>> all right. i'm melissa lee. thank you so much for watching. we will see you back here tomorrow at 5:00. a full day of trading and a regular show tomorrow. in the meantime, don't go anywhere. 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. well will come 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 you, but to educate you so call me at 800-743-cnbc. this could be aye an incredibly confusing time to be an investor. with the the news agencies and every single piece of data is

billed as a cacophony. not every headline matters to the stock market no matter how full of gravitas it might sound, but how the heck are you supposed to tell the difference between what matters and what doesn't? in this information overload how do you know what truly deserves your attention and what you can pass on? you only have so hutch time doing your homework on your portfolio so you have to use the time wisely. the squawk on the street, the 9:00 show, but this stuff comes so fast and furiously that you never have time to ask does that even matter? you presume it has import even if it doesn't. that's why for my new book, get rich carefully, i looked through five years from the charitable trust i talk about to see which pieces of data were actually worth paying attention to and which ones were overhyped and unimportant because i think this

is a crucial subject. today i want to share with with you my findings so you could be a more media-savvy investor. i'm a radio, web, parties are going do real damage to your portfolio if you're not savvy. let me start with the big one. looking back at my charitable trust for the last five years, there's one thing that stands out above everything else and the only thing that has a lasting impact on the stock market is the labor department non-farm payroll report. that's the big employment report we get on the first friday of every month and it is worth every bit of focus. there are a ton of different employment numbers that come out in this market and the weekly jobless claims and they have important tales of what will happen with the big picture monthly labor report, and i am telling you forget about the monthly claims unless there is a definitive trend and one direction and even then it could be fatal to trade off of as you get close to the big labor department numbers. sometimes by the government's

own admission, the weekly figures aren't even tallied right. how's that for credibility? also in the jobs front, the non-farm payroll department we get the report called the automatic data processing or adp, the largest processing report, i am telling you, ignore that adp number, too. it's meaningless, people. in fact, the adp employment figures have no reliability as what the big daddy, non-farm payroll report will be and that's the only employment report they am telling you you need to predict and be worried about. you do need to predict and worry about it, though. however, how you can ignore the monthly picks you cannot ignore this labor department non-farm payroll number, as i look back on what came out on friday night after the monthly jobs report release. i have five years' worth of data. i was astonished to how it could be. any disappointing employment number leaves a lasting impact

that can take weeks of declines in its wake, really, and if it's followed by another bad number, you get a further decline even though the number has fallen in the precipitous numbers of accounting and you need to see three months of stability meaning no further job losses and not necessarily job gains before the market will actually stop drifting or plunging lower. i can't believe this. i did this work and i couldn't believe it myself. meanwhile,s flipside is also true. nothing can frustrate a bear market in excess of the previous month. a big number that's better than expected and that's the ultimate triple whammy for the bears. and can produce a spectacular performance for the bulls. when these payroll numbers come out, they'll pick apart some figure to make it less important.

i am telling you, these people are charlatans, hold your ear, ignore them and hope that others don't so you can take advantage of any weakness to do some buying at lower levels than you deserve to get. these cynics are simply crafting arguments to excuse their incorrect predictions or they just don't understand. maybe they learned the lesson of the great recession and can't believe honest to betsy good news when they hear it and that piece of the puzzle simply isn't as important as the sheer number of hires. what really matters, if you're negative on stocks and they increase the number of hires in a row and not a drop in the unemployment rate then you will miss a terrific opportunity and that's what i found from examining the last five years from my charitable trust. look, i don't blame you if you wait to see a second payroll number in a row, that's simple prudence. a really good report coming in

the wake of several flat ones can justify careful buying. just to be sure i am quite conscious of the fear of the fed if the economy is getting better as represented by the labor number. i don't care, when interest rates are as low as they have been. if you're trying to buy stocks after an excellent reporting report, here's a tip. if you wait until after 10:00 a.m. on the day a strong jobs report coming out, you will almost always get a better price than you would at the opening. the reason? because after a good payroll report there's often a huge amount of short covering in the first half hour of trading as the negative hedge funds have to short out their positions by buying stock. once the buying is done you tend to get a vacuum and the market begins to decline. wait for the moment before you do your buying. don't be picked up on the day that the non-farm payroll reports are out and i would remind you, at 9:00, don't be picked off. i'll be on the floor of the

