nature, aren't they, dan? >> to some degree they are. >> to a large degree. first solar, i think josh the sausage man talked about it yesterday. fslr. >> only sausage 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. it's my job not just to entertain you, but to teach. that's what i'm doing tonight. so call me at 1-800-743-cnbc. there's some things i've been keeping from you, it's not fair. tonight i'm going to do something about it. tonight i'm going to tell you who i am and how i got here.

no, not i am jim cramer, host of "mad money," "squawk on the street." that pretty much sums up everyone these days. i want you to know more than that. although it did take me to learn that an avatar wasn't a movie and that a hash tag wasn't a number sign. what i want to do tonight in an extremely personal show is trace the arc that brought nomad mad. not for some auto biographical ego trip, i do that all the time, but to hear some money making lessons from the phases of my various careers and how you profit from them. in the end, this is cramerica! ♪ in short, i am going to give you the invest to cramer guide book, and how i continue to learn every day so i can help you become better than i've ever been or ever will be. that is the goal of "mad mone"."

let's start real early. my love of stocks didn't begin after law school or even high school. my love of stocks started bag in fourth grade. my dad would bring home the old philadelphia bulletin. at that point, one of the largest newspapers in the country. a great afternoon paper. that was when he returned from work every night. i wanted it for the sports. i was a ridiculous phillies fan back then. i would have made it so i was a yankee fan. we were only 89 miles south of new york. i was a curious kid, though. curiousty has always been a blessing and a curse of mine. not unlike that of a cat that's always probing, occasionally jumping on a couple hot stoves. there was always this solid chunk of the paper that seemed impenetrable to me. called the business section. it had these giant lists of names and seemed to go on forever. they were the other tables.

different from the batting average tables and box scores i would scrutinize with regularity. when you read them from left to right, they made no sense to me at all. open, range, close. what open? what range? what close? what were these strange things and why did they matter? i asked my dad, who i know dabbled in the stock market. occasionally i would hear him get mad when he would hear prices mentioned on the room. he always seemed angry when i heard something called national video. >> boo! >> and how national video went out. i didn't know what national video did or why it went out. i didn't know if it popped it either, but i know it made him furious. i went to find out more about what these things were that made him react with such fury. so he sat me down and explained that each of these lines represented a performance of a stock of a company on a different day. the open was when the stock opened up in the morning on the opening bell. the range was how low and how high it traded during the day. and the close was how much it

was worth at closing bell. it fascinated me. why the heck did they trade, and what did it mean to close? he described to me that people tried very hard to figure out each day which stocks would go up at the close, and buy them so they could make money from that increase from the open to the close. frankly, this struck me as downright silly. i mean, i told him when i looked at the baseball tables, i was trying to figure out who would hot, what it would mean for the teams i liked, specifically the phillies. he said it was pretty much the same thing with stocks. that you studied the companies like you studied the players. some were doing just okay. some were hot as pistols. some were just duds. i said i wanted to figure out which was going to go higher,

just like everybody else was going to find out. he said why don't you think? it seemed in my house the radio was always on. we always watched the news while eating. i hated it because most of the news was about the war, meaning the war in vietnam, and it seemed frightful and scary and very real life, even when i was 9 years old, my mom was worried that i would have to go to vietnam. fortunately the war was winding down by the time i got my draft number, and it was a high one, so i was spared from conflict. they always mentioned the dow jones industrial average. and they either talked or showed the most active stocks. and then the ones that had done the best or the worst. national video was often on the worst list, i discovered, hence the anger. so what i did was write the names down that i heard and i tracked them. kept them in -- well, believe it or not, this ledger that i still have. here it is. what a terrific game. i was trying to figure out the

next move of a stock, even if all i knew was the name. polaroid, xerox, pan-am, united. most of them were defense stocks and they went up a lot in tandem with the war. hey, so i followed a lot of those. and a bunch of others. look at that. con air. eastern. rca. admiral. after a year, i decided this was about as cool a game as was imaginable. i wanted to introduce it to my fifth grade class, so i did, show and tell. showing them my ledger. inviting everyone to play to see who could find stocks that went up during the week. not everyone was as into it as i was, but the coolest thing happened ever. my dad's company represented the mmm corporation selling tape and a fancy ribbon that bowed

