea. as an iron-clad law of the universe, the efficient law of the markets can't help us, but as a rough guideline, it can lead news the right direction. markets try to be efficient. they aspire to efficiency. when a company reports a fantastic quarter and the stock spikes immediately, because that kind of data can get baked in very quickly. when the federal reserve changes policy, telling us it's probably done raising interest rates like we saw in late 2023, that's huge too. and it takes longer to get reflected in the average. baking that in can make months. even if that abruptly changed courses at the end of 2018, that time, it took weeks in to work in through the averages. stocks that benefit from lower rates will instantly soar, but it could take days or weeks or months for the average to reflect the new normal, but it takes time for portfolio managers to reposition. we're talking about huge slugs of stocks. no fund is going to buy or sell at once. sooner or low we reach a new equilibrium. let call it the kind of sort of

efficient markets coalert. if there is a widely consensus view held about anything, be it positive or negative, you have to assume that view is already being discounted by the stock market. so when everyone is filling your fork about the strong job market, that's probably baked into stock prices already. when everybody is worried about a temporary fed slowdown, already baked in. when investors are hunkered down in fear of a bad earnings season, people are already anticipating a disappointment. [ crying ] in short, when all the talking heads and journalists friendly money emotioners are telling you to be afraid of the same thing, that may be 21 thing you don't actually need to be worried. let everybody else worry for you, from the statement perspective that most investors believe something is going to happen means wall street is already treating it as a reality. yet it's so easy to fall prey to group think when you're managing your own money. emotions are infectious like a communicable disease. you see experts on television saying the same thing while the

newspapers print similar stories and your friends echo back to you it's only natural to assume it must be true. and you know what? very often it is true. but that doesn't mean it's going to move stock prices. by the time we get real consensus on any issue, that move is probably over. you missed it. the bottom line, if you want to be a better investor, don't tear your hair out fretting about the same things as everybody else, worry about the things that people don't seem to care about, because the real threat is the one that you don't see coming. let's take questions. mary in idaho, mary? >> caller: hi, jim. nice to talk to you again. i have a comment and a question for you. >> okay. >> caller: the comment is regarding when you were talking about the conventional stupidity. >> yes. >> caller: i sent you an email on that, and i hope you'll have an opportunity to read it. i thought you'd enjoy it. >> thank you.

>> caller: the question is at what percent of increase in the stock should a person consider taking some or all of their profit either to reinvest immediately or to just hold back as cash to buy something down the road? >> okay. let's take this from the point of view of that you need to sell something in order to be able to buy something. what i like to do, and we talk about this cnbc investing club, is that if a stock has -- if there are fundamental differences from what happened when i bought it. in other words, let's say i bought a stock, and subsequently it has two bad quarters. well, that's wheat i want to sell. lower stocks if they missed a couple of quarters and i boot that to buy something i think is better. there are going to be moments where a third quarter turns out to be good and i didn't get it. i kick myself when that happens. what i've done is create a level

of discipline that that's what you should do. thank you for your email too. dave? >> caller: hi, jim. >> dave, how you? >> caller: dave in colorado, boo-yah to you, sir. >> boo-yah. >> caller: long-time listener, first-time caller. >> thank you. >> caller: thank you for all you do. a side note, my mom got me into investing decades ago and had me watch wall street week and you are carrying on the legacy. >> that's how i got involved too. so we're in the same boat. let's go to work. >> caller: all right. let's go to work. here is the setup. i'm calling on behalf of my girlfriend who is in her early 60s. she is retired with a state pension. she has an investment management firm managing 600 thousand dollars in stocks and etfs in tax-deferred accounts, but they're charging her 1% per year. they haven't kept pace with the s&p 500 and have actually avoided the amag-7. two questions. how can she construct a portfolio of her own and over

what time frame make the changes? >> put two-thirds in an s&p index. if they can't beat it, go for it and join it. one-third i would structure around what we've been saying a portfolio say 6 to 10 stocks. two or three can be overweighted and large, mostly mag seven. cnbc investing club can help you pick the ten because we have a portfolio of more than 30 you. take the ten that you're most excited about, and no more 1%. you're now free to move. and, well, she is. and tell her congratulations for having saved up that much money. that's terrific. the most useless thing you can do as an investor is to worry about what everybody else is worried about. [ buzzer ] remember, the real threat is the one you didn't see coming. on "mad money" tonight, i'm giving you my madomics 101 course and all my best practices for investing. sometimes you need to take a step back and evaluate not just what you're investing in, but how. so if you want to better your investing skills, i say yes

indeed, stick with cramer. >> don't miss a second of "mad money." follow @jimcramer on x. have a question? tweet cramer, #madmentions. send jim an email to madmoney@cnbc.com. or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.