exchange. you'll get better proses that moment if you just wait for the panicked short sellers to finish closing out the wrong positions and those who feel your fed tightening dump their holdings. >> the house of pain. >> don't be worried that you missed the move that the market has more room. i just want you to got the best cost basis possible after a great monthly report. here's the bottom line, not every piece of government data that gets thrown in your face from the media really matter, but the non-farm payroll department, that is crucial. so please don't ever ignore these numbers and they're the most impactful ones that you'll ever which across. when your eyes glaze over, take solace. the only one that matters comes out at 8:30 a.m. on the first friday of every month. john in florida. john! >> hi, jim. john. >> how have you been? what's up? >> i'm certain of the following

question, if i purchased 1,000 shares of a company, let's say at $10 today and three months later i purchased another thousand shares of the same company at $5. now, if the stock goes up a dollar can i take the profit on the success thousand shares or must i sell the first thousand shares and take a loss of a dollar? i'm uncertain of the answer. >> okay. i want you to talk to your tax guy on that. you can elect the lot, but you've got to talk to your tax guy because i want to know what he says and i don't think that specific advice will be helpful to you. can i go to jim in arizona, please? jim. >> hi, jim. thanks for taking my call. >> of course. >> my question is about secular and cyclical stocks. you're always telling us to make sure that we're diversified in our stock portfolio. >> right. >> and i'm just wondering how

should i diversify these types of stocks in my portfolio? >> to get rich carefully goes over this because i think the most confusing thing i may have done for a lot of people is to say i like secular growth, not cyclical. cyclical means you need big gdp growth. secular means you have a long runway of product that will be in demand no matter what. that's celgene. what you have to do is you plot how your stocks have done against a market in good times and bad -- when there's growth and no growth. that's what i do. i've looked back using chart, 1989 and 1991. 1996, 1998, 2000, 2002 and see how they've done. you've got to do that history if you want to really feel confident that you have a secular grower whose numbers don't get cut, versus a cyclical grower and a whole chapter on that in "get rich carefully." sonny in illinois. sonny! >> jim cramer, a big chicago

windy city boo-yah to you. >> sweet. >> hey, jim, i'm always taking your advice. longtime fan. i enjoy your show and your books. >> thank you. >> i have a question for you. so i'm always taking your advice and reading up on the company, going in and listening in on the quarterly conference calls. -- to report solid numbers and fundament also, what is your definition. >> i've always used 5% to 7%. something lee cooperman when he was the research director at goldman. he said the first 5% to 7%, take a hard look and that may be where you're starting to do some buying. i know it's easy to get over the numbers that are thrown your way every day. 8:30 a.m. on the first friday of each month, that is the number to pay attention to, the rest of them, don't let them confuse you, but a good employment

number is good for the stock market. don't think otherwise. "mad money" will be right back. don't miss a second of "mad money," follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an email to madmon madmoney @cnbc.com or give us a call at 800-743-cnbc. miss something? head to madmoney.cnbc.com. ♪ i wanna spread a little love this year ♪ [ male announcer ] this december, experience the gift of exacting precision and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection.

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in this era of information overload, how do you tell what really matters to your portfolio? i think the filtering out the clutter and being able to focus like a laz or what's generally impactful is so important that i devoted an entire chapter in my latest book get rich carefully to show you what does matter and what doesn't and tonight i'm sharing some of these insights with you gratis although the cynics in the audience might point out i'm be shamelessly self-promotional @jimcramer, to which i say, of course, in an effort to cut the bull.