easily. satin ribbon. have to make the bows. mmm was always coming up with new product lines, which it still does, which is one of the reasons i've always favored it. about fifth grade, pop came home with a new line of mmm he was selling. games. they got into what's called as mmm bookshelf games. wanted to know more about how the stock market really worked. acquire about takeovers, which had all been the rage at the time. and stocks and bonds of which i am fortunate enough to have gotten a copyright here courtesy right here, courtesy of george, who is producing "mad money," who gave it to me for the holidays. i almost cried when george gave it to me. i've subsequently asked the ceo of mmm to bring it back. but the point of mentioning

this, the stocks and bonds which george bought off of e-bay, is the stocks are fascinating enough to get your kids started in them right now. it's easier than ever. pick some stocks. maybe not of defense companies, although they are performing at an odd and positive way. but companies that are familiar to your kids, and have them track them, and guess which will do better over time. not the city transport. not the growth corps riggs of america. not the pioneer mutual fund. not the central city municipal bonds. but stocks that are real. so here's the bottom line of my childhood stock market obsession. get started early. and then they play for life, because the stock market is a long-term contest. and one i think the earlier you get in, the more you can win. i'm going to mickey in new york. mickey! >> caller: hey, jim. i wanted to thank you for all you do. your books and your show helped me at a very young age, which leads me to my next question. i've been investing since i was quite young, i was wondering what type of changes i should

make to my investment process as i get older. >> it's a generational thing. i used to say when you're 50s, push 50% bonds. no more. interest rates are way too low. what i need you to do is find some conservative stocks, that give you a good yield. and shift over time from the high growth stocks. and then i think you will be able to pick up some income and do well. rick in arizona. rick? >> caller: hello, mr. cramer. how are you? >> real good. how are you? >> caller: great, sir. i have a couple of young children. i'm trying to get them started in investing. the question i have is what advice and what are the most essential items or ideas of investing concepts do people need to know when they start learning about the market and investing themselves? >> the first thing they need to know is what they own. the idea behind that is to own things like disney. it's why i always tell people start with disney. domino's pizza. mcdonald's if you like mcdonald's. go to the mall. go to costco. go to places that you're

familiar with. read the annual. buy a share. one share. get him or her involved. get them started early. teach your kids about the market. it is a very valuable lesson. and there are many more coming up on this special edition of "mad money." we'll be right back. don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney @cnbc.com. or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and all-new is.

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welcome back to a bizarrely special "mad money," where i'm trying to teach you life lessons in investing from my life. i am not a dollar sign represented by a man, or a stock symbol for that matter. ticker j.i.m.

i have stumbled around long enough in life to learn a thing or two, and tonight you're getting some of that wisdom from the school of hard knocks. don't you always love it at the beginning of a pro football game where they have the player say his name, and some say the school of hard knocks. that's what i attend when it comes to stocks. you're getting the on-tv version right here, right now. my fourth grade obsession with keeping a ledger, to track stocks, and then ultimately to learn how they trade through the greatest game on earth. no, it wasn't monopoly. it was stocks and bonds. but with its little certificates and its game boards and its cards, tells you about news and how that would send a stock lower or higher. that's what this was all about. now, i left the stock market games behind me by the time i got to middle school. which by the way we then called junior high. where my obsession became sports and i was the second fastest guy

in the sport for ages. i ran track, of course. and the other thing i cared about was girls, whose movements were more elusive than any of this stuff. and they were more elusive than the ranges of stocks. that was a random walk down main street. i couldn't win for losing. that's a different show. maybe entirely. however, my father did ingrain in me the desire to save. early on, i learned that even in high school, you've got to save. i saved as i bussed tables, at the old block in cleveland, which we called the block in cleavage, because we were hilariously stupid back then. i sold first cold soda. hey, ice cold. and then ultimately graduated into selling ice cream. now, very quickly at that job, i learned the value of market power. specifically cornering the market, and i paid people to give me exclusively right to sell ice cream. hey, ice cream here. vanilla and chocolate. on the 600 and 700 level of the

vet stadium. can you imagine how much money could be made if you had the only franchise in the whole upper deck, even for a team as horrible as the phillies back then? by paying those guys not to sell ice cream against me, i made fortunes, except the one time they gave me only strawberry ice cream. talk about having to run from a customer. or maybe when steve karl would pitch. he pitched so quickly that i would get stuck with unsold ice cream, and i would take a genuine beating. talk about learning how business worked. ice cream on a hot july night is about as short as short can be. i might jest with you about your name. sometimes you hear me calling you hey skip, chief, or hey come on, captain. i learned these names at the ballpark. it's what people called know get my attention to buy ice cream. i loved it for the false intimacy and i never forgot the monikers bud, i mean, partner.