[thunder rumbles] ♪ ♪ ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ [thunder rumbles] ♪ ♪

a slow network is no network for business. [thunder rumbles] that's why more choose comcast business.

and now we're introducing ultimate speed for business, our fastest plans yet. we're up to 12 times faster than verizon, at&t, and t-mobile. and existing customers could even get up to triple the speeds at no additional cost. from the company with 99.9% network reliability and advanced cyber security, it's ultimate speed for ultimate business. and it's all from comcast business. ♪ like i told you before the break, when you tap into a crowded trade, you're playing with fire. if everybody is on the same page about a stock, or even a whole sector, that usually means the easy money has already been made. it doesn't mean you can't profit from something obvious. but when you're late to the party, you're going to have lower returns and higher risks. look, that's just the nature of the beast. fortunately, nobody is putting a gun to your head and forcing you

to follow the hedge fund herd. in fact you don't even have to think about spotting tops and bottoms by gaping sentiment if you dent want to. there are lots of different ways to invest. some of them take less work than others. for example, there is timing. you could try to call every gyration in the average buying stocks when they're poised for near term bottom and then selling them when they look toppy. you can trade around a core position and take a large holding and lighten up when it's overextended and buy it back when the stock sells off. you can keep your bit on the shoulder where the whole market sales off dramatically, give you a chance to pick up your favorite stocks for much less than they're worth, my fave. back in my old hedge fund, i love doing this stuff. if you have the time and you need the inclination and the right resource, it is a terrific way to make money. but if you have a full-time job, this approach is nuts. i say this with someone with a terrifying family of history of mental illness. that's funny. regular people who work for a living don't have time to stare

at the table all day. even if you work the night shift, it's not a good use of your precious free time. trading this actively isn't worth the agitation. that's why i come inhere every night to do the show. i focus on the market like a hawk so that you can take a less intense approach to investing, one that lets you go to work and have a personal life. it's why we help walk you through these different things with our charitable trusts when you join the cnbc investing club which you know i want you to do. how should you approach the market if you're not prepared to devote your entire waking life to stocks? what is it parked on? for starters, let's me say once again the index funds are a wonderful thing. if at any point when i'm describing sounds too daunting to you or just too time consuming, please do not hesitate to say individual stocks are not for me and just put most of your mad money, that's the cash investment that's not part of your retirement portfolio into a nice low-cost investment fund or etf, they have very low fees versus the s&p 500. i say this before the break

because it's a good advice. being a savvy stock investor takes work. being a savvy index fund investor is relatively easy. if you manage your portfolio well, if you do your homework and stay disciplined, i think you can beat the s&p 500 with a diverse group of individual stocks. i do like one were to overweighted, but not everybody has that time of kind. not everybody has that temperament. not everyone is contractible taking on mr. risk to chase a higher return. that's fine too. you have to do what's right for you. call that suitability. what suits you. keep that index fund opgtion in your back pocket. assuming you want to profit from individual stocks, let's see how you can do that without the stock market taking total control of your life. from the get-go, accept that the best is enemy of the good. there is no point in trying to buy or sell stocks a the perfect moment. nobody is that talented. even making the attempt will drive you nuts. you need to accept results that good enough rather than chasing perfection. for example, if a stock you like gets hammered down from $60 to