not that kind of bull, let me tell you why you should stop caring about it immediately. i know we want to presume that every piece of data, every single piece released by the government, whether it be the commerce department, labor department and the federal reserve is of great import that it would impact your investment, i say hold it! we listened to this stuff, we read it and wait for analysis from people who were supposed to know what they were talking about and we make decisions off these bits of data and we sell the stocks off them and when you do this, you think you know what you're doing. let me tell you, it's a mistake. . in the last five years of public trades of my charitable trust, i can tell you other than the non-farm payroll report r i mentioned after the break, most of the data has been just plain wrong. >> i know that soundses inconceivable and the media has

spent so much time dissecting these numbers how can it not be mean? every news editor has a list of data that comes out in any given day and in advance of its release has decided that a big story must be done around that information. yes, there is a day book. although when i started in journalism it was a handwritten ledger and notice that every gem or piece of fool's gold is held up as being all important and that is what i call hyperbole. unfortunately, hyperbole is the gist of this business. it's having something to say day in and day out. how do you think that all of those blogs get filled? with that in mind, let me warn you about one of the most overhyped day books out there, the monthly release from the federal reserve. these are considered to be the holy grail, i kid you not, but i have to tell you in reality they mean nothing. nothing at all. the the minutes are almost a total sideshow, and i should be it considering that my most famous tv moment came because i

knew that the fed knew nothing. first, let me explain the fixation with the fed minute, it releases a summary of its thinking that took place at the median trading. they wait with bated breath and it is viewed as one of the single most actionable papers meaning they want to take action on it, but the truth is it's not actionable at all even as so many take uninformed silly action, i might add. forget that the fed minutes are a-month-old by the time we get them. forget that circumstances may have changed since the last meeting and a spike in oil and a cliff jump or two in washington. the document is treated with reverence, even though it should be viewed as irrelevant and it's oftentimes inaccurate with the current set of facts. in the beginning of the horrific period that generated into the great recession, i was beginning to get hideous feedback from many of my sources within major investment firms that thing his

gone seriously awry. over my 30-plus years of wall street i managed to trust people early. not everybody is right, but these people are people whom i trust for the most part and they trust me, at the time of august 2007 i was getting an earful from acquaintances who thought i wasn't doing enough to bring the financial network to light. i was listening to the conference call by the lamented bear stearns and i was shocked by how defensive and fearful the executives seemed to be. they were having difficulty, but they were prepared for them. the only way to prepare for difficulties on wall street is to say nothing about them. that meant baird wasn't prepared at all as we saw from the firm's collapse when it came not long after. at the same time the management was yammering on about how they were holding things together. i was getting calls from several people saying if the federal reserve didn't start cutting

rates right then and there there would be a huge problem, not just for the mortgage industry, but for the entire u.s. economy. i was on "street signs," i was steamed so badly they violated my rule about trying to be -- and then i began to rant, as erin burnett gingerly tried to calm me down i went on a tear about how the fed was oblivious. >> i have talked to the heads of almost every single one of these firms in the last 72 hour, and he has no idea what it's like out there and bill poole has no idea what it's like out there! my people have been in this game for 25 years, and they are losing their jobs and these firms are going go out of business and he's nuts! they're nuts! they know nothing! >> we now know how everything turned out. the fed really did know nothing. the economy collapsed as the fed held tight to the view that

there was nothing wrong at all and their judgment was the worst economic policy blirnd since the hoover administration, fortunately the fed reversed itself over and it was a better late than never affair and here's smith didn't know at the time and it cuts to the core of how useless the minutes are. the fed releases the full transcripts five years after their meetings so i later learned that the fed met soon after my stop trade appearance and my reaction came up in the conversation. it came up as a laugh line. they tliel made a point of ridiculing my prognostication. as we soon learned it was a very dark comedy. here's where the fed minutes come in. not long after my rant the fed released the minutes of the previous meeting where they said it was always well and those who felt it was just plain wrong. the minutes emphasized that the fed would cut rates as needed and things were nowhere that dire. when i read that, the people now who think these are all important i and my source might

be too negative and my sources were wrong. maybe i was being too bearish. the minutes were so reassuring that i acted on them and sent out a bulletin on august 17, 2007 saying, quote, at last i believe the worst is behind us. even though i had been right about the systemic risk of the crisis to come and did change my mind soon after this bulletin, i ended up to be way late in cutting rates and took its time about it and the damage be onning ared pretty much as predicted, and i did believe the fed's statements were paramount. i just violated -- and instead of the actual actions taken by the secretive committee and since then i learned not to put too much trust from these out of date notes. you shouldn't either. the bottom line, i need you to do something that i think is very difficult and i need you to ignore the fed minutes and don't make any serious decision, and i

