hard working interns. josh brown is abusing, i pine, mentoring him for this summer. >> these are my boys. that's cole billington. >> have a great summer to all the sberns. "mad money" is up next. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to creigh mere ka. i'm just trying to save you money. my job is not just to entertain you but educate you. so call me. up day, down day, flat day. something you need to understand. investing can be like comedy in both disciplines, timing is everything. perhaps the similarity is why people call me a clown or even a

joker, as long as it's not a midnight toker. maybe they're actually complimenting my keen sense of timing where they compared me to these investing legends, crusty, bozo, the joke is on them. when it comes to stock getting the timing correct to buy. >> buy buy buy. >> or sell. >> sell sell sell. >> the frustrating parts of managing your money you tell me this so many times when i see you, it is demanding. precision is tough to get right. that's why you hear so many say it's impossible for individuals to time the market. in fact, there's a whole cottage industry of nay sayers who make a living telling you there's no way a regular investor can do it. might as well give up on trying to trade, give up on picking your own stocks and just put all your money in an index fund and mimic the performance of the market as a whole and leave it there for all eternity. now look i have nothing against index funds per se. they can be a decent way to make money in the market if you don't

have the time or inclination to manage a portfolio of video stocks and many people don't. i've been saying that since the show began. the argument that the only way to go, that's totally bogus. as we all have either made good money buying individual stocks or know people who have or you would not be watching a show devoted to trying to help you invest yourself. an yet, that success is denied if not den ne graded for this brain-dead form of investing. even the index fund timing is crucial. bought it at the peak in temp, you got annihilated. came in 2009 when the s&p traded below 700, you made out. how important is timing? the s&p at the top in 2007 you half your money, eventually you made a decent chunk back. that loss can take ages to recover from. if you bought the s&p at the bottom you doubled your money and what the dow jones average

before europe ruled the roost and then panic at the twilight of the summer of 2011 you saw 20% of your capital erase. now these are extreme examples. but they've happened enough recently to be considered regular occurrences don't you think. and they get my point across. timing is everything if you want to make money. last i looked that is a very worthwhile objective, not trumped by the demand that you go into an index fund. timing or how to better time investments can be taught and that's what i do. it is my mission in life to make you a better investor or a better client if you use a broker which i like instead of being self-directed. i'm going to teach you to do a better job of timing your moves by avoiding some common mistakes and absorbing crucial lessons i picked up in over three decades of trading. let's get to it. one of the reasons timing the market was so tough is that the moments of greatest opportunity where you should be putting money to work investing sideline

cash, from bonds to stocks are the moments of the greatest terror and angst. they tend to be the exact hours or minutes when everyone is telling you to get out, sell sell sell and all of your instincts are screaming you should panic. i understand the concern. it's a lot easier to say i would sell something here when everything is going down than to say no, wait a second. it's time to buy. no one is going to remember you as a hero if the market reverses and goes back up. you will always be reveiled as a goat if it keeps going down nowadays when twitter and youtube can keep anything live in context or out of it, and you can say sell and the market go up the next day, people don't realize that the rest of the sentence was if you're up and got a triple and i think maybe you should go. more important the most frightening moments the days freaking out because the markets are being clobbered. those days are almost never the right time to sell. there will come a time when the market lifts a bit if you want

to dumb stocks. why not try this strategy for a change. i'm serious. just reverse all your thinking. pick something to buy. not sell. do it small. you don't have to be heroic. you also don't have to join the herd breaking down the doors on the way out. nobody made a dime panicking. it is an awful strategy. i know i don't believe it's one. let me put it another way for you. because you don't like a market that doesn't necessarily mean it's the right move to sell. only once in my 30 plus year career was it right to blow out of your stock trades while others were panicking. every other time selling was wrong and buying right. the sell-off because of the fiscal cliff, the sequester, the sequestration scare and u.s. bond downgrade, debt ceiling debacle, japanese nuclear crisis, the market got clobbered then, the flash krashgs 1987 crash, 9/11 for that matter, panic selling has not been the smart thing to do. in all those cases at these