$50 and you pull the trigger, but then it goes down another couple of points before it bottoms, you didn't screw up. you made a good pick. you could have made a couple extra points if your timing had been flawless, but win is a win. second, regular viewers know that i don't believe in the concept of buy and hold. i believe in the concept of buy and homework. meaning you need to keep researching your companies after you own a piece of them. if something goes terribly wrong, you may have to bail. i think it's a good idea to buy stocks slowly on the way down and buy gradually on the way up. active management. please don't feel compelled to be too active, though. the last thing you need is to be flitting in and out of stocks with every gyration in the broader market. you want to be an investor, not a trader. do you think you can time things perfectly and flit in and out, but most gains occur in concentrated bursts. so you're liable to miss them if you're on the sidelines. thank you to the great peter lynch for putting that in my head. if you have a the time and the inclination to trade, that's

great. however, most people don't. when you have a full-time job and you're trying to manage your own portfolio, you need to be able to sit tight with the stocks you believe. in there will be sell-offs there will be rotations out of one group and into another there will be crazy action on a week to week and even day-to-day basis. you don't have to constantly adjust your holdings based on these moves. if you believe in the stocks you own and you shouldn't own anything that you don't believe in, then you should be willing to stick with them when the backdrop gets tough. ideally, be able to trade it in and out. but like i told you, the best is the enemy of the good. in reality, when everybody is panicking over the latest crisis, you're going to be tempted to panic too and just sell everything. get out now. you might even avoid a substantial decline by bailing on the hole stock market. sooner or later you're going to need to get back in. the whole point is to sell high and buy stocks back at a lower level. unfortunately, it's really hard to nail the timing here. you see my theme? i don't want you to do the impossible. if you dump everything, no guarantee you'll be able to buy

your stocks back before something changes and the market comes roaring back. witness the bottom in october 2023 when long-term interest rates peak and started heading lower. something almost nobody saw coming, what's the solution? if you don't want to give yourself a panic attack every day, keep doing your homework so you know what you own. when your stocks sunch higher, use that opportunity thering the register, raise a little cash, after a20% move or more, you need to take something off the table. when your stocks get hit, put that cash to work buying more shares at lower prices. but you don't have to nail every short-term top and bottom. let me give you the bottom line here. to trade or not the trade, that is the question. if you're trying to be an investor who doesn't need to stare at the table all day long, it's no thing to suffer the slings and arrows of outrageous merch fortune. you don't need to be perfect, just good enough. you shouldn't waste your time trying to pavement every gyration in the market. take a page from jimmy chill and

relax. "mad money" is back after the break. boo-yah from the emperor of cramerica. >> the honorable james j. cramer. >> you got me jumping around my hoyfsst office right now. >> i enjoy your show and find it very entertaining and informative. >> i watched your first episode in 2005, and i've been watching every single episode ever since. >> don't miss "mad money" every night at 6:00 p.m. eastern. plus, join the cnbc investing club and stick with cramer around the clock.

this is clem. clem's not a morning person. or a night person. or a...people person. but he is an "i can solve this in 4 different ways" person. and that person... is impossible to replace. you need clem. clem needs benefits. work with principal so we can help you help clem with a retirement and benefits plan that's right for him. >> i made a promise let our expertise round out yours. to my daughter that i would get my college degree. i had 20 years of experience as an hr professional. i had reached a ceiling, so i enrolled in umgc. umgc removes every barrier. everyone treated me like a person with individual needs and met me where i was. i would not be the person that i am today, the mother, the business owner, had it not been for the partnership with umgc. [ music ]

♪ the stock market talks to me, and i mean that figuratively, not literally. contrary to what you may have read on x, formerly known as twitter, i do not hear voices, though periodically i think my left molar crown does indeed play music. but that's not what we're talking about here. i'm constantly listening to the tape, not music, to get a read on what the big institution money managers are up to. to do that, i need to separate the saying signal from the noise. what do i mean by that? on any given day there might be monster moves in individual stocks. . assuming all the swings a equally significant, but some are a lot more meaningful than others. when you see the cloud stocks getting killed, [ gunshots ] for instance, the natural conclusion to draw is something must be wrong with the cloud. on a really low group bounces --