know given the furious and volatile action that occurs after the release, it probably seems ridiculous that these minutes could be that irrelev t irrelevant, but they are, people. these supposed all-important releases are dodges that throw you off the set and cause you to make bone headed decisions. if anything the month-old fed minutes are good for is giving you buying opportunities some of your favorite stocks by creating unwarranted and, yes, undeserved, pullbacks. after the break i'll try to make you more money. i'm jim kramer and welcome to my world. one man, one mission. >> i just want to make you money. >> you need to get in the game! >> tens of thousands of miles traveled? this new black gold rush is just getting started. >> it's the sound of american industry roaring back to life. >> hundreds of ceos. >> my life story can be your life story. >> thousands of callers.

>> boo-yah, jimbo! >> millions of your emails and tweets. "mad money" thanks cramerica for being with us for over 2,000 episodes. it's as simple as this. at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets.

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the stock market, like

everything else these day, is now hostage to the 24/7 media cycle. that means if you're going to make even a token effort to follow your investment, you'll be bombarded by all thoughts of overhyped information and it can lead you a stray ask cause you to make nasty, money-losing mistakes. as your investing coach it's my job of keeping you from being misled in making those mistakes that's which is why i devoted an entire chapt tore in my latest book "get rich quickly." you need to do your best to ignore. once a month we get reports from the big investment reports and specifically what they decided to buy or cut back on. we here in the media pore over 13f forms that these funds file with the fcc, and trying to find what stocks, like george soros or carl icahn might be getting into or maybe getting sick of and a lot of people make the mistake of assuming they might be wrong if they happen to own

any of the stocks that these big boys happen to be selling. what do people do? >> sell, sell, sell! >> they dump these stocks even though they've done an enormous amount of homework on them, based on the presumption, based on what you know, these iconic money managers have to know more, right? the most closely followed trail is the one by the greatest investor of our time, warren buffett. you should never dump a stock you have conviction in simply because you found out that some famous money manager is selling. >> sell, sell, sell! >> how do i know this? first of all, selling is not like buying. we have no idea why some hedge fund might be selling something. maybe the portfolio manager who specifically followed this stock has left the firm. maybe the stock is in a sector of the economy that's fallen out of favor with the money manager in question and maybe some hotshot investor thought he had insight or bought the stock for a trade and turned around and sold it when the insight proved wrong. maybe the money manager is trying to free up cash for an

even better investment that he's got up his sleeve and maybe he does have real reasons for selling that we'll never know, we're never going to learn about. the point, though is that you don't know. you can't know and basing your investment decisions on something so unknowable is always a bad idea, people, even if trying to follow in the footsteps of a giant like warren buffett. selling off the 13f filings sends to be a huge mistake. years ago my charitable trust, you can follow it on charitable trust.com, union pacific, sold it in the 70s and take a look at where that stock is now in large part because warren buffett's 13f disclosure form showed at this moment that he exited his position in the stock. he blew it out, we should blow it out, right? isn't that what people think? what a regret. not only did union pacific go into double, but buffett actually went out and bought union pacific's competitor, burlington northern because he

loved the rails so much. of course, was there no reason for buffett to hold stock in one railroad when he was about to buy another one lock, stock and barrel, it was a huge mistake to assume something was wrong in union pacific just because buffett sold it. the truth is, his selling was simply a symptom of the sector and he only sold it while acquiring another railroad. he bought burlington northern and don't jump to negative conclusion when a big-name investors sells something. please remember that union pacific lesson. it should be large in your mind when you take action off these bulletins. this was a valuable lesson. it was one that the charitable trust created a nice price break in kraft this time, by deciding to exit his position in that company after he had a spat with its ceo irene rosenfeld. if you bought after the news broke that buffett had sold which was a well-covered event

and you called a terrific bargain as kraft went on to break itself up to create for shareholders. so you really need to take those 13f filings now widely talked about and accounted upon with a grain of salt. if you like a stock that a big-name investor is selling and you've done your homework and you have conviction, if anything, you might even want to use that weakness to buy more of the stock. by the same token, you should never buy a stock just because some money manager you respect surfaces in having taken the position. they're a-month-old by the time you see them and it's a snapshot, and at that very moment he could have doifrmd trimmed has position the next day. you have no idea. a friend i admired took a monster stake in freeport mcmorran. i know the fund did superb work. i know they had an excellent track record and i decided to piggyback off their efforts to