i opened an account at fidelity and contributed a little every week of my ballpark winnings. the great peter lynch, who's written two investment books. two of the best investment boosks abooks of all time. they're the ones i usually tell people to get after they've read my books and say i want to learn more. i didn't save enough when i got to college. the money paid was work study anyway and it went toward my tuition and room and board. but when i got out of college and after a lot of attempts to get a job in the newspaper business, rejected by more than 50 papers, i had every single rejection in a trunk. i landed a position, making $156 a month. i still keep a tattered pay stub in my wallet to remind me of how hard it was and how poor i was. nevertheless, poor, $156, i contributed even then. i put a few dollars away when i could. not long after i applied to and

got a job at the now defunct los angeles herald examiner. it was a horrible job. i was making $179 a week. it was more, but it was in a town that was about as four times as extra pensi expensive tallahassee. i was living in a fairfax district. a little dicey. a pioneer chicken, which was way too expensive for me to go to. a few weeks later, i was stalked and ultimately broken into repeatedly. something the cops were helpless to stop. at the time, i was assigned a story at san diego, a horrible school shooting. when i returned, everything was gone. everything i had. so it began. my terrible but thrilling six months of living in my car, basically trying to get by. the only real upside being when you met a woman, it was pretty easy to figure out the inevitable end of the night query. your place or mine. now, i know this isn't your normal behavior. but as much as i knew that my

ultimate goal was to save enough to get an apartment, people would take me in now and then so i could get a shower, change, maybe even get a good night's sleep. but you know what? i still never quit saving. i remember cashing my paycheck every other weekend and writing a check to fidelity fund, for what i could afford. you only have your gasoline, car insurance, and food expenses if you're in your car. terrific savings on homeowners insurance, rent, wow. how poor was i, yet still putting money away? when i only got mononucleosis, i had no health care. when the company mercifully put me on the road so i could submit expenses for my day-to-day. so i had to go to a clinic to get fixed up. i still put away money, though. even as i was making my weekly trips to the doctor, who was one of the best i ever had. the upshot of investing when you're living in your car, amazingly, giving money to the

best stock picker of all time, i managed through the years, 35 years later, to put enough money away to take advantage of the great bull markets of our time. not to brag, but to teach. that money ultimately amounted to a fund well into the six figures. not because of my capital additions. i stopped putting money away in that fund years ago. but because of the power of compounding. with an amazing investor at the helm. i just let it build. i think the takeaway here is that i want you to save no matter what. obviously the earlier the better, through thick and then. when cnbc has those all-star managers on, if you don't have enough money or time to handle your own stock portfolio now or can only buy one or two stocks, send the money in. as little or as much as you can. and here's the real bottom line. if i can still send those checks to the fidelity magellan fund when i was living in my car, stick as a dog with jaundiced liver, saved by a pistol by my side, the most down and out that you can be in this great country, you can put some money

away, too. after the break, i'll try to make you more money. we in the united states are competing with the best countries in the world. >> look at the global competitiveness of american companies by any story. my life story can be your life story. you can start with nothing in america and create the american dream. [ male announcer ] i've seen incredible things. otherworldly things.

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i have learned the hard way, through decades of stock investing. i told you first how to get your kids started early. then i told you about how nothing should ever stop you from investing. listen, if i could do it living in a 1977 ford fairmont, you can put money away, too. right now, i want to tell you about how i got started in an individual stock pit, something you know i still love. after seemingly interminable periods of chaos. it is still totally worthwhile, if not lucrative. and yes, is the reason i believe you watch. certainly your inclination. that is much like the funny outfits, and of course the outraged sound board, courtesy of when i used to have a radio show similar to "mad money." it was called "real money." if you're picking stocks, playing with real money, not just with a ledger, or with a game of stocks and bonds, you need to open an account. when i got started in 1979, this