times of maximum fear what worked was prudent buying. many cases it worked big. the only time panic made sense was to sell in 2008 because the financial institution was indeed on the brink of the collapse. that's when you had to take it off the table. that was the systemic crisis people, not a temporary crisis. panic even in the midst of a nightmare sell-off made sense which is why i told you to sell. then went on the "today" show on october 6th of 2008. >> what is your advice today? >> whatever money you may need for the next five years, please, take it out of the stock market. right now. >> yep. the whole system was in jeopardy, only time since the great depression, buying actually hurt you. stocks kept falling and falling. good call. so you never got a chance to unload the merchandise you bought on the dip at a higher price. that is the only time. that one instance. just once in 80s years. i don't expect that to repeat itself. this rule, in october of 2008 i was criticized for what i said

on the "today" show telling people to sell into a sell-off. i was chided for yelling fire in a crowded theater. my response was if the theater was truly burning you needed to get some out, even as you knows others might not be able to make it. in 2008, in 2008 only, quick almost immediate selling was the right move. the theater was on fire. the market was headed down huge. almost at a straight line. it was smart to sell even when we were already several hundred points down. because basically the market just kept falling. getting back in was tough but you managed to side step the decline of 35% if you took action when i told you to get out. it was better to keep my september 2008 sell call, but that was done in a less dire moment. they are among the proudest hours i have had in my many years of "mad money," yet they have forgotten in the vast of day-to-day investing and i get that. maybe that's good. that kind of selling is not an appropriate take away unless the system is in jeopardy and as i tick down all those other proximate causes for big sell-offs you can tell the -- they ended up being moments to

buy. not sell. you have every other time. every other crash or correction or sell-off you could afford to wait or should have bought into the panic. how about the timing within the sell-off? i often find on day one of a vicious decline, hold your horses please. stand pat. you have to be patient. even recognize patience doesn't come easy when the market is getting eviscerated. wait it out until we decline 5 to 7% from the highs. 5 to 7%. that's when i like to start doing some buying. that's been my rule of thumb and historically been a prudent place to begin your purchases. what happens if you go the other way after a kind of decline? believe me, i have seen what happens when you proclaim sell sell sell and panic and get it wrong. long-term capital huge reckless hedge fund was collapsing in 1998 threatening to bring down several other institutions. i wrote a column for the on-line publication i had funded called the street.com titled "get out now." i always remember the headline, get out now. it was advising people to sell

into an intraday downturn the fed didn't understand the gravity of the moment and ignoring crisis that could spin out of control. within one hour of that piece's posting the fed held an emergency meeting to cut rates and the market rallied back in my face. it was a terrible moment for my old hedge fund. magnified by the time stamped article, a moment i wrote about in confessions of a street at dict, an exercise in the perils of panicking. 1998 i was dead wrong. people still pen about that chapter of jim cramer on twitter and the lessons learned. if you took the other side of my panic you made fortunes. pointing that out to say i'm not an idiot but it happens. it happens. i reversed my stance not that long after, the same day, but it was too late and had to pay up huge for the stocks i sold in the morning and feel the scrambled eggs on my face from that call. do not sell in the midst of an awful decline no matter how much you might want to. that's bad timing. keep your head. you will get a better moment to

sell and in all my years of selling panic has only been right to a huge sell-off once, systemic problems. every other time the right move to buy into weakness. remember that and my story about getting it wrong the next time we get a horrible pullback, believe me, it will not be systemic like it was in 2008. now go to paul in california. please. >> yes, jim. this is paul from rancho santa margarita, california. first of all i want to thank you very much for everything -- all your help and research. >> thank you. >> caller: you've really helped my family. >> thank you. >> caller: i appreciate it. you always say to use limit orders. >> right. >> caller: but if i've been watching a stock and tracking it, constantly and it finally hits the buy price that i want, wouldn't it be smart for me to use the market order if i feel it's gone down or do you think i should wait for a limit order price. >> >> you have to wait. let me tell you why. because some of the big declines we've had, have been so fast and