buy freeport, a stock i didn't know if i should purchase before the filing and you what? it was a disaster. >> the house of pain! >> freeport was at $87 when the sec released the 13f showing that this hedge fund had taken a tremendous position in it. not long after the recession hit and guess what in the stock went down to $8. yes, 87 to 8 all of the work the firm may or may not have done didn't matter, oh, and of course, shortly after that the firm closed. i was able to escape my position with freeport before it did too much damage to my charitable trust because i did my own homework which showed the company's profits were decelerating rapidly and it was my job to follow the tailspining hedge fund before i got into trouble. when i talk to investors about the positions they're thinking of taking so and so bought it and i know this manager is terrific. believe me, you have no idea why he bought it or even if he'll be

right. even the best money managers make mistakes. if the idea went awry, he doesn't know how things are going to be better and you shouldn't care about him. end of story. in fact, in all of the years i've been running my charitable trust, i've only found one big-name manager and that's nelson peltz and his partners. he's an activist investor. he tries to make changes and peltz is fabulous, giving you huge return asks even after we've become public knowledge. >> you think that they're doing the heavy lefting for you by pushing management to the wrong direct. >> my it's too late as the bump from the news an activist has gotten involved pretty much ruins the potential upside and

peltz was the only one which you could and after, and the bottom line, never blindly follow big-name money managers into or out of their stocks based on the 13f filings. if you want to be a good investor you need to do your own homework and stick on to your own convicts. we've done ret search and the fact is piggingbacking off the big boys will not make you beat averages. in short, never sell because an iconic money manager is selling and never buy because a respected hedge fund is buying. it's lazy and worse, it doesn't work. danielle in kansas. danielle! >> boo-yah, jim. >> how are you? >> i'm well. thanks. i'm wondering how investors would be with inflation be with banks increase lending and how will investors know this inflation is coming? >> i still use the producer price index which is actually a

pretty decent sign of inflation, but more importantly i follow the bond market. if interest rates start going higher that will be a tell of inflation if we do not have strong economic growth. i'm giving you the scenarios that i've historically looked at. i am not concerned about inflation right now. i am still more concerned about deflation. may i go to paul in texas, please? paul! >> boo-yah, jim! >> boo-yah, paul. >> my wife retired and i read your book "stay mad for life." thank you. >> you listed 20 stocks and 10 to 15 funds, and i wonder because of the housing real estate bubble burst and the financial meltdown, would you consider revising that list and adding any companies? >> it's one of the reasons, frankly, why, "get rich caref careful carefully" because there were new them thats didn't exist. that book was written a long time ago and not to say you have to buy the new book to find out what the old book was right or

wrong about. the and. >> you no i go to sid in texas. >> big, burly boo-yah from corpus christi, texas, where the good winds are for sailing and the red fish are tailing. >> didn't know that. >> my question is this. with the volatility in gold what should us baby boomers do, about the percent of gold in our portfolios. >> i want you to think of it as a currency. we're in america and all we ever think is the dollar unless we go overseas and i regard gold as a hedge against the dollar. i think you can have 10% of your money in gold. i prefer the gld in coins. up to 20%, 20% is pretty high, but it's a good hedge against anything else that you own in life. follow the leader. how about doing your own homework? i don't you ever to blindly follow the big guys based on the window that is the 13f filings because that is just the height of laziness, and it doesn't

work. stay with cramer.

