>> you are long gm. >> i am. >> all of it. >> all 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." if you want to make friends i'm trying to make you money. my job is not just to entertain you but educate you so call me. 1-800-743-cnbc. investing isn't easy but can be easier and less daunting than you think with a little instruction. the business of manage your money is made much more confusing and difficult because all the air cane terminology and

authentic wall street gibberish you hear every day. if you're not clued in it can sound like the pros are speaking an entirely different language. there is an industry that wants you to think investing is too hard, you can't do it and safest thing is to give your money to a pro. maybe that is the right thing for some of you. if you put in the effort, do the homework you can do, i think, as least as well as the professionals. the fact of the matter is many of the pros are about getting your fees, more interested in taking your money than making your money and that often means keeping you ignorant about the market so you stay in their stock chains. their chains are strong. they're like the "wizard of oz." they don't want you to peek behind the curtain, they don't want you to understand. if you did you would take control of your own finances, pick your own stocks and not pay someone exorbitant fees to dot things you're perfectly capable of doing yourself. that's where i come in. tonight i'm pulling back the

curtain and ek plang everything. while authentic wall street gibberish can sound complex it's not rocket science or brain surgery. you don't need to go to business school to understand it. you can understand the vo cac blairry we throw around as long as you a coach like me who can explain what the darn words me. think of me as someone that played for the other team, managing $500,000 of rich people's money but playing for you teaching you to make your way through the mine field of the stock market. forget even the code talkers. to be a great invest you have to break the wall street code. i'm giving you my wall street gibberish to plain english dix nare she. consider this a glossary of the important terms you need to understand to manage your portfolio, words an concepts people don't want you to get your heads around. that might make you feel empowered enough to pull your money out of their moisture funds, their coffers and stop

handing over your fees and commissions. why not take advantage of my 30 plus years to give yourself an extra edge. let's start with a couple important ideas that go hand in hand. sickicallicle and secular. you hear these all the time but no one bothers to explain what they mean, even when they're crucial when it comes to picking stocks. cyclical, nothing to do with the spin cycle on your washing machine, or the ring cycle, not my kind of classical music but not bad. secular isn't about the separation of church and state or public versus parochial schools. we say at companies cyclical if it needs a strong economy to grow. it's cyclical because it depends on the business cycle. steel producers in this category, so do machinery categories and raw materials plays, building. chemical companies, dow, ppg. the old pittsburgh plate glass. these companies are hostage to

the economy. when it heats up they earn more money and willing to pay more for the earnings and slows down and they shift to recession mode they earn less money and investors pay less for the shares. a secular growth company is one where the earnings keep coming regardless of the economy's health. think anything you eat, drink, smoke, brush your teeth with or use as a medication. you have consumer staples, general mills, kellogg, tobacco companies, drug stocks, pfizer, merck, these are the classic recession proof stocks you want to buy when the economies slow down. you don't stop eating food or brushing your teeth because of a recession. okay. why is the secular versus cyclical so important? why is the first piece of wall street jargon i'm translating? it helps you figure out how much money companies will earn and matters to the money managers that have so much to throw around they're buying and selling drive stocks up and down, the single determinant of where price goss in the short term. the hedge fund is about when to

buy and sell cyclical or secular ones based on how the economies around the world are doing. this drives their decision-making process about 50% of the performance of any stock comes from its sector a fancy word for the segment of the economy a stock falls into. tech, energy, machinery, health care, finance. and when it comes to sectors much of the moves are driven by when they fall into the secular or cyclical. cyclical means it's going to be a camp that in this market is going to get hammered when growth slows. secular won't impact it. you don't want to own much in the way of cyclicals when the economy is slowing. these stocks are going to get crushed because their earnings could and often fall apart. they can't make the estimates as they have during every slowdown including slow downs and nothing you can do about it. when business heats up and cyclicals are doing well no one wants to own those boring. they don't want sec due lar growth like cereal and you won't make much money in them during

these periods. this can help you understand another piece. a rotation, when money flows out of one of these two groups into the other and various little sectors within those groups. this is probably completely an theatrical to what you've been told about the right way. if you're going to pick your own stocks, something the conventional wisdom requires you should buy high quality companies and stick with them and hold out long enough you will make money. this is the brain dead philosophy of buy and hold. a zombie ideology that refuses to die. and i explained that in a bunch of my books, real mun, getting took about even. those are all about trying to deal with tough markets. still in what stocks hold up when we finally get back to even. once you recognize how powerful the secular versus cyclical

