like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger. my mission is simple. to make you money. there is 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." other people make friends, i'm just trying to make you money. it's also my job to teach. 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 am going to tell you who i am and how i got here.

no, not i am host of "mad money" jim cramer, "squawk on the street." i want you to know more than that, although it did tell me two years to learn that avatar wasn't a movie and that a hash tag wasn't a number sign. what i wanted to do tonight is an extremely professional and personal show, even by my own wacky standards is trace the arc that brought me to "mad money," not for some autobiographical ego trip but to give you some lessons from my career and how you can profit from them. in the end this is cramerica! i'm going to give you the skinny of how i became a good investor and how i continue to learn every day so i can help you get better than i ever will be, and

that is the main goal of "mad money." let's start real early back in a time machine. my love of stocks didn't begin after college or even high school. my love for stocks actually started back in fourth grade. my dad would bring home the philadelphia bulletin, at that point one of the largest newspapers in the country, great afternoon paper, and that was when he returned from work every night. i wanted it for the comics and the sports. i was a ridiculous phillies fan back then. if i could go back to time, i would somehow make it so i was a yankees fan. we were only 80 miles south of new york. i was a curious kid, though. curiosity has always been a blessing and a curse of mine. kind of like that of a cat that's always probing to jump on a couple hot stoves. anyway, there was always a solid chunk of the paper that fascinated me of the it was called the business section. it had a giant list 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. when you read them from left to right, they made no sense at all. what open, what range, what closed? what were these strange things? why did they matter? i asked my dad. i know dad knew the stock market because i would hear him get mad at prices that were mentioned on the radio. he always seemed angry when he heard something called national video 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 him, either, but i know it made him furious. but i wanted to know what things made him act with such fury. so he went on to explain that each of these lines represented a different stock. the stock opened in the morning with the opening bell. the range was how high or low it traded during the day and close was what it was worth when

trading finished at the closing bell. it fascinated me. how could there be so many companies and why did they trade in ranges 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 they wanted to buy them so they could make increase dirg turing the range the open to the close. this struck me as silly. when i was looking at the baseball tables, i was always trying to figure out who was hot, who would go up, who would go down and what it would mean to the phillies. he said it was pretty much the same with stocks, that you studied the companies like you study the players. some would do okay, some were hot as pistols and some were duds. i said i wanted to figure out which would go higher. i wanted to know if i could learn something just by following the ranges, reading the tables. he said, why don't you try? in my house it seemed the radio was always on until pop put the

tv on when it was time for dinner. we always watched the news. 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 nine years old, my mom was worried i might have to go to vietnam. fortunately the war was winding down so i was spared from the conflict. after the world news on the radio or tv, they always mentioned the dow jones industrial average. and they either talked or showed the most active stocks. 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 the stock. even when all i knew was the name polaroid, xerox, national

video, pan am, united. most of them were fend stocks and they went up a lot. i followed a lot of those and a bunch of others. con air, eastern, national, rca, admiral. i decided this was about as cool a game imaginable. i wanted to introduce it to my fifth grade class, to i did in show and tell, showing them the bulletin, following my ledger. i have to admit not everyone was as into it as i was, but the da darndest thing happened. my dad's company was the 3-m company. my executive person was talking about satin ribbon. they had to make the bows. triple m, as we called it, was always coming up with new product lines. right about fifth grade, pop

came home with a new line of 3-m he was selling. they had what's known as 3-m bookshelf games. he said perhaps i might want to learn more about how the stock market really worked and the company had created two games about business. acquire about takeovers, which was all the rage at the time, a and stocks and bonds of which i am fortunate enough to have gotten a copy right here, courtesy of george menesis who is producing "mad money" and gave it to me for the holidays. i've subsequently asked 3-m to bring the games back. i don't know if they will, apparently they don't even own the rights anymore, but the point of admitting this is that 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, though they're performing in an odd and positive way give p the

budget pressures, 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 association of america, not the pioneer mutual fund, but stocks that are real. so here's the bottom line of my childhood stock market obsession. get started early, and they may 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 book and show got me through at a very young age, which leads me to my next question. i was ip venvesting quite young i'm wondering what changes i should make as i get older. >> it's a generational thing. 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. kracramer how are you? >> good, how are you? >> caller: great, sir. my question is, i have a couple young children. i'm trying to get them started in investing. the question i have is what are the most essential items or ideas on investing concepts do people need to know when they start learning about the market and investing themselves? >> first thing they need to know is what they own. and the idea behind that is to own things like disney -- i always tell people start with disney -- domino's pizza if you like domino's, mcdonald's if you like mcdonald's. go to the mall, go to costco, go to places you're familiar with. buy one share. get him or her involved. get him 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. ♪ this is for you. [ male announcer ] bob's heart attack didn't come with a warning. today his doctor has him on a bayer aspirin regimen to help reduce the risk of another one. if you've had a heart attack, be sure to talk to your doctor before you begin an aspirin regimen. [ engine revs, tires squeal ] [ male announcer ] since we began, mercedes-benz has pioneered many breakthroughs.