breathtaking that you'll get a report that you bought a stock at 20 and the stock will be at 15. because the machines went amuck. until the government rules that all this financial engineering that cause some of these quick downturns has to be banned i can't count against that kind of order. mark in florida, please. mark? >> caller: hey, jim. thank you. boo-yah to you. thank you to you and your crew. they're fantastic. >> they are good. they are good. >> caller: jim, my call today is on options. i hear often time on cnbc and sometimes even on your show that options for a particular stock are expensive right now or reasonably priced right now. how would i know when options are reasonably priced or expensive? i'm a subscriber and read your books but i don't remember this being discussed? >> that's true. i addressed it in "real money" and "getting back even" but it's a great question.

thank you for describing that. what i like to do is look at how many points over -- you take the option, you look at what's known as the premium, how much it is over if you just backed out the price of the stock, and if it's very high and the expiration of the put or the call is happening in a very near shorted time you know it's expensive. measure the premium, the premium, can be too big, and that's when you have to avoid it. now you've heard it before, timing is everything. and it's especially true when it comes to investing. in the face of a sell-off, please no panic. time is on your side. take a breath. relax. keep your head. and maybe buy. time is money. i got a lot more coming up. stay with us. don't miss a second of "mad money." follow @jimcramer on twitter, have a question, tweet cramer, #madtweets. send jim an e-mail to

madmoney @cnbc.com. give us a call at 1-800-743-cnbc. miss something in head to madmoney.cnbc.com. i take prilosec otc each morning for my frequent heartburn. because it gives me zero heartburn... annc: prilosec otc the number one doctor recommend frequent heartburn medicine for nine straight years. one pill each morning 24 hours zero heartburn.

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i'm jim cramer, welcome to

my world. >> one man, one mission. >> i want to make you money. >> eight years. >> 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. millions of your e-mails and tweets. "mad money" thanks cramerica for being with us over 2,000 episodes. when to buy, when to sell, all about time. that's right. you can have the best stock picks of the world and won't mean a thing if you didn't have a good sense of timing. i'm a believer in the notion that ordinary people, nonprofessionals, can manage their money just as well as the pro, sometimes better.

that's why i come out every night to coach and teach. despite what you may have heard from the naysayers it's possible for regular persons, somebody with no wall street background at all to beat the market and outperform the benchmarks, like the s&p 500, as long as you know what you're doing, as long as you think like a disciplined investor rather than a gambler. if you're willing to spend that time, as long as you're devoted and inclined to learn about stocks, my experience is that you will most likely beat many money managers and you'll be able to take taxable gains and losses when they suit you not the manager, a very important issue considering the importance of taxes and long-term performance. right. a huge part of knowing what you're doing is -- having decent timing or at least knowing enough to make -- not to make boneheaded mistakes when to buy and sell. that's why tonight i'm going over some of the most frequent errors investors make so i can steer you on the right tack. easy to not make mistakes when everything is going your way.

when everything looks like it's falling apart when the pressure is on, that's when people tend to screw up. for example, let's say your portfolio gets caught with its pants down, many of you are caught owning too much stock into a hideous sell-off versus how much cash you have, something the pros call having too much exposure, i have he been there. it's horrible. the worst part is not knowing what to do, whether you should blow out of your stocks or hold tight. now i just explained why selling [ inaudible ] is almost always wrong. what else is dangerous, the pro pensty to take drasting action at once. when it seems like everything is going wrong the economy and market is getting worse, nothing good can happen, here's my advice, take a breath. hold it. don't do anything crazy. i would say meditate or do yoga but i am one of the down dogs that rum mates about how bad things are. instead of concentrating on my breathing. what's crazy. selling everything is crazy. even if you own too much stock

and you want to lighten up in the midst of a bearish moment you have to resist the urge to sell everything. that's bad timing. i always tell you never to buy or sell all at once. pure arrogance to assume you can time your trades that well. my rule is you should buy and sell by increments. if the stock you buy goes down, buy more at a lower price, goes higher, sell more to take advantage of the higher price rather than feeling like a chump. that rule applies to more than just individual stocks and plus your portfolio no matter how bad it looks you should never sell everything at once. what's the right move? here's your crisis playbook for dealing with an awful moment in the market. moments where the fundamentals is deteriorating and you want to get out. first you can't sell everything but have to sell something. not everything you own is equally good. here's my rubic for what can be sold during a nasty pullback. big profits in the stock, don't give them back. that's when you have to remember this sound. you have something where the fupdss have changed, the story is going against it, blow out of that stock, people.