was no such thing as an online account. i had my money with fidelity, so i chose to put my money in an individual stock account there. when i first started, i didn't know where to look for ideas, so i turned to forbes. please at forbes, please do not take this personally. i read a nifty article. it seemed to be very compelling. so i bought first thing, ten shares, for nine bucks. a week later, frost hit and wiped out the whole crop. my investment was more than cut in half. i was completely devastated. >> the house of pain. >> but not defeated. i sold it out and took the capital. you know what i did? went back to forbes. i bought seven shares of bobby brooks. an outfit i had never heard of. forbes said it would be a terrific buy. the company reported a bad quarter and my money was halved again. fortunately, i had a decent job at a magazine called "american

warrior." i was making 20 gs and living at a less than swank studio. the cheap $40 a month rent with the sofa bed. albeit twice the rent for a beautiful bedroom in tallahassee. i was on the road quite a bit back then. after a particularly hard night on the town researching a story, i fell in love with breakfast at bob evans farm. finding out it was publicly traded when i went back home, i visited the huge fabulous midtown manhattan new york public lie brir and devoured everything i could about bob evans farm. they had magazines with articles, a four-month-old financials and write-ups that allowed me to compare with other companies in the industry. i bought 20 shares. the stock went up immediately. a good quarter. i found out know what you own. like it even. what do i know about growing

oranges? what do i know about fashion? but a good plate of scrambles and sausages served in an attractive setting with a nice waitress. a company that i found, a long tradition of good service. nice enough growth. now that was for me. next up, standard press steel. now that became sps technologies. from my hometown. they made fasteners, screws for airplanes. why sps? because a buddy of mine from high school told me they were hiring like mad. wanted to know if i was looking for a job. paying good money. i had a good job, but back to the library for more research. st technology. solid company. no debt. but nothing about its hiring push. ripe for a trade, right? no one had that skinny. you know it doubled not long after, and by that point i caught the bug for good. 23 years later, it would be acquired by precision cast

parts. and i still like and have liked for many years. quality company. so now i'm figuring it out. the best investment ideas come from what you know, melded with the information gleaned from public sources, even if they are as late and as hard to source as taking a trip to the new york public library when i was supposed to be working. i didn't like the random way i was making money through this. i mean, you know, a friend from home's lucky call about jobs? so random. a hearty breakfast at bob evans farms? i was thinking there's got to be a more methodical way, right? and then it hit me. look around at work. at the time i was covering mergers and acquisition wars, profiling some, following the deals they were on, it seemed that every other deal was in the oil patch. one after another after another. smaller to midsize oil companies were being acquired. and all i was doing was standing around writing about it. so i went back to the library,

took out some editions of value line and checked out the pages devoted to oil companies. i cross referenced them with other research to find out which could be acquired without problems. even because they were public without a family owning them or because they seemed to fit the size and parameters of so many other deals i was writing about. so i settled on -- natomus. i didn't to wait long. i almost doubled my money. buy companies that will do well on their own as natomus was, but still undermanaged, which is the consensus i found. that meant another oil company could do more with natomus, which was cheaper than it should be if it simply got rid of the management. as much as i had hit some winners, i was distraught that i had given up the ghost in those first few trades. at the time, i had been hanging around the track. yeah, the track on weekends. mostly aqueduct.

nearby. and i learned how to handicap by reading the books of a guy named andy buyer, "the washington post" racing winner, picking winners. they teach discipline, how to identify the best thoroughbreds to bet on, how to find the best long shots, going to out of the way tracks, where information was less well-known and not betting willy nilly on every horse. find the one where is the payoff was more sure and bet big. cut your losses if you're having a bad run. every one of these lessons can be applied to the stock market. you can take a huge swing when you know what you're doing, m particularly when others don't. don't just gamble on stocks for the excitement and fun of it. most important. be disciplined. don't let your losses pile up. after five years in professional journalism, i decided to hang it up and go back to law school. the good news, i have saved enough to pay me for my first year. all in the stock market. i would never have been able to make enough had i just kept in a savings account. an index fund would have made me

nothing. well, nothing at all. so here's the bottom line. you want to get started? go small. invest in what you know. research it intensely. back then i got old data from the public library. now it's as simple as a key stroke. the information is free and ubiquitous. analyst presentations, brokerage research, and of course the conference calls that i tell you are musts if you're going to know what you are doing. simple? no. lucrative? you bet it is! frank in arizona. frank? >> caller: jim, whenever i'm considering buying or selling a stock, i look at the bid price and the ask price. sometimes that price range is nar row. sometimes it's wide. how is that information useful in determining if it's time to pull the trigger? >> well, look, if you like the stock, i'm going to tell you that's irrelevant. what really matters is, because if you want to hold the stock for a while, you just have to hold it and forget about that. i used to buy stocks that had a -- we used to say they could