distings is you can see why buy and hold is silly. going to own stocks through thick and thin you need to be prepared to lose money if the cyclicals when are out of favor or trade water. you have to take that level of pain. you may be in the wrong sector at the wrong time. that doesn't mean you should play the rotation game and only own the group in style. not at all, actually. remember the need for diversification, another important piece of investing vocabulary not having all your eggs in one basket. no more than 20% of your portfolio is in any single sector so you won't get anile lated or, for example, a sector rotation takes down your cyclical stocks because you have secular growth names holding up better or making you money at the same time. diversification. free lunch. bottom line investing isn't easy but doesn't have to be misty fide. you need to learn the language, know the difference between cyclical and secular, recognize the rotation when you see one and always stay diversified. gary in indiana, gary. >> caller: hi, jim.

boo-yah. >> boo-yah. >> caller: this is gary ward from indianapolis, indiana. i'm a first-time caller, long-time viewer and i thank you for all your help. >> you're welcome. and i'm glad you called. >> caller: my question is, when is it advantageous to purchase preferred stock over common stock or vice versa? >> preferred i like to use when i see the yield be well in extreme. well in excess of what i can get from a risk-free treasury and at the same time, it's safe. that's when i use preferred. common stock i'm trying to get capital appreciation and sometimes also capital press preservati preservation. two different things. preferred i regard as a fixed income instrument where i can pick up more extra yield than i can get from treasures. dave in california. >> caller: hi, this is dave in sunny california. >> what's on your mind. >> caller: how do you come across a company that's a growing company, doing all the right things for investors to what they call get uplifting, to go from like a nasdaq pink

sheets or the otc market, to the new york stock exchange? >> this is all in odds game, sir. dave, the odds do not favor those companies do well. they didn't get to the pink sheets or go into oblivion because they were doing well. they were doing badly. i look at the odds and i don't think the odds favor those situations and i pass up on what could be attractive opportunities to be able to avoid the dozens of unattractive ones. the markets is key to mastering the market. and it's the key to your financial future. "mad money" will be right back. >> don't miss a second of "mad money." follow @jim cramer on twitter. have a question, tweet cramer #madcle tweets, send jim an e-mail to "mad money" @cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney .cnbc.com.

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does it ever seem like the ticker is speaking tongues? yes. so i'm helping you translate the cryptic and occasionally

unphantomble terminology that makes stock owning difficult. i'm giving you the phrase book to navigate through the world of investing. consider it the televised encyclopedia for tearing back the cloak of mystery that can make managing your money seem like an impossible task. the process of picking stocks shouldn't be as difficult as people say. it's not like conducting triple bypass heart surgery. you don't have to be albert einstein to understand this stuff. with the way the prose talk about the stocks i bet einstein would have a tough time figuring out what they were saying. i explained the difference between cyclical and think industrial thats need a healthy economy versus secular, toothpaste, cereal, getting growths all over the world and need more toothpaste and cereal, expanding at the same pace regardless of where we are in the business cycle. is how you sell the sickicallies and when the economy starts to

slow and dot reverse. when you want to outperform you do this. this is the playbook all the hedge funds use. even though the hedge funds can behave like animals who buy and sell at the same time their playbook information works. the reason for that has to do with another piece of wall street gibberish that you absolutely must know. if you're going to pick your own stocks. and that's the price to earnings multiple. often heard of as the p/e multiple. or just the multiple. they refer to the same thing and one of the cornerstones how far we value stocks. in fact when you hear talking heads talk about how some stock has become over or undervalued they're talking about the multiple when you hear someone say pepsico is more expensive than coca-cola they don't mean it's cheap, just using a couple price, the share price tells you nothing about a stock's valuation vis-a-vis another stock. to make any kind of apples to apples comparison you have to take a step back. when you buy a stock you're actually paying for small piece