something that you think is going lower, short term, you know what, sell sell sell, sell a little please. just do it. that's fine. you can always buy it back lower or when the risk/reward is in your favor. do not sell it all. that is just plain stupid. don't ever blow out of everything. don't give up on stocks entirely and hide in treasury bonds or cds with puny yields. instead, when things look dire get ready to redeploy your capital in the stocks selling off even though they don't deserve to. use the money to buy something you like. this is why this is why not in the heat of battle but in the calm of the end of the week i rate my stocks for my charitable trust. action orders.com follow along from one to four, ones the best fours the worst. i swear this rating system will help you. i pioneered it and it is on display in every bulletin we send out all day, we send out a ton of bulletins. the best way to handle a sell-off. a proven game plan i have used for three decades an has never steered me wrong. the ones, they are the top flight stocks the names you begin to buy more of in moments

of pure chaos. you have been ready. done the work. you know they are right for the occasion. the fours are the expendables you sell when things turn awful. you just don't get emotionally attached. you dump them. the threes, stocks you wish you were higher before you sell them. they can be sacrificed if you need to raise cash. don't wait for them to get back to even if you can own something else likely to go up a lot more a lot quicker during the same period of time. the twos those are the ones like to wait for a 5 to 10% pullback before i pull the trigger. why not just sell it when it seems like the market is turning against you? why not. american stores. don't know it, don't remember it. the old acme my favorite supermarket, where my mom was friendly with the checkers. i owned them in the 1990s, always betting one day it will be taken over, it was worth so much more than it was selling for, time would be on my side. then one day we got a really brutal sell-off and couldn't

stand the pain. you know that feeling. i got goldman sachs picked them up and said buy my book. meaning that they simply took down -- took me out of my positions. what they did, they stopped me down 2% from where they were. they agreed i would get the proceeds only down 2%, no more and you could do that then. you could offer everything you had and they would buy it on the line. i was only selling $400 million at the time. including that package was american stores. so ugly i didn't want to wait, didn't want to own anything, including a stock i owned forever and a big institutional trader i was can get a huge firm like goldman sachs to buy your portfolio at a discount. knowing that if you just sold them you could really crush your own stocks, and do more damage than goldman or any of the big firms could do going at it piecemeal. it was what i thought a prudent decision. two weeks later, two weeks later, after i sold all my positions albertsons bought american stores. it was a huge premium. gigantic. i couldn't believe it. i had held on to american stores

for alls these years, like a chump i sold it because i couldn't take the pain. if i added to the position rather than throwing it out i could have made my year. i always remember that moment because it cause med to rethink how i felt about pulling out of my portfolio when stocks are going lower. that goldman sachs gave me to take me out of my stocks down 2%, you know what, the stock market bottomed down 2%. i didn't have the guts to go back in because i was adamant we were going down 4 to 5%. what's the moral? what did i do wrong? selling something wasn't a bad idea. the pain sometimes becomes too unbearable. i know that when you're all-in, you have little to no cash on the sidelines. selling everything, massive mistake. always good to use a top notch s&p 500 futures led sell-off to pick at, not load up on, but pick at your ones, your favorite stocks after the sell-off ends, and they always end at some point, not all of your stocks will bottom at the same time but if you rank them, you probably won't care when they bottom because the best ones will get put on sale along with all the

other merchandise, good with the bad, and the draws for that matter. selling everything, getting out all at the same time that doesn't leave room for the possibility that things can and they might get better and get better quickly. it doesn't leave room for the next american stores. it takes you out of some of the best stocks out there you've been waiting on and been patient, it's awful timing. here's the bottom line. time warpses our feelings about stocks. not every big decline is the end of the world. never sell everything at once. go to the supermarket of stocks find out what you want to buy on weakness and remember i checked out of the most important stock i liked in my zeal to get into that ten items or less line. and because of my hayes, my overwilling bearishness i missed the huge american store buyout and the stock market rally that left after i left the store. do not repeat my mistake. after the break i'll try to save you more money. >> keep up with cramer all day long, follow @jimcramer on twitter and tweet your

questions, #madtweets. the huge american store buyout in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