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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. while i am not a dollar sign represented by a man or a stock symbol for that matter, ticker j.i.m. i have stumbled long enough in life to learn a thing or two. tonight you're getting it from the school of hard knocks.

don't you always love at the beginning of a pro football game where they have the players say his name and school and some say the school of hard knocks? well, that's what i attend when it comes to stocks. and you're getting the on tv version right here, right now. we covered how i first got involved. 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. well, that would -- you know about news, tells you about news and how that would send a stock higher or lower. 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, then called junior high where my obsession became sports and i was the second fastest guy in the school for ages. i ran track 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 range of the stocks.

that was a random walk down springfield high main street. i couldn't win for losing. that's a subject of different showing, maybe entirely. however, my father did engrain in me the desire to save. early on i learned even in high school, you've got to save. i saved as i bussed table at the old block and cleaver, which we called the block and cleavage because we were hilariously stupid back then. subsequently as a vendor at veteran stadium, i sold soda and 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 the exclusive 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 if you sold them that stuff. or maybe the other time when steve carlton would pitch because he pitched so quickly and got players out so fast that i would get stuck with unsold ice cream. you had to buy the ice cream for the company if you were selling it, and i would take a genuine beating! talk about learning how business worked. the shelf life of ice cream after the ninth inning is about as short as short can be. during the lightning round, i might jest with you about your name. sometimes you hear me calling you hey, skip or chief or, you know, come on, captain. i learned these names at the ballpark. it's what people called me to get my attention to buy ice cream. i loved the false intimacy and never forgot them. i opened an account at fidelity and contributed a little every week of my ballpark winnings. it was the top-performing mutual fund at the time. remember the great peter lynch who wrote two investment books,

one up on wall street and "beating the street" which remain the two best investment books that i tell people to get and say i want to learn more about the stock market. i didn't save enough when i got to college. the money paid was work study anyway. and 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 have every single rejection letter in the trunk. i landed a position as a general assignment. making $156 a month, still keep a tattered pay stub from those days to remind me of how hard it was when i got started 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 los angeles herald examiner. wow, it was a horrible job, making $179 a week. i was sure it was more than tallahassee, but it was in a town that was four times as expensive as living in tallahassee.

soon after my journey began in los angeles, i found a bungalow apartment pretty sketchy back then, little nicer now, 1819 orange grove, around the corner from a pioneer chicken which was way too expensive for me to go to. few weeks later, i was stalked and broken into repeatedly. something the cops were helpless to stop. i was assigned a story in san diego, a horrible school shooting and when i returned, everything was gone, everything, 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 night query, your place or mine. now, i know this isn't your normal behavior, but as much as i knew my ultimate goal was to save enough to get an apartment, i was living hand to mouth, 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 never quit saving. i remember cashing my paycheck

every other week and writing a check, yes, to fidelity magellan fund. terrific savings on homeowners insurance, rent, wow. how poor was i yet still putting money away? when i ultimately got mono and a jaundiced liver, a yellow spot about the size of greenland on a projection of my stomach, i had no health care. the hmo of my newspaper i belonged to had nothing when the company mercifully put me on the road so i could submit some expenses for my day to day. i had to go to migrant farm workers clinic to get fixed up. i still put away money as i was making my weekly trips to the doctor who was one of the best i ever had. amazingly, given 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 in that fund years ago. but because of the power of compounding with an amazing investor at the helm. i never touched it, just let it build. i want you to save no matter what. the earlier the better. when cnbc has those all-star managers on, if you don't have enough money or time to handle your own portfolio 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 could still send those checks to the fund when i was living in my car, sick as a dog with jaundiced liver, kept warm by a bottle of jack and saved by a pistol by my side, the most down and out 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. mad about "mad money"? immerse yourself into cramer's world while you watch the show