of a company's future earnings. to value a stock look at where it's trading relative to the others in the earnings per share category which you'll often see rendered as aps and that's what the multiple allows you to do. here's the basic al ja ba not any mofts any fourth grader could do. the share price p is equal to the earnings per share e times the multiple m. tells you how much the companies are willing to pay. we don't care coca-cola might be at 55, or pepsico might be 65, we care it sells 14 times earnings. the main ingredient in that sauce, growth. how much bigger the earnings will be next year than they were this year and the year after that and year after that and so on. the stocks of companies with faster growth tend to get rewarded why? the multiple is about what we're willing to pay for earnings. and the more rapidly a business grows the bigger its futures earnings will be. so let's take one. say chipotle sells for 24 times

earnings. that doesn't make it more expensive than a slow but steady grower like pepsico at 14 times earnings. chipotle deserves the bigger multiple much higher growth rate, 24% say versus pepsico's 8% now here's where it gets interesting. multiples aren't static and different markets people pay more or less. when they pay more multiple expansion and when they pay less multiple contraction. two more terms that sound much more complicated than they are. that's what hedge funds are trying to game when they play a sector rotation. they don't want to be in earnings contraction situation. of course the earnings aren't static either. when you buy a stock you're making a bet that the e or m part of the price equation is heading higher. so what goes into the e or earnings? how do you make sure you're increasing -- they're increasing and aren't about to collapse. when you hear people talk about a company's bottom line or profits or net income, the same thing, the earnings. we call it the bottom line because the number is the bottom figure on an income statement. to figure out how a company's earnings can grow in the future

you look for clues when reports quarterly results. that's why i'm always telling you to listen to the conference calls, look at the top line, another piece of gibberish interchangeable with revenues or sales mean the same thing. you want to see strong revenue growth which tells you that there's demand for the company's product all the key of the ability for most businesses to grow their earnings long term and that's why it's important for younger, smaller companies to have a fast growing revenue stream. oh, and investors will really pay up for what's known as accelerating revenue growth. the holy grail. arg. sales growing at a higher rate with a more mature company it should turn its revenues into profits cutting costs and return those profits to shareholders in the form of a dividend or buyback. dividends are attractive because they put money directly into your pockets beyond the top line and the bottom line. it's also crucial to consider the gross margin. which is in no way discussing not the least bit marginal. tells you what percentage of

every dollar sales becomes profit and it's super important to figure out how much money a company can make. to figure out the gross margins, consider the competition, cost of production, doing business in general. supermarkets or airlines tend to have horrible margins. some industries the margins can vary wildly, the oil business where it swings up or down with the price of crude. the bottom line you need to know the vocabulary to evaluate a stock. look at growth rate, top line, bottom line, and the gross margins. after the break i will try to make you more money. [ both ] when we arrived at our hotel in new york,

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♪ tons i'm going to penn and teller mode demystifying the technical wall street gibberish that you hear all the time but might never actually understand. translating the most overused und und explained terms in the investing business into language you can comprehend. consider this show your wall street to english dictionary a glossary that will help you navigate your way through tough markets and more important, the tough sounding terminology that keeps so many out of stocks or makes them scared and buffalos them. the fact is, all this investment terminology suddens difficult because the pros that speak wall street fluidly they want it to sound difficult. they want you terrified and feeling totally ignorant.

at a complete loss when it comes to managing your money. judging by what i often read on twitter @jimcramer, i go there all the time @jimcramer the arrogant managers let's just say they are winning. my mission is to adjust the opposite. i'm here to enlighten you to teach because i know you can do better than the professionals who want your fees and commissions. i don't want their fees or commissions. i'm not managing anyone else's money and i don't own stocks except my charitable trust, i give away my winnings more than $1.8 million i'm proud to say to charity. not enough for me to tell you which stocks i like because you can't own them if you can't understand them. knowing what you own is a must. it's one of my cardinal rules. if you don't have a grasp of how your holdings make their money, what stock, what the companies do, of the stocks that you own, you won't have any idea what to do when their stocks turn depend against you.

at some point they will. you can't know when to hold and fold them, any more of the words of kenny rogers unless you know what it is you're holding and what might make you want to fold, in this case sell the stock, along with what would make you in the story if it's intact. >> bye-bye bye. >> the fact is the profusion of or cane terminology makes it harder to know what you own. let's continue with another important piece of verbiage hardly ever explained even though used constantly. risk/reward. the risk/reward analysis defiances the short-term stock picking. what does it mean? break it down into two parts. assessing risk is about figuring out the downside, how much you potentially stand to lose in a given stock, how far it can fall in the near term. assessing the reward is about figuring out how the potential upside looks. how many points of gains the stock could reasonably give you. too many people when they analyze the stock focus on the potential upside and that is a grave grievous error.