>> [ booing ] -- >> it's not much of a stretch to assume the pain must be over. >> the house of pain! >> but that's too easy. some of the moves are a signal, and some are noise. signal means something. it means the stock will probably keep moving in the same direction. noise, on the other hand, is noise. to borrow my favorite line from macbeth, noise is a poor player that struts and frets its hour on the stage and thin is heard no more. it is a tale told by an idiot full of sound and fury signifying nothing. in short, while signal carries a message, there is no real takeaway from noise. in another life, shakespeare would have been a dynamite investor. distinguishing the signal from the noise is part knowledge as science. you need to understand that we get major single day advances and declines with no real significance all the time. good stocks can get ahead of themselves, rallying too far too fast before selling off. the technical term for this is overbought and chartists measure

wit a oscillator or the williams percentage r. oscillator named after the legendary larry williams we talk about a lot when we go off the charts. when something is overbought, pretty much everybody that wanted the stock has already purchased it. even the highest quality company can have a overbought stock. when you run out of buyers, you almost get a pullback. it doesn't tell you anything except the stock in question needed to take a breather and digest its gains. even bad stocks can rally and for similar reasons. if they get oversold because they have come down too quickly, you get a nice oversold bounce. this is a sort of ream that doesn't convey information. it's noise. a stock gets oversold, it bounced. and it can go right back down once it works off the bounce. i bring this up because when you see dramatic swings in individual stocks, you mind will try to draw connection to the fundamentals, the real world facts about how the underlying companies actually doing. sometimes that connection genuinely exists. other times, the action in the

stock is noise, not a signal, and you'll end up feeling very fool fish you take your cue from that kind of action. those who want to know about this can go back to the canon on supermarkets, and that's confession of a street addict. it's easy to see how a stock moves a point and convince yourself something is underneath. it's a funny part of the book. all it means is you have more sellers than buyers at any given moment. i demonstrated that with a stock called stride rite. this is something we're constantly walking through with the cnbc investor club. it's not just the technicals. there is plenty of reasons why a stock might explode higher or melt down. sometimes the market simply makes a mistake and the stocks gets rolled back. maybe anticipate interpret a good quarter as a bad one, there are so many things happening at once. maybe money managers are dumping one stocks. >> sell, sell, sell. >> so they can buy in other.

>> buy, buy, buy! >> yeah, one that's hotter. so what kind of action carries real significance? how do you know when a big move is foreshadowing something even bigger down the line? all right. there is a lot of signal that is pretty obvious. a company reports a blowout quarter and its stock roars, obvious. and analyst cuts estimates and a stock plummets. obvious. that's business as usual. i prefer to look for the unusual. a company catches an analyst downgrade and its stock goes up. interesting signal. counter intuitive. in my experience when a stock appears to go lower on bad news, that means it's putting in a bottom and is ready to rocket higher. by the same token, a company reports a fantastic quarter and gives great guidance and the stock gets slammed, that's the kind of signal i'm looking for too. it means wall street believes this company is looking at its last great quarter. when your stock falls on positive news, well you may be looking at a dive. for the most part, you can't decipher hidden messages in the way stocks are trading except in

some rare cases you probably shouldn't even try. it's important toe know what is working and not working in any given market, but you can't let your money management decisions be completely guided what's in or out of style in the wall street fashion show, otherwise you end up owning stocks just because they're going higher, and that is a terrible place to be, because you won't know what the heck to do with them when they inevitably start coming down. here is the bottom line. when you're evaluating a stock, your cue from the fundamentals of the underlying company. don't put too much significance on day to day gyrations in the share price. sometimes you can extrapolate a great deal from a big move in an individual stock, but more often it's telling you something you already know or it's just noise that means nothing. let's take a call. let's go to howard, new york. howard? >> caller: boo-yah, jim, this is howie from the bronx. first time caller and club member. >> excellent, thank you, my friend. thank you. what's going on? >> caller: every time i visit