drive a truck through them. things are much easier now. don't worry about the spread. >> cramer, you are super. you are awesome. >> i'm a first-time investor. >> you are inspiring me to get in the game. >> your show is the best on tv. >> i want you to know that you have transformed me. thank you, cramer. ♪ [ male announcer ] you wait all year for summer. ♪ this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac ats for around $299 per month or purchase for 0% apr for 60 months.

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to go the distance with you. go long. we do? i took the trash out. i know. and thank you so much for that. i think we should get a medicare supplement insurance plan. right now? [ male announcer ] whether you're new to medicare or not, you may know it only covers about 80% of your part b medical expenses. it's up to you to pay the difference. so think about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they help cover some of what medicare doesn't pay and could really save you in out-of-pocket medical costs. call now. with a medicare supplement plan, you'll be able to stay with your doctor. oh, you know, i love that guy. mm-hmm. [ male announcer ] these types of plans let you visit any doctor or hospital that accepts medicare patients. and there are no networks. you do your push-ups today? prepare to be amazed. [ male announcer ] don't wait. call today to request your free decision guide and find the aarp medicare supplement plan

to go the distance with you. go long. tonight's show is all about you learning from my attendance at the university of financial hard knocks with a major in investing. i've taken you through the importance of getting started early. and saving no matter what. i've shown you thousand sphow t winners and avoid losers, all through looking at actual examples of my life. now i'm going to give you a sense of how you can become a trader if you want to, and be a good one at that. "mad money" has changed time and time again over the years. it's been on for so long and i have to literal ly scooted away from trading and much more oriented toward investing.

there are so many obstacles to trading than investing these days. it's very hard to do. you can't really do your job at the same time and also follow the market. there's so many people with such great sets of tools and the ability to be accessing information in realtime and they're always going to beat you. there's so many different products that allow hedge funds to move stocks around like toys and you're really going one-on-one with the big boys if you attempt to try trading at home or work. it's almost a sucker's game. but there's some advantages that you have now that you sure didn't have when i started trading in my law school dorm back in '81. first, commissions are so, so much lower, so you can get in and get out without much friction and without much more after commission profit. that's why i'm not worried about the spreads, as i said earlier. second, the information you need is on your personal computer, even on your smart phone. i'd have to call brokers all day, watch the ticker. back then i didn't even know what price i got on my stock when i bought it. when i was in class, i had to

use pay phones. no cell. you have to wait while some kid chatted aimlessly to his girlfriend or someone called her mom. i was begging to get on the darn phone. at the same time, though, i had to go with what i knew. i knew individual stocks for all of the stories about harvard law. including the movie "pay for chase." i can tell you there was a lot of down time and a real good business school across the river. all things considered, i possessed the best publicly available information around at that time. the first thing i decided to do, though, given the circumstances was to work on finding one trading idea per week. my reasoning was pretty simple. you can't be all over the map. i figured i couldn't take a lot of chance until i really gnaw what i was doing, and that's a very valuable lesson for you if you want to start trading. i discarded a ton of ideas

looking for catalyst, possible mergers. stocks that could rally based on other parts of the paper. an article on the front page of "the new york times" might be talking about some breakthrough in medicine. a brokerage report might discuss the potential for a new oil fund. i go on a roll and started my first writing about the market. yeah. i wrote a news letter. it was called mr. bullish. which i mailed to my parents once a week. articulated the thesis behind my trade. used to type it on my typewriter. i would do no trade if i couldn't explain exactly what the company did. and why i liked it and what would happen. i had that level of discipline. no buying of anything that didn't have an exit strategy. i had to have an exit strategy. an important lesson made disciplined by the insistence of a written thesis before i pulled the trigger. when you trade, you must trade with confidence.