it's more important for you to understand the risk side of the reward because the pain from a big loss. >> the house of pain. >> hurts a whole lot more than the pleasure from an equivalent size gain. >> house of pleasure. >> so how do you figure out the risk and reward. these are determined by two different cohorts of investors. the reward the upside determined by how much growth oriented money managers can be willing to create for a stock. they create stop. the risk value oriented money managers would be able to pay on the way down, they create the bottom. to figure out the risk you need to consider where the value guys will buy on the way down to solve for the reward think about where the bullish of growth guys will start selling. when asked i boil the risk/reward to something quick and dirty, five up, three down, how do i get there. how can you know where growth managers will start selling and value guys will start buying. to do that you need insight into how they think and requires translating another piece of wall street lingo growth at a reasonable price. growth at a reasonable price defines this. and we call it aka garp.

when we talk about growth at a reasonable price or garp, that's not a subjective criteria. it's a method of analyzing stocks poplized by peter lynch by comparing a stock's growth rate to price to earnings multiple if you want to figure out the maximum the growth guys are willing to pay you look at the world according to garp. learn more from peter lynch buy one up on wall street and beat the street. the two most inspirational books that are the fund meant for my investing philosophy and what i teach here that i have ever read elsewhere. one up on wall street and beat the street by peter lynch. amazon. a quick rule of thumb that's hardly let will me down. a rule that can help us. figure out what -- really help us figure out when a stock is overvalued or undervalued based on what the growth and value mun managers would be willing to pay. if the stock has a price to earnings multiple lower than its growth rate, that's the definition of cheap. any -- and any stock that's selling at a multiple which is twice the size of its growth

rate or greater is probably too expensive and should be sold. so if a stock is trading at 20 times earnings and has a growth rate of 10% it probably won't go much higher than that. it's reached the two times growth ceiling. here's another piece of wall street gibberish to help you simplify this the process. the peg, peg ratio, the price to earnings to growth rate or the multiple dived by a stocks a long term growth rate. a peg of one is extremely cheap and two or higher is prohibitively expensive. google in its hay-day from 2004 to 2007 could sell for 2,000 times earnings and be expensive. 30% long-term plus rate giving it a peg ratio of one at the cheap end of the spectrum and growth kept accelerating sending the stock into new high. that's how that happened. where did i come up with these observations? the value investors who will be attracted to selling stocks pegs of 1 or less they create the

floor. they're looking for a peg of 1 or less. you will be able to find a buyer if the stock's multiple is at or below its growth rate. the growth investors buying high multiple stocks hardly pay twice growth rate a peg of two. we know coal stocks can go higher. google still in a mega growth mojo, it would become a sell if it traded up to 60 times earnings, too high as i've learned over and over again since the show began so many years ago. like with any of my methods or anyone else's for that matter this is a rough approximation, useful, especially when trying to figure out the risk/reward but not always right. stock will get cheap based on earnings estimates because those estimates need to be cut like the banks and brokers before the financial crisis or look cheap relative to growth rate because the growth is slower. like dell during the dot bomb collapse. as the competitors copy the business model.

in these cases the stock could trade below the one times growth and peg could keep sinking and the fact that it looks cheap is not a buy signal. the best time to buy the cyclical stocks when the multiples look expensive the earnings estimates are way too up and need to be raised to catch up with reality. one other thing about risk when you hear the terms risk on and risk off ignore them. that was just some sort of gibberish that appeared like in 2010 went away in 2012, periodically peeks its head and i have to bash the darn thing and that's because it's steered regular invests to trading to b aggressive stocks. practically banished from the discourse, circa 2011, 2012, hurt people while being done. the bottom line, know what you own and know what others will pay for it. that means you need to understand the risk/reward poeshgs terrible downside, upside before you purchase anything. by figuring out where the growth investors put in the ceiling and where the value cohort puts in