with my grandson, he looks at my portfolio because he knows i'm watching "mad money" every day. and thanks to your 10:00 a.m. conference calls and your intra-day alerts, he sees gains of anywhere from 60 to 200% on some of my stocks. my grandson, he wants to be an investor too. >> i hope he does. >> caller: here are my questions, threefold. when do i start to trim? how much should i trim, and more importantly, because i like these stocks so much, and i believe in them, when can i get back in? >> okay, these are really great questions, and they're fundamental, because what happens is we believe in discipline and we believe in conviction. discipline must always trump conviction. that means we like the start trimping at 20% up. we'll trim between 5 and 10%. another 20%, same thing. if we really want to be able to be in shape to buy some back, we must do that. and that's how we play it. otherwise, we let it run after we got our cash out. holy cow. ned in ohio, ned? >> caller: five-star professor cramer. it's good to talk to you today,

sir. how you? >> i am good, ned. thank you for calling in. how can i help you? >> caller: yes, sir. well, a couple of months ago i was listening to warren buffett, and he talked about high growth rate companies that eventually forge their own anchor. he said the company keeps expanding and its shares kept rising. would you explain that to me? and does it -- is nvidia an example of that? >> well, nvidia is a really great example. let me tell you why. when you look at nvidia on forward earnings on estimates, it always looks expensive. and then it so far trumps the estimates that when you look backward, it turns out the stock was selling at a low earnings multiple. that's been literally since 2012. incredible. it just keeps doing that. please, don't put too much significance on day to day gyrations in a stock price. you have to know when something is a signal and when it's all

just sound and noise signifying nothing. watch more "mad money." i'm highlighting one of the key pitfalls in investors falsely think of as an opportunity. i'll explain why you should be more cautious than you think. and i'm taking all your investing questions with jeff mars. so stay with cramer. boo-yah, jim, i love you, man! i've been watching since day one. >> thank you for all the wonderful advice that that you provide us. >> i'm learning so much watching your show. >> watch your program every day. i love it. >> i always wanted to say boo-yah on your show. >> thank you for being the greatest in the world. >> we consider you the money market maker, and we thank you for all you do. >> i love your show. >> i love your show. we think it's the most entertaining program on tv. - "best thing i've ever done."

that's what freddie told me. - it was the best thing i've ever done, and- - really? - yes, without a doubt! - i don't have any anxiety about money anymore. - great people. different people, that's for sure, and all of them had different reasons for getting a reverse mortgage, but you know what, they all felt the same about two things: they all loved their home, and they all wanted to stay in that home. and they all wanted to stay in that home. - [announcer] if you're 62 or older and own your home, you could access your equity to improve your lifestyle. a reverse mortgage loan eliminates your monthly mortgage payments and puts tax-free cash in your pocket. call the number on your screen. - why don't you call aag... and find out what a reverse mortgage can mean for you? - [announcer] call right now to receive your free no-obligation info kit. call the number on your screen. >> university of maryland

global campus isn't just an innovative state school, it's a school for real life, one that values the successes you've already achieved. that's why at umgc, you can earn up to 90 credits toward a bachelor's for prior learning and life and job experience, why we offer scholarships and affordable tuition, and why we have online classes and the support you need from your first day to graduation day and beyond. for over 75 years, umgc has helped people succeed again. what will your next success be? every day, more dog people, and more vets are deciding it's time for a fresh approach to pet food. they're quitting the kibble. and kicking the cans. and feeding their dogs dog food that's actually well, food. developed with vets. made from real meat and veggies. portioned for your dog. and delivered right to your door. it's smarter, healthier pet food. get 50% off your first box at thefarmersdog.com/realfood

all night, i've been warning you about the dangers of being a follower. everybody expects the same outcome in the stock market, there is a very good chance it won't play out as expected because it's already priced in. that's what we call priced in. and that's why you need to be extra wary of the ipo cycle. let's go over this. we've seen the pattern over and over again. at first many of them explode higher, but at the same time they're flooding the markets with new stock supply, and that supply ultimately drives us down. i've said it a million times. the stock market is all like any other market. too much demand and prices are going to be lower. when ipos make people a fortunate, you get a palpable sense of exuberance. and then when the deals start attracting less interest, the exuberance turns into hostility, and then the whole market, not just the ipos, tends to get