none of this scare stuff. you could easily be shaken out by the broader market if you aren't. you want to trade with confidence? well, ask yourself, would you be willing to put a stock recommendation on your voicemail and update it every week? hi, this is jim cramer, i'm not here right now, but i like monolith memories. darn it, i actually did that, too. yeah. and i had that level of conviction about my pick of the week, which is incredibly important to possess. of course, i was putting my money where my mouth was. i managed to augment the winnings with work i was able to get from my old employer american lawyer, some freelance work from "the new york times," and some legal work from a professor who moonlighted during criminal defense krcases. it wasn't that long until marty tried to get me a piece. i neglected to call him back, so he got three weeks of trades all successful at that machine. when hi met him, he said he made more money from my answering

machine and he wanted to give me half a million dollars to manage. i told him i didn't think i was capable of that. he said he had confidence in me. i gave him a tug of war. he actually did give me a check for half million dollars. that was real money back then. i was like whoa. it was too hot to touch. i set up another account. i went right to work trading. almost immediately, i lost a ton of it. >> the house of pain. >> and i could see how i would have to wash dishes at marty's house and mow the lawn for about 125 years to make back the 70 gs i had just blown to smithereens. my mistake, as clint eastwood told us, a man's got to know his own limitations. you can't trade a huge chunk of money at once. you can't put it all to work a once. you only do stuff only after you had ideas that you knew had a

clans to p chance to pan out. knowing that you would be gone whether it worked or not to keep that discipline intact. i had violated my own rules and i had blown it. i confessed to marty of my sins and said he should take whatever is left of the money back. instead, he wanted to give me more money. he was betting that i had learned my lessons. you know what? he was right. i then reverted to my old style, trying to be right about one idea at a time, keeping the rest in cash. going big when i had the most conviction. any good trader would do. i slowly but surely made it back. a morefective, but not true trading pe ining portfolio. make sure you have an exit point where something's supposed to

happen and you are out of the stock, either way. because you are trading, not investing. you need conviction. and you have to ask yourself, would you be willing for the world to hear hi, it's me, i'm not here right now, but i want you to take a swing at disney ahead of the analyst meeting. if you can do all those things, start small. give it a try. stick with cramer.

welcome back to this special autobiographical "mad money," where i'm teaching you life lessons in investing from my life. now we're up to the professional grade. my time when i started at goldman sachs. now, i had been courting and being courted by goldman sachs for three years before i got a job. it was then called security sales. helping individuals in small institutions manage their money. i got a ton of history out of those years, as well as some i talked about earlier. you can always get the skinny of my goldman days and the

outrageous attendance stories of that year. but that's not what tonight's show is about. tonight's show is about learning how to trade and investing by studying with me at the university of hard knocks, not to give you cool, funny stories. i will dispense with the anecdotes and try to teach you how to make money from the events that transpired at goldman sachs. it's fun to have fun. you can read the books. but i'm about making money. first, that's where i began to understand the process of actual money management. not picking a stock here or there. but the process. the ability to build a portfolio from the ground up. and i had the best teachers in the world at goldman sachs. one of the great hedge fund managers of our time, lee cooper. lee cooper was the research director at goldman. he put on an investing clinic almost every day of which i never missed a session. hardly an hour went by when i didn't hear a new great idea to explore. but you know who i really learned from? my customers.

chiefly wealthy individuals from all walks of life. it was at goldman that i learned something that to this day can't be understood by so many professionals in this business, including a lot of academics, and that's that individuals can beat the market quite regularly. why can't they know it? if they had only worked at goldman with me, they would see it. they would know what i saw. but they're all theoretical. i'm practical. i had what was called as nondiscretionary accounts. meaning i wasn't allowed to invest anyone else's money with my own trading ideas or investment ideas unless i could win them over to make the purchase. i had to talk them into it. remember, i was on commission and made only with the buys or sells i could convince people to act on. there was no 1% fee or 20%. that came later with my hedge fund. that's where i learned how important it was to talk over a story with an individual. to be able to articulate it in a way that made sense. can you do that to someone if you were picking a stock? you had to know your stuff.