the floor. jim in new hampshire, jim. >> caller: mr. cramer, greetings and boo-yah from the live free or die state new hampshire. >> new hampshire rocks. go ahead. >> caller: i got a question about stop orders. i know you're big on stop orders. one of the things i've played with is trailing stops. say you got a stock at 100 one of the things i've done is a three tiered approach that may have a $5 increment so i don't get stopped out all at once. seems like something like that sort of strategy works. i would love to hear your thoughts on that. >> that's a pretty good idea. as you know, i think this idea you get stopped and it hits it and next thing you know it comes back up that's bad for me. going to do it in pieces that's like the stage that i like. i will -- you know what i like that method. i'm not going to endorse it for my own, but i think if it makes you comfortable it's good to do anything in stages is the right thing by me. jim in new york. >> caller: jim, i would like to

know what's the drawbacks of owning stocks that's held by a holding company? >> well, i mean we got -- it's hard to bring out the value of assets in a holding company. we don't know what they are. things can be opaque sometimes, they're not opaque, if they're not opaque we can make a judgment, berkshire hathaway if they are opaque like the mortgage investment trusts i don't touch them. john in texas. >> caller: thank you. greetings from austin. i have all of your books, watch the show every day, live and record it, and admire your energy level. >> thank you very much. >> caller: no problem. my question involves your ongoing suggestion to buy stock shares in increments. i understand why, but doesn't that eat up commission money even though it can offset capital gains or losses? what's your take? >> i mean my feeling is very strong on this which is when i got in commissions were about ca drople what they were now and still recommended that strategy. i didn't want people to it at once and get confused or lose

interest or hate the market. it's even better now with the commission rates low. so no, i'm not going to back away from my view. commission rates are low enough you can do that trading and not hurt yourself. nick in new jersey, please. nick? >> caller: cramer, big boo-yah from hoboken, new jersey. >> lot of buddies there. what's up? >> caller: shout out to my brother overseas in the navy. >> thank him for serving, please. >> caller: i look for a financial institution that has a 30 day holding period policy on all securities purchased for associates. what strategy should i apply sourcing out a new stock knowing i might be limited when i pull the trigger and unload. >> you cannot trade. you have to find long-term investments. sound like your a young fellow. find stocks that have tremendous upside that are risky because you have your life to make it back if it turns out to be a bomb. go for the riskiest good stocks you can find and let it rip. talk the talk, i'm translating, wall street to english,

risk/reward, potential upside downside know what you own and know what others will pay for it. stay with cramer. >> jim cramer, you're one of my heros. >> i look forward to your show every week night. >> thank you so much for helping beginning investors like me. >> when you talk about the market, i just believe that you're spot on. >> oh, i love it. thank you so much. every night we watch you. i have learned and earned. i spent my entire childhood seeing the world in reverse, and i loved every minute of it. but then you grow up and there's no going back. but it's okay, it's just a new kind of adventure.

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lost in translation. managing your money is a whole lot less daunting than it seems when you have a translator. someone like me who can help you decode the arcane and intentionally sometimes obscure terminology that the pros use. that's why i'm give yg my televised wall street gibberish to english dictionary to understand the essentials of investing. i've explained the complicated piece of sounding jargon that are essential to making money in the market but the difficulty goes in two directions. just as there are plane concepts that seem misleading complicated men mr.ty of terms that are simple than they appear.

take the notion of a trade versus investment. a lot say those two are interchangeable. couldn't be further from the truth. they're distinct and in the words of the '90's stock gurus offspring you have to keep them separated. isn't this just splitting hairs, isn't it -- that's a word of the day, searching for a real dix nare vi. a trade is not the same. if you treat one like the other, turn a trade into an investment breaking the first command of investing in true mr. t fashion, rocky 3, my prediction for your portfolio is pain! when you buy a stock as a trade you're buying it for a catalyst, some future event you think will drive the stock higher. you think it will deliver better than expected numbers i don't recommend trying to game earnings. hasn't worked well. too much chaos and confusion, cause the stock to get

clobbered. the catalyst could be news about event you're predicting if you're dealing with pharma stocks or biotechs many catalysts when the companies release their clinical trial data about important drugs in development or the fda decides whether or not to give -- to approve a given treatment. these are data points to send the stocks soaring higher if they go your way. so when you make a trade going into it you need to know there's a moment to buy before the catalyst and a moment most importantly that people seem to get wrong to -- >> sell sell sell. >> after the catalyst happens. sometimes your trades won't work, the event you're waiting for won't happen or the data point you're expecting turns out to be less positive than you expected. either way, when you buy a stock as a trade, it has a limited she will life. only a brief window you want to own it. once the window passes you must sell sell sell. >> hopefully you'll turn the right catalyst and be right about it and rack up nice gains if that happens, there's no point in sticking around. ring the register, lock in your profits. if it turns out to be wrong. >> the house of pain. >> you still need to.