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we're riding the delicious magical money mystery tour tonight. and i'm giving you the life lessons i have learned the hard way, through decades of stock investing. i told you first how to get your kids started early. and 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 how i got started in individual stock picking, something you know i still love and believe in. even after seemingly periods of pain, chaos and chicanery. it is totally worthwhile and lucrative, and yes, is the reason i believe you watch. that is also the references and the sound board courtesy of when i used to have a radio show with great similitude to "mad money" called "real money." if you're 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, there was no such thing as an online account. i had my money with fidelity so i chose to put my money in individual stock account there. when i first started, i didn't know where to look for ideas, so i turned to forbes. now people at forbes, please do not take this personally, but i'd read a nifty article about a company called american agronomics. it was an orange grower in florida. i bought first account, first thing, ten shares for $9. a week later, a 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 and you know what i did? went back to forbes. bought seven shares of bobby brooks! a clothing outfit i never heard of. forbes said it could be a terrific buy. almost immediately, the company reported a bad quarter and my money was halved again. fortunately i had a decent job

at a magazine which just had been started. i was making 20,000 and living in a swanky studio. the cheap $400 a month rent with the sofa bed. twice the rent for a beautiful one bedroom in tallahassee, and a heck of a more than the backseat of a car allowed me to replenish my stock coffers. i was on the road quite a bit and after a hard night on the town researching a story in kentucky, i fell in love with the 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 library. one with the big lions in front of it and devoured everything i could about bob evans farm. they had articles, four-month-old financials and write-ups that allowed me to compare bobe with other companies in the industry. i knew i had a good one. i bought 20 shares. the stock went up immediately on a good quarter and the stock split and i figured out the good component of investing, know

what you own, like it, even. what did i know about growing oranges? who knew about woman's fashion, but sausages served in an attractive setting with a nice waitress. a company i found a long tradition of good service, nice enough growth plate expanding in the midwest? now, that was for me. next up, standard press steel. that became sps technologies. from my old hometown that made fasteners, screws for airplanes. why sps? because a buddy of mine from high school said they were hiring like mad. wanted to know if i was looking for a job, paying good money. i had a job, back to the library for more research. st technology, solid company, no debt, but nothing in print about the 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, aircraft builders around the globe. and one i've still liktd liked for many, many years. and quality company. so now i'm figuring it out, the best investment ideas come from what you know melded with information gleaned from public sources even if they are as late and 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. a friend from home's lucky call about jobs, so random, the one available at sps technology or hearty breakfast at bob's breakfast farms. there's got to be a more methodical way, right? and then it hit me. look around at work. i was covering merger and acquisition lawyers, profiling some, following the deals they were on. seemed every other deal was in the oil patch, one after another, after another, smaller to mid-size oil companies were being acquired. >> buy, buy, buy! >> and all i was doing was standing around writing about it.

so i went back to the library, took out additions of value line, stock research magazine and checked out the pages devoted to oil companies, i cross referenced to find out which one can be acquired without problems. either because they were public without a family owning them or because they fit the size parameters. so many other deals i was writing about. so i settled on an oil company with a real gusher in indonesia. i didn't have to wait long until they were bought and i almost doubled my money. another lesson learned, buy companies that would do well on their own as notomis was but still undermanaged. that meant another oil company with bigger scale could do more with notomus which was cheaper than it should be if it simply got rid of the management. as much as i hit winners, though, i was distraught i'd given up the ghost in the first few trades. at the time, i'd 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 picking winners. and my first $50,000 season, they may be the second best investment books after peter lynch's books i mentioned earlier. they teach discipline, how to identify the best thoroughbreds, the best long shots, out of the way tracks, where information was less well known and not betting willy nilly on every horse on each race. find the ones where the payoff was more sure and bet big. cut your losses if you're having a bad run. every one of these lessons could be appied to the stock market. you can take a huge swing when you know what you're doing. particularly when others don't on a less well known stock. don't just gamble on stocks for the excitement or the fun of it, most important, be disciplined, don't let your losses pile up. after five years of professional journalism, i decided to hang it up and go back to law school. the good news, i saved enough to pay me for my first year. all in the stock market, as i would never have been able to make enough had i kept it in a

savings account. and an index fund would've made me nothing. well, nothing at all. so here's the bottom line, you want to get started, go small. invest what you know and research it intensely. back then i got data from the public library. now it's as simple as a key stroke and the information is free and ubiquitous, including up to the minute financials, analyst presentations, brokerage research and, of course, the conference calls that i tell you are musts if you're going to know what you're doing. simple? no. lucrative? you bet it is! frank in arizona, frank? >> reporter: 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 narrow, sometimes it's wide. how is that information useful in determining if it's time to pull the trigger? >> 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 spread and most of them are much tighter. i used to spread buying stocks

that had -- we used to -- things are much easier now. don't worry about the spread. ♪