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tonight i'm teaching you how to navigate your way through an environment where you are constantly inundated with information about the economy and individual companies that's often overhyped, overblown and just plain not as important as it seems. >> boo! >> there are so many thingious need to keep track of as part of your investing homework that you cannot afford to get sidetracked or worse, derailed by data points that don't really matter. think, nobody in the business will come out and say, of course, this news isn't really a needle mover, but we're telling you anyway. the press makes everything sound

much more important than it is now especially the people on the blogs who are desperate for information to write about. that's why i'm doing my best to sort out the weak from the chaff when it comes to processing information about the market, both here, on the show and in my latest book "get rich carefully." i'll let you in on another valuable lesson, don't get caught up in the winds. they have a big win, big win, whether they be technology company, don't get caught up. i've been enthusiastic myself about companies that capture big multiin-year contracts for seemingly big jobs and in reality barely mattered, failed to move, the earnings needle. take transocean, the world's largest offshore drilling and transocean, experienced the $140 down to $40. do you know all through this dlient company kept receiving giant contract win after giant contract win? in the end the contracts didn't matter because the price of crude drops dramatically, you have to resume that the drilling

projects will ultimately get canceled or at the very least the company like transocean will have to give their companies major discounts if it wants to keep doing business, and that's why even with the wins transocean stock ended up a gigantic loser and so the same thing with the engineering construction firm whose stock sank from $95 to $50 during the gratest streak of contract wins in the company's history. it turnses out that not only did it have energy exposure when all things energy were getting crushed and is had huge losses from older contracts that went over budget, nullifying the new business that i mistakenly thought was so important. you know what? the exact same thing happens in tech all of the time. you'll see an enterprise software company like sap. getting a huge contract win from oracle or sales force.com and you will take a contract from hewlett-packard, when it does nothing or the sales force doesn't run, you might think, you've just been given a wonderful chance to buy.

nope. the stocks are right not to react and you're wrong if you think it's an opportunity. yes, some companies report lots of good-sounding news that never seems to matter at all. it gets incredibly frustrating when they don't impact the stock because you're looking at them thinking it should. sometimes the only thing that does move the stock is the actual quarterly earnings report itself. i learned this the real hard way when i got super frustrated with the stock of deere, de, the agricultural equipmentmaker. it put out press release after press release, including lots of new big equipment purchases. i was salivating. we got crop report after crop report saying that deere was going to van amazing quarter, i at least i thought so. i couldn't believe the stock hadn't moved and what a agreement moment to buy, sure enough, when the company reported the quarter was terrific, but deere is a famously cautious company or should i say infamously cautious. so even when things are good and the they refuses to acknowledge the positives and often simply

stresses the negatives, it is amazing how this happens over and over. he failed to turn the good news into profits and it gave a downbeat outlook saying the good news continues and no matter how many new orders and the positive conference call, the stock's not going higher, so don't get confused about this. it doesn't work and there is an important corollary, though, even though i don't like buying stocks, you may need to is the stock of a company that loses a big contract, that's been on the books. >> my charitable trust with chicago bridge and iron, cbi, and it announced that the huge oil and gas customer had canceled a contract, the company had wanted to build a gigantic liquefied natural gas project in off thia. they pursued the contract with a significant amount of money. when we saw the news, we hesitated and we thought perhaps the market would see how they were other major projects in the books so cbi would make up the

loss, but the market didn't hesitate. the stock got hammered because the analysts felt compelled to cut their estimates as they built the australian project into the models already so the model his to change to the worst to reflect the cancellation. here's the bottom line, do not get bamboozled among the engineering construction firms or tech companies or oil plays or machinery companies. at the end of the day what matters for most stocks are earnings, not orders. by the same token if a company has a major contract already on the books and it gets canceled you probably need to -- >> sell, sell, sell! >> ska daddel and that will punish the stock, as was the case with cbi a year later it was higher than it had been when the giant contract was cancelled. stick with cramer.

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when you're picking stocks there are so many ways you can find yourself being led off course which is why tonight i'm helping you sort out the thing that should matter to investors from the things that don't matter and the ones you simply shouldn't care about at all. something i devoted a whole chapter to in "get rich carefully," my latest book, as much as i made the informationa, veilable to everyone i've also made it possible for pretty much every opinion to get itself heard, even when it appears on faulty logic and it will save you money. here keent sent that i see being waved around all of the time as a reason to buy stocks even though it is a serious money loser. i call it the relative valuation rationalization, bear with me. i want to never, ever buy a stock just because it's relatively cheaper than the rest of its cohort or the market as a