slammed. we've seen this happen so many times. in 2020-2021 we got this wage spac mergers. just in 2021, get this, we had roughly 400 traditional ipos anderson another 200 spac mergers which are blind check companies that would make a bunch of acquisitions overtime. but in 2020 a lot began to use them as a way to become public while evading the strict regulations that the securities and exchange commission places on ipos. initially there were some very exciting ones that really caught fire. for example, zoom video. this one came public in 2019 and then soared to the stratosphere in 2020 once the pandemic made its platform essential, at least during the covid era. at first you get a bunch of hot deals to get people excited. we had electric vehicle and stations ipo. at first the stocks were unstoppable, although most of that was because this was a period of high-risk speculation where people were willing to give anything with the right

buzzwords to benefit of the doubt. mistakenly, of course. reminiscent of the dot com era in the late 90s when anything connected with the internet was beloved until the market was flooded with excess supply and the whole group collapsed in year 2000. i'm going give you an example from 2020. it's a company called quantum space which was in retrospect a science experiencelooking to develop better batteries. anyone can develop better batteries with the ability to charge quickly, and you can make a killing. even in a world where electric car have lost some of their luster. but quantum space was a long ways away. even four years later, these guys didn't have any meaningful revenue. back in 2020 and early 2021, wall street was still giving the benefit of the doubt to anything connected to electric deals. qua quantum became, it saw its stock

more than double in two trading sessions putting it in the 20s. during this period of maximum hype, this stock -- i know, this is going to be crazy -- the stock shot up to $132 and that's where it peaked in december 2020. then we started seeing short sellers come out of the woodwork arguing it was a scam and wall street eventually lost interest in companies with zero profitability, let alone with speculative names like qua quant quantumscape. it got obliterated. it's only been able to bounce above at times of occasional short squeeze. don't mean to pick on it. all sorts of electric vehicle plays that came public during the frenzy of 20 and '21 got crushed. it ended up coming back, lucid, nicola, canoe, lion electric, lightning motors, fair day future intelligent, all saw their stichs go 90% from peak to trough. many like nicola had

fraudulents. roughly 600 companies come public in 2021. by the second half of the year many of the deals were blowing up in your face. we already had far too many newly minted stocks. the fed started talking about raising interest rates in 2021. the entire edifice collapsed and the new issues spent pretty much the entirety of 2022 getting eviscerated. that's why knew more about the dangers of the ipo mania in 2021. i said there was one surefire way to wound a bull market and that is by flooding it with lots of new supply. when companies start coming public we get a supply glutton. i warned you that the ipo bubble might burst and you would be left holding the back. don't forget hundreds of really low quality companies in the 2000 era ultimately went disrupt. 2021 was just as bad. you could argue it was bad because so many were spac mergers. that would make forecasts that the s.e.c. would never allow in a traditional ipo.

the other big problem, when portfolio managers get excited about putting a lot of money to work in ipos, they often need to raise that money by selling something else. when there are a lot of large deals, they need to do a lot of selling. 2021 was different thanks to the fed rate policy. the new 10s to trot out the old. that's what happens. you sell and buy. remember, the bulk of the new money that comes into the market goes into index funds, and they can't participate in ipos because they aren't in the indices set. they participate in the deals in the aggregate don't have enough sky harbor coming no to get in on a bunch of big deals without selling something else. there is the mechanics of it. so the next time we have a big wave of upcoming initial public offerings, i need you to remember that it pays to be cautious when the ipos are coming hot and heavy. the bottom line, as much as i love anything that generates enthusiasm for the stock market, of course, like a few massively successful ipos, you got to be careful when we get a whole wave

of new issues. the ipo tends to start out strong. generally euphoria and then it burns out, and all the new stock supply can really weigh on the market. please, just keep in mind that concept the next time you get excited about a bunch of red-hot deals. "mad money" is back after the break. >> good evening, mr. cramer. thank you. thank you for everything you do. >> you've been such a wonderful source of information with your teachings. i have to say thanks. >> thank you for all your advice and saving us from ourselves. >> your advice let me quit a job i hated. i love you to death. >> thanks to everything for you. thanks for making us money. more importantly, thanks for keeping us from losing money.