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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 how to spot winners and avoid losers and stay disciplined all through looking at actual examples in 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. hey, you know what, "mad money's" changed time and time again over the years. it's been on for so long and i have deliberately skewed it in the last 500 and some odd shows away from trading and more oriented toward investing. there's so many more obstacles these days. you have to watch your positions like a hawk to the point 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 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 or without much more after commission profit. that's why i'm not worried about the spreads as i said earlier. the information you need is on your personal computer or even on your smartphone. i'd have to call brokers all day, watch the ticker, precursor to cnbc. back then, i didn't know what price i got in my stock when i'd bought it. wow, when i was in class, i had to use pay phones, no cell, you remember having to wait at one pay phone while some kid chatted endlessly and aimlessly to his girlfriend. 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 the stories about harvard law and including the movie paper chase, i can tell you there was a ton of down time and a real good business school library right across the river, brokers turned out as well as up to date quarterly reports, those little plastic things. 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 simple, you can't be all over the map if you're doing this as a hobby. i figured i couldn't take a lot of chances until i knew what i was doing and that's a valuable lesson for you if you want to start trading. i discarded a ton of ideas for stocks that had catalysts. upcoming reports, possible mergers, stocks that could rally based on the other parts of the paper. an article on the front of the page of the "new york times" might be talking about breakthrough of medicine, brokerage report might discuss the potential for a new oil find. i got on a roll and started my

first writing about the market. yeah. a news letter called mr. bullish, which i mailed only to my parents once a week. it clearly articulated the thesis behind my trade. i used to type it on my old little olympic 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 from the moment i put the trade on. an important lesson made discipline by the insistence by 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 voice mail and update it every week? hi, this is jim cramer, i'm not here right now, i like ahead of

the next quarter. darn it, i actually did that too. and i had that level of conviction about my pick of the week, which is incredibly important to possess. managed to augment the winnings with work i was able to get from my old employer for freelance work for the "new york times" and legal work for a professor who moonlighted during criminal defense cases. it wasn't before long that marty, at that point a publisher for the new republic magazine tried to get me to write a piece. i neglected to call him back. he got three weeks of trades all successfully off my answering machine. and he told me to meet him in a coffee house nearby when i did. he said he made more money from my answering machine than he had for years with professional money managers and wanted to give me $500,000 to money manage. he said he had confidence in me and shortly thereafter, after i gave him a tug of war, he did give me a check for $500,000. by the way, that was real money back then.

now, i mean i had it in my hands, it was like too hot for the touch. i ran down to fidelity with the money, set up another account, right to work trading. almost immediately, i lost a ton of it! >> the house of pain! >> sell, sell, sell -- >> 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 $70,000 i had blown to smitherines. my mistake as clint eastwood told us so wisely in "magnum force." a man has to know his own limitations. you can't trade a huge chunk of money at once. you can't put it to work at once, only after you had ideas that you knew had a chance to pan out with an entry point that was reasonable and an exit point that was planned. >> buy, buy, buy! >> sell, sell, sell! >> knowing that you would be gone whether it worked or not to keep that discipline intact. i violated my own rules and i had blown it.

i confessed to marty my sins and said he should take whatever's left of the money back. instead you know what, he wanted to give me more money. he was betting i'd learned my lesson. 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 while i also paper invested a more active but not truly trading portfolio, paper invested, even though i had $500,000 in the bank. that would become the beginning of my actual professional investing career. if you're going to trade, make sure you have a catalyst, an exit point where something's supposed to happen and you are out of the stock either way because you are -- either way, either way. because you're 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

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welcome back to this special autobiographical "mad money" where i'm teaching you life lessons and 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 been courted by goldman sachs for three years before i got a job. it was called security sales. helping individuals in small institutions manage their money. i got a ton of history of those years as well as some of what i talked about earlier in "confessions of a street addict." you can get the outrageous stories of that era. but that's not what tonight's show is about. tonight's show like every "mad money" is about learning how to trade and investing by studying with me at the university of hard knocks, not just to give you a kind of 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. i'm about making money.

first, that's why i began to understand the process of actual money management, not picking the 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 cooperman was the research director at goldman and 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 i learned something to this day can't be understood by so many professionals of this business including a lot of the academics. and that's individuals can and do beat the market quite regularly. why can't they know it? if they'd only worked at goldman with me, they would see it, they would know what i saw but know that all theoretical, i'm practical. now when i was at goldman, i

have what is known 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. now, remember, i was on commission. and made money only with the buys or sells, i could convince people to act on. there was no 1% fee or 20% for the wins, that came later with my hedge fund. but that's where i learned how important it was to talk over a story with an individual and 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 they suggested to me 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'd be their idea, right? and if it went down, it's on me.