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to go the distance with you. go long. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. the apologies to the great carol king it's never too late. not what you own anyway. knowing what you own is more important. we live in a world where too many never met a disaster they didn't like. they're all equal these days.

a negative story you can bet the press will go into disaster financial mode. hurricane disaster like. day after day. the more sensationalist and frightening unfortunately the better. everyone's kind of addicted to it. it's a fact of life. every geopolitical issue, weather issue, every story of crime and punishment gets whipped into a frenzy 24 hours and fans the flames of panic. everything is painted to trade as a huge and equal catastrophe, treated like the end of the world like apocalypse now. every negative story will be exaggerated to make it seem like it's the end of the world or on the eve of distraction. musscle reference targeted the older demographic older than carol king we have to accept this is part of the change in the way the business media and market work all media entertainment, doesn't matter, sports media, you can't shake -- it's almost like they want to shake you out, shake you out of anything you want to own or might want to buy. at times we seem to be unable to steer ourselves against the

media's gloom machine. our thoughts with pessimism over all outcomes. think about it, the market sold off based on instability of egypt and civil war in libya, cypress, japan, of course the sovereign debt crisis in europe which i think now mercifully is over. what should you do during these types of scares? what's the right way to react? i think these terrific nonsystemic risks meaning the banking system in the u.s. is not about to go under these moments can make terrific buying opportunities in the right stocks, just get it in your head. how? okay. let's figure this out "mad money" style. using the method that i would employ at my hedge fund. that i no longer work at. i'm retired from. whenever events occurred that drove down the stock futures, which would then overwhelm the market, remember chicago futures knocked down new york stocks, first ask yourselves the news is potentially tragic and almost

always is, can't ever make fun of it, potentially dangerous, not something you make light of, potentially terrifying, but what effect does it have on the numbers? we're about the numbers. let me give you an example. 20 years i invested money, there were events that hit the stock market, what i called the bristol-myers, named after the company i thought had the most consistent earnings imaginable. nothing's changed. at the hedge fund we used to have morning meetings at 6:00 a.m., i felt at 6:01 what was the point. get out. might as well go home. much of the opportunity to make money had passed. i dismissed you sent you home if you were a minute late. lucky i didn't throw water bottles or appliances at their backs. i saved that when they lost me mun. i hit the guy. every time we got one of the nasty events, someone would say what will we do now, nuclear plant melted down, what do we do. i was in call your mommy and

scream back dripping with sarcasm and arrogance, what the heck does that have to do with the priced to earnings ratio of bristol-myers. the answer is nothing. so the first thing i always did when i heard or saw one of these scary events was make a list of the equivalent of bristol-myers, the company wouldn't be hurt by the event even if it turned out to be worse than expected. given the 24-hour news cycle blows everything out of proportion, we get a new crisis every other week you need to develop your own list of names. high yielding food stock, okay, think about that pinnacle foods if that comes in again, maybe verizon, another steady eddie company with a big dividend, southerns duke, i don't know, be ready, find something you like and get ready to buy during a market wide sell-off based on some exaggerated crisis that won't hurt the earnings of a verizon or pinnacle, southern, duke, general mills. step two, ask yourself is this the event, really bad for all the earnings out there. for example, when the egyptians were demonstrating in the streets in 2011 and then

demonstrating again, trying to kick out a dictator there were -- there was a moment when even the oil stocks which benefitted from high oil prices, got knocked down with everything else. doesn't that make no sense whatsoever. tremendous buying opportunity if you bought the oils and that's what you had to do. same with the overthrow of the elected but disliked