i often asked the buyers questions about whether they knew enough about the stocks, their stocks, about the ones that they suggested to me that they wanted to buy. i wanted them to be as educated as possible about my idea or their ideas. that's because i knew that stocks go down. and i knew that if it went down, well, let's say if it went up, it would be their idea. and if it went down, it's on me. and that is just nature. can never say hey pal, that was your idea. what else did i learn? how aboutat goldman that i figud out how humbling this business could be. when one of your ideas went against you, you had to get on the horn and explain either why the person should buy more or whether they should cut their losses. that's why you always have to recognize how fallible investing can be and how you have to

understand what to do when stocks go against you. i also learned to let your gains run until you cut those losses. i learned the hard way. many of my clients were terrific business people who didn't really know that much about stocks. they had been fabulous at their own enterprises. building up great wealth, not through the stock market, but through actual companies. so i had this real cantankerous client. a real estate tycoon. he had worked hard to get where he was. and i was working hard to try to get him as a client. trying to win him over. and it took me ages and ages. i told him when i finally convinced him that he should work with me that i would be judicious, that i would work hard, and i would get it right by him. he said point-blank he didn't want to trade. no trading, jim. i want longer term investments. at the time, i liked kimberly clark, the paper company, one that i've liked forever. still do. i told this cantankerous client that i thought this one, knb,

would be terrific for his portfolio. he agreed. i got it. i got the sale. he told know buy a thousand shares. i got it! almost immediately it went up eight points. it was a dream. i had a winner. so i called him. i said bob, bob, i want to ring the register. i want to sell the 1,000 shares of kimberly clark. i thought he would thank me. he was furious. he told me that i had said kimberly would be good for the long term. that it could have great gains over time. he wasn't the least bit interested in only making $8,000. then he questioned my integrity. he wanted to know if i was churning him. well, that's a horrible charge, meaning that i was just trying to generate commissions with his money. you know what? i was scorched and torched. but he did teach me a terrific lesson. just as you don't want to turn a trade in investment, because that's usually a sign that you're embracing a loss, trying to ferment why you're in it, you don't want to turn an investment

into a trade. you have a good one, let it run for heaven's sake. bob was right. kimberly ultimately doubled. and well, i was vindicated, despite myself. finally i learned the science behind learning a portfolio and learning how to create long-term wealth. a lot of my businesses involved people that came into a great deal of cash. like a power ball winner or someone that would sell his company to yahoo!. these people tended to be rather unsophisticated about their money, even as they may have been unsophisticated about something else in life. i regarded my first job as listening to their needs, trying to figure out what they wanted. were they conservative? did they want what's known as capital preservation? meaning they didn't want to risk their money and make a little bit of it. or were they aggressive? did they want capital appreciation? build that wealth quickly! i tried to get to know them and i urged them to get to know themselves. just as you should know yourself. you may think you want to get rich quick, believe me, you want to get rich carefully.

as yourself, can you handle the pain of a market decline? would you prefer your money to appreciate slowly and get most of it from fixed income, meaning bonds or maybe from dividends? do you want to participate? new issues? try that. could be too risky. do you want to try to hit it out of the park with some, maybe i'm not the right guy for you. many of you are familiar with these lessons. you've heard me say them on many a night. i try to teach you thousahow to yourself. finally this is when i learned the value of diversification. you have to understand that these were different days. you could have oil companies double and then double and double again in a very short time after they struck oil and we figured out how big the finds were. the finds were pretty available back then. so everyone got caught up in oils. the families, the p.a. they called it. every day seemed like another great day in the oil patch. oil services, oil drillers, oil platforms, you name it. then one day, oil, the

commodity, plummeted in price. the saudis started pumping like mad. some global tensions that jacked up the price were settled. they had cooled. next thing you know, the bull morphed into a bear. those who had nothing but oils, including yours truly, we were crushed. i had understood firsthand from right then the diversificatiodi. i never again intentionally avoided diversification. hence why i think it's so important, because i almost lost everything. i worked hard to get it. here's the bottom line. i learned from my early days the coreiples of investing, long-term wealth that suits the customer. consider yourself the customer of this show. and remember all of my investors who consistently beat the market on their own in ways they like, aided by people like me, who would work with them to put their money into action.

"mad money" is back after the break. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. for the strong and the elegant.

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i i like to say there's always a bull market somewhere, and i promise to try to find it just for you, right here on "mad money." i'm jim cramer. see you next time. . good evening. we are live tonight and i begin with a question. are new economic green chutes popping up around the globe? good news on foreclosures, lower food price, china, japan, even europe. are we underestimating world recovery. and i call it big government at its worst. some cities in california are ready to abuse the eminent domain laws to bail out a few underwater mortgages at the expense of pensions, retirees and savers. it is an unkons tau