and that is just human nature. and i realize that very quickly, can never say, hey, pal, that was your idea. what else did i learn? how about humility. it was at goldman sachs i learned how humbling this business could be. the bull market started before i was hired. 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 learn to let your gains run while 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'd just been fabulous 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'd 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, i would work hard and 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 i've liked forever, still do. i see the management comes on the show. i told this cantankerous client that i thought this one kmb would be terrific for his portfolio. he agreed. i got it! i got the sale! he told me to buy 1,000 shares! i got it! almost immediately it went up eight points, it was a dream. i had a winner. so i called him and i said, bob, bob i want to ring the register. i want to sell the 1,000 shares of kimberly clark. i thought he'd thank me.

he was furious! he told me i said kimberly would be good for the long term, that it had great gains over time. he wasn't the least interested in selling. then he questioned my integrity. he wanted to know if i was churning him. well, that's a horrible charge, meaning 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 into an investment because that's usually a sign you're embracing a loss trying to ferment why you were in it. you have a good one, let it run for heaven sake. bob was right, kimberly ultimately doubled. and, well, i was vindicated despite myself. finally i learned the science behind building a portfolio and understanding how to create long-term wealth. a lot of my business involved contacting people who became into contact with a great deal of cash. like a power ball winner or someone who would sell his company to yahoo.

now, these people tended to be rather unsophisticated about their money even though they may have been sophisticated 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. were they aggressive? did they want capital appreciation? build that wealth quickly! i tried to get to know them and 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. ask 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 in new issues? try that, could be too risky. do you want to try to hit it out of the park with some minuscule part in capital. you heard me say them on many a night.

i try to teach you how to know yourself and know what you can handle and can't. finally, this is when i learned the value of diversification. when i first got to goldman sachs, the oils were hot as a pistol. these were different days. you could have oil companies double and double again in a short time. and we figured out how big the fines were. boy, those fines were pretty available back then. so everyone got caught up in oils. the families i covered wanted oils. the p.a., they called it, every day seemed like another great day in the oil patch. oil services, oil drillers, oil platforms. oh, you name it. then one day, oil, the commodity plummeted in price. the saudis started pumping like mad, global tensions that it jacked up the price were settled. they'd cooled. next thing you know, the bull moved into a bear. those who had nothing but oils incluing yours truly were crushed. i'd understood firsthand from right then the concept of diversification. and while it violated the rules, i never avoided diversification.

hence why we play am i diversified, hence why it's so important. i almost lost everything. here's the bottom line, i learned from my early days at goldman sachs the core principles of investing, finding solid ideas to build a portfolio to create long-term wealth in a way that suits the customer and that included, by the way, no margin buying. consider yourself the customer of this show and remember all of my investors who consistently beat the market on their own in ways they liked aided by people like me who would work with them to conscientiously put their plans into action. "mad money's" back after the break.

mad about "mad money"? immerse yourself into cramer's world while you watch the show with zbox on your phone, tablet or on the web. get sneak peeks, go behind the scenes and join the conversation. download the free app today for the ultimate cramerican adventure. to show the importance of getting started early in investing. you live with me with my .22 caliber pistol with me in the back of my car, no matter what the circumstances to understand the need to save and you learned how to find the good ideas, how to research them. i want to wish you success in trading and investing and to remind you when you hear from

the graybeards that say you can't make money at home and have to give the money to professional index fund that the story of my life at every turn is very much the opposite. and you can make money in many different ways with managers, with brokers and, yes, gloriously by yourself. stick with cramer. diarrhea, gas, bloating? constipation, yes! one phillips' colon health probiotic cap each day helps defend against these digestive issues... with three strains of good bacteria. [ phillips' lady ] live the regular life. phillips'.

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i like to say there's always a bull market somewhere and i promise to try to find it for you right here on "mad money." i'm jim cramer. see you next time. >> imagine a store with no signs in the aisles, a store that doesn't bag your purchases, one that never advertises, where you have to pay a fee just to walk in the door. who in the world would shop here? as it turns out, about 3 million fanatically loyal customers every day. it's called costco... >> i love costco. >> i bought ground beef. >> lawn furniture. >> a television. >> i bought my engagement ring here. >> ...a chain of stripped-down warehouses that's become a sensation at home and abroad. >> [ speaking chinese ]