your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire what is cirkul? cirkul is what you hope for when life tosses lemons your way. cirkul is your frosted treat with a sweet kick of confidence. cirkul is the effortless energy that gets you in the zone. cirkul, available at walmart and drinkcirkul.com. ♪ music ♪ ♪ unnecessary action hero! ♪ ♪ unnecessary. ♪ was that necessary? no. neither is missing your daughter's competition

to do payroll. with paycom, employees do their own payroll so you don't have to miss your daughter's big day. time to shine. get paycom and make the unnecessary unnecessary. [crowd chanting] they ignored your potential, and mocked your ambition. but it's not the critic who counts. with every swing and block, your game plan never changed. ♪♪ some still call it luck. let them. because you know what it's always been. inevitable. ♪♪ ♪♪ ♪(voya)♪ there are some things that work better together. like your workplace benefits and retirement savings. voya provides tools that help you make the right investment and benefit choices. so you can reach today's financial goals and look forward to a more confident future. voya, well planned, well invested, well protected.

when you're picking stocks, you need to be very careful about doing the right thing for the wrong reasons. this happens more often than you expect. let's say you find a great company, well managed, strong fundamentals, good dividend, you buy that company's stock and it goes up. so it's only natural to conclude that the stock is rallying all the reasons you liked it in the first place. that's not always true. you might think a win is a win, but sometimes it's more complicated than that. you if you don't understand a stock is moving up or down, you're going to be confused when it goes in the opposite direction. when we're confused, guess what happens? we make lousy decisions. there are a bunch of consumer packaged goods, called cpg companies. maybe you want to buy procter & gamble, long-time favorite. there are a lot of reasons to

like them. but like i told you earlier, logic is rarely what drives the stock market on a day-to-day basis. but let's follow through here. let's say you pick up procter & gamble because you really believe in management or you like the dividend or you think that plastic and fuel costs are going down, which will improve the company's gross margins. that's a huge part of the expense. you buy the stock and it goes higher. what's next? you have to ask yourself why is it rallying? it's very easy to tell yourself, i nailed it. this market is finally giving proctor the credit deserves. when you buy a stock and it goes up, that means you were right. why would you second guess yourself when you're right? the answer is simple, because maybe you were just lucky. as i told you before, it's better to be lucky than good. either way you need to be able to tell the difference. let's say you rack up a nice win in proctor. you should ask yourself if you're right or happen to be in the right place at the right time. what i mean right place, time, rotation, rotation, rotation. there are times stocks roar higher for reasons that have nothing to do with the

underlying companies. proctor, like all consumer package good plays is a recession stock. because the earnings tend to hold up during a slowing economy, the stock roars when we get lousy economic data. you buy the stocks because you believe in the business and then they go higher as part of a rotation that has nothing to do with the business, you still have a win. the bank isn't going to tell you they can't take that money because they don't accept profits from rotations, but you don't want the get caught with your pants down because the market suckered you have into believing procter & gamble is going up based on the fundamentals when really it was benefitting from rotation into the whole consumer goods package sector. this is what i meant earlier about filtering out the signal from the noise. and it is hard to do. why? because of something called confirmation bias. when you have the thesis and new evidence seems to prove correct, you were right all along. you should are approach with skepticism. people are right about stocks every day, but maybe it's just a

qu coincidence and you should ring the register before it goes away. let me offer an example. stocks soared in 20 and 2021 and kept running into 2022 even when most growth plays were getting pulverized. if you on the other hand it, maybe you thought you were winning because people were embracing renewable energy. but in 2023, the residential solar stocks got obliterated. why? it had nothing to do with the popularity of renewable energy, and it couldn't be stopped by generous federal subsidies. instead, it turned out that people can't really afford residential solar systems without borrowing money. the whole issue was built not on solar, but on financing. once people realized long-term interest rates would remain elevated, solar sales got crushed. it's not like end phase was roaring in 2020 and 2021 when people could borrow money for next to nothing. let me give you the bottom line on this. it's very helpful to understand why a stock you like is going up

or down. you have a win, don't lazily assume you simply got it right. think about what it means if you were merely in the right place at the right time. and please proceed with caution. stick with cramer. ♪♪

sandals jamaica sale is now on! with rates from $199 per person per night. visit sandals.com or call 1-800-sandals