>> sell sell sell. >> when you buy a bottle of milk you don't drink it after the expiration you throw it away. you can't buy more and call it a longer term investment without the catalyst you have no reason to own the stock and never should own anything without a reason. i've watched an endless parade of people lose money by turning trades into investments. come up with alibis long after the expiration dates to fool themselves to believe they're doing the right thing and get crushed. without a catalyst you don't have a trade. find yourself in that position you had better sell and cut your losses. and investment on the other hand is based on a long-term thesis, the idea that a stock potential to make serious money over an extended period of time for you. not banking on one catalyst. expecting many good things will happen. that's not an excuse to buy a stock and forget about it. investments can go wrong too. it would be great if you could spend an hour on it, i know you can't, but be sure the story is inta intact.

it does mean that when a stock you like as an investment goes down in the short term, it makes more sense to buy as long as the fundamentals are still solid than sell. you don't ring the register after the first time the stock jumps in price. looking for larger gains over a longer period of time. i made this mistake with apple when i bought at 26 before the iphone was a glimmer in steve jobs' eyes and the ipad was a distant dream and sold it after a five-point gain. i threw the investment thesis out of the window for a profit that turned to be tiny relative to the gains you would have received had you stayed longp in here's the bottom line, not all of wall street gibberish is complicated. some is deceptively simple. between a trade and investment. they're not the same and a big mistake to turn a trade based on a catalyst whether successful or insuccessful into an investment which will most likely fail. stay with cramer. >> cramer! you are super, you are awesome. >> i'm a first-time investor.

>> thank you for inspiring me to get in the game. >> your show is the best. i am so glad you're on tv. >> i want you to know you have transformed me. thank you, cramer. don't just visit rome.

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welcome back to the wall street gibberish to english guide edition of "mad money." all night i've been explaining investment concepts to help you become a better investor and make the process of managing your money seem less daunting. here's one of the most dreaded and poorly understood terms in the business and it's the

correction. what a euphemism. correction is when after the market has been roaring it turns around and gets crushed, declines as much as 10%, the sky is falling never want to own another stock again. that's precisely the wrong reaction people. it may feel horrible but stocks can come back from corrections. they bounce back from big declines all the time off a major run. think of it like this when the market goes on a 56 game hitting streak and doesn't get on base the next day doesn't mean you never make money again. it's just what happens when you go up too far too fast and then that's why you should expect corrections. they can happen to an individual stock, index, the market. happen to bonds. and you will most likely never see them coming as people didn't see them at various times in the last year. you shouldn't beat yourself up for not anticipating them. sell offoffs are a natural feature of the stock market landscape. we don't have to like them but need to acknowledge they will happen no matter what. you shouldn't get flustered or never must do, you must never

panic when they inevitably smack you in the face. finally one last piece of investing vocabulary the idea of execution. this is a tough one it's comparatively subjective. when we talk about execution we mean management's ability to follow through. when you own a stock there is risk associated with executions, messed up mergers, product launches and cost control. the ways a bad management team can screw up a company are infinite. they're less likely to make the kinds of unforced errors and a reason why it's so important for you to pay attention when i bring ceos on the show. nobody knows a company better than people running it and since you can't get the ceos on the phone yourself you want to see what they have to say about their business firsthand on "mad money." this notion of execution is also crucial when it comes to understanding why it's worth paying up for what i love the best of companies, the top players in the given industry almost were always proven executives.

stocks are always more expensive than the cheaper competitors but worth every penny. a good management team is less likely to make mistakes and less likely to get buried by big problems and more likely to figure out how to solve it. here's the bottom line. don't be afraid of corrections or intimidated by people who use the word. a sharp sell-off after a rally is something you must build in and expect and remember even though it's hard to quantify, execution is as crucial a factor when it comes to picking stocks, companies with proven season management, teams less likely to drop the ball, factor them in and when we get the correction you'll probably do better than most. let's speak to russ in new jersey. russ? >>. >> caller: hey summer new jersey strong boo-yah to you. >> 206 boo-yah. what's going on? >> caller: i have a question about buying a good stock that's high. you say to wait for a pullback, downturn, market correction, 5% or so. but what's the time horizon on that correction? day, week, month, quarter? how do you identify when to pull the trigger.