whole. all stocks are not created equal. some deserve to be worth less than others. this is a mistake i've made myself with my charitable trust which is how damaging it can be. cisco,s networking giant and we were super frustrated with the underperformance as the stock seemed to tick down almost every day. we noted that in the siskly had the higher growth rate than the average stock in the s&p 500, but somehow strangely it sold at a lower price to earnings multiple than the average stock, in short, cisco looked cheaper than the market on both the pure earnings bases and the growth basis and this is the complicated jargon money managers have it all of the time. it doesn't always work. theoretically yes, when you compare it to the s&p and you compare the growth rate and if the stock is, you should pay a higher price to earnings multiple than you would for the s&p and it's growing fast perp a company that gross 20% faster than the average stock of the

s&p 500 should not be trading at a 20% discount than the price to earnings multiple which was pretty much the case when the charitable trust was loading up on cisco. however there was one fatal flaw in our analysis. sure, it was better, but it was slowing. in other words, when you make a bet, that one stock seems cheaper than another based on a particular function you have to be sure that the reason isn't going away, making the stock more expensive down the road, not cheaper and that's exactly what happened with cisco. the stock's cheapness didn't matter at all after the company reported a shortfall soon after and the stock was hammered mercilessly, leaving the charitable trust holding the bag. so here is the bottom line, yes, you should always be on the lookout for bargain, but just because a stock is cheaper than its peers or the whole market on a relative basis doesn't mean it's necessarily worth buying. often inexpensive stocks are inexpensive for a reason and if you buy something merely because it's cheap it may simply end up

getting even cheaper down the line. "mad money" is back after the break. bny mellon combines investment management & investment servicing,

giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon.

hey, we've got to get some of the tweets you've been sending me @jimcrame me @jimcramer #madtweets. first up we have a tweet from jeffrey. should a young investor worry about the market leveling out to fair values as mentioned by buffett and icahn. i don't want you worried about the market. that's the big misnomer. worry about the company's stocks that you own. do the homework, get conviction and then stop worry budget fair value of the market. that's not what this their show is about. it's not what you should be about. now let's go to @soapboxwire. these companies that get dropped from the dow, does it hurt them? there's absolutely no imperical evidence whatsoever that it will hurt them and by the way, they

dropped by the bottom, hewlett-packard ask alcoa being two that i am thinking could have been that case. and if the real dustin 24 posted the fake dustin 24, he tweets this question, thank boss, one of my mant ras, sell into strength, buy weakness. i care about the price i buy a stock at. if you chase you won't get a good price and therefore the odds dramatically go against you when it comes to making both long-term and short-term money. a tweet from @scott, underscore, jc. need a place to stay when visiting mom and pop at mountainside, are we ever. room 14. we love kids at the place. we don't like dogs. we like kids and i'll serve breakfast on the weekends for you and by the way, i can make moeched eggs martha stewart style. a little vinegar. let's go to a tweet fr frofrom from @officedoctor1 which of your books would you recommend for a more experienced

trader/investor roll money was the book written as a handbook for people who came to work as my old hedge fund, otherwise "get rich carefully" is more in sync with the current market though the market has changed. and now to sam roadwayrouge, louis ck with jim cramer. it's a heck of a lot better to be confused with louis ck than it is with v latted mir lennin. and now #madtweets. i want to invest in some big-name companies. we don't like to buy stocks that are selling at two times or more of their growth rate because if they screw up the stock gets eviscerated and that's one of our rules. here's one from @mattunderscore cat. what is the secret to having so much energy in the morning? i get almost no sleep, but it's a hereditary thing and maybe the secret is i love my job. don't tell the bosses. "mad money" is back after the break. from our family to yours,

happy holidays, cramerica. peace and prosperity in the new year from all of us here at "mad money."

i like to say that there's always a bull market somewhere, and i promise to find it just for you right here on "mad money." i'm jim kramer and i'll see you next time! the white house now says 2 million people have signed up for obamacare health policies. but are these numbers for real? and are the deadlines to sign up and pay up for it, is that real? why is the obama team pushing back against calls from other liberals to get a real ceo to run the program? the obamacare enrollment numbers may be fuzzy but the raft of new obamacare taxes about to kick in are entirely real. you may not know much about them, but after tonight you will. thanks to our guest, grover norquist, who will run it down for us. and how can you ask the richest people in america for donations for the church while the pope is criticizing the very