♪ tonight i taught you all about madonomics 101. but now it's time to turn to you. my viewers are smart, which is why my favorite part of the show, as i always tell you, is answering questions directly from you. now tonight i'm bringing in jeff marks, my portfolio analyst, partner in crime at the cnbc investing club to answer some of your questions. and jeff, don't get a swelled head. some of these callers have been calling in saying you do a pretty great job.

keep your door so you can get through the door here. >> thank you. >> for nose in the club, jeff will need no introduction. those who aren't members and soon i hope you will be, jeff's insight and our back and forth really are what we think is a major part of being part of the investing club. thank you very much. all right. now let's get started. first up we have a question from jimmy, who asks how can we identify the best companies within an industry. i have a way i like to do. i like to see who has the highest gross margins. that means they have the biggest moat, they can make the most money and something people don't look at enough, the gross margin. >> that's a great way the do it. you can look at who is growing the fastest revenues. but another way is really important is read the conference calls of the companies. >> definitely. >> and their peers and their customers. see who is partnering with who. that will give you a good tell about who is best of breed, who has the best of products who is doing the best by their customers. >> that's a really good point. i find in the conference call you get a real sense of whether the analysts hate it or like it.

you can often see by their questions whether they are in awe or they think that there is something that's suboptimal. great point to the conference calls. now next up we have a question from ian in pennsylvania who asks, you stress the importance of being diversified and also doing your homework. there a point where one individual can have too many different stocks to be able to keep up with the homework while staying diversified? >> i used to discuss this question with pop, my father. he usually liked to have 40 or 50 stocks. i would say dad, why do you have 40 or 50 stocks? jimmy, i work a couple of hours a day, and i spend a lot of time just looking at the market. so i like to look at a lot of stocks. now he had time on his hands. most people don't. that's why i usually say try to keep to it ten. don't be a mutual fund in yourself. >> i think the benefits of diversification may start to diminish at a certain point if you keep adding and adding and adding stocks. but five to ten, that's what we generally say for the club. start with what you can handle. >> pick the ones you like. use your power of observation

and curiosity. >> when you do more of the homework, that's when you can add more. >> that's a perfect situation. next up a question from dean, also from pennsylvania, who asks, i'm considering either an s&p 500 indexfund or a total market index funds. both have similar expense ratios and historical returns. what is the primary difference between the two? do you know john vogel personally told me, jim, i want you to put in your 401(k), i want it to be in the total stock market return fund of vanguard, and that's what i did. and why did he want me to do it? he said over the long-term, you'll get a little bit better performance because you'll be diversified away from the s&p and end up picking some really good young growth stocks. >> that's exactly the difference. s&p 500, that's going to be more of the large caps while total stock is the mid caps, some of the smaller caps as well. i think if you look over the long run, the returns, there is not much of a difference between the two. >> i didn't find it either. but the father of the index fund

is john as you know. and jack said jim, this total stock market term will beat it. there was a very long period where it did. but it's really kind of -- any way, i'm doing it out of homage to the late john vogel who was an amazing guy. let's go to miles in new york who asks what are your stages in cutting bait? i'm assuming cutting bait means selling. 20% a little sell. we've been very i like to say diligent about letting our great stocks run and cutting off the ones that aren't. that's the key thing. you let your great stocks run, but if you can minimize your losses and be more aggressive in cutting, you will outperform the market. >> right. and you always have to remember when your original thesis, when it's not playing out as expected, that's when you may have to make an adjustment. and i know in some of those cases, we've often learned that our first sale is the best sale when trying to get out of a struggling game. >> and i think there is nothing wrong with admitting that you have a loss. what matters as we were talking

about the other day with roger federer, is you just win more than you lose. that's what you need to do. all right. now, you know what? we're going to have to save the rest of the questions for next time. so all i can say is i like to say there is always a bull market somewhere, and i promise to try to find it just for you right here on "mad money." see you next time. right now on last call, is social media the new smoking? surgeon general delivered a steady demand to better protect kids. tightening his grip, elon musk starling for maybe it's biggest day yet to dominate the internet. biting the dust, sort of mcdonald's is to a major experiment with ai. all that and more over the hour. buckle up, last call is up on a monday right now.