>> great question. i talk about time and price. sometimes the price won't get there until we go out in time. i like to stick by the -- look 5 to 7%, it's where you start. okay. 10, 12% buy more. leave room. then don't worry about the time. worry about the price. words words excorrections. corrections can be scary but expect them, don't fear them and execution, it's critical. stay with cramer. when folks think about what they get from alaska, they think salmon and energy. but the energy bp produces up here creates something else as well: jobs all over america.

engineering and innovation jobs. advanced safety systems & technology. shipping and manufacturing. across the united states, bp supports more than a quarter million jobs. when we set up operation in one part of the country, people in other parts go to work. that's not a coincidence. it's one more part of our commitment to america.

are you long america? >> we in the united states are competing wis the best companies in the world. >> look at the global competitiveness of any companies by any measure. >> my life story can be your life story. start with nothing in america and create the american dream. we have got to get to some of the tweets you've been sending me @jim cramer #madtweets. our first tweet comes from m

biker 25, writes, hey jim, when did you start investing? that's easy i started in 1979 when i was working for a magazine called american ware, we started it and got a couple bucks and decided i am going to go buy a stock that i read about in "forbes" magazine. i bought american agra nomics, orange grove, and then the next week they had a frost, lost number everything. our next tweet comes from, @molly kaine 3 says i'm a teacher and i use your it is time for the lightning round for mad facts time. am i violating trademark sflaus. >> only if you say are you ready ski datty that is patent pending. next @clark records who asks i'm 53, maxed out on a 401(k) what to do best with my personal "mad money" fund? pay tax, capital gains, taxes are low, used to be high, don't fear the tax man, make money. discretionary account. now a tweet from @invesble brand, what's reliable source

for stock options and plays, any options? i go to cbo.com. it's the best. they have a great site, everything you need to know and learn is on that site, remarkable resource. here's a tweet from @jt -- j tweets five. thank you for always looking out for us. you're the best thing that ever happened to mom and pop investors like myself. actually dick grasso, went to a lecture by him, talking about mom and pop investors, how important they are. where the grassos of our day. arthur levet, another guy that felt like i did. believe me, i was one of like a million who thinks like this. now i'm like an army of force of one. force of ten. no. just one. @shawngraft tweets hey @jim cramer people of new orleans have nice things to say about you. hope to meet you one day. i go down constantly my daughter goes to tulane and i'm a proud

dad. leave it at that. wade miller 44, what is better buying diefers fide etf. appreciate feedback. thank you. first of all little warning here right now, etfs thinly traded, we're done with them. no more. they're too dangerous. we like the spx for an etf. if you want -- look we just want you to have exposure to the market. the s&p 500 etf does everything you need. stick with cramer.

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encyclopedia creigh mer ka strikes and you're better for it. right here on "mad money," i'm jim cramer, and i will see you next time! i'm jim cramer, welcome to my world. >> one man, one mission. >> i just want to make you money. >> eight years. >> break a leg. >> 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. >> we're going to be -- >> hundreds of ceos. >> my life story can be your

life story. >> thousands of callers. >> boo-yah! jimbo. >> millions of your e-mails and tweets. tweets. "mad money" thanks >> the following is a cnbc prime original. >> it is both legal and lethal. seven pounds of metal and plastic... that fire a bullet at roughly 3,000 feet per second. it's called the ar-15. [ shell casing clinks ] to some, it is a brilliant piece of engineering, a modern sporting rifle, and a symbol of one of america's most basic freedoms. >> thank god for america! >> all: pass the law! >> to others, the ar-15 is an obscenity, an assault weapon with no justifiable place in civilian hands. >> you don't need an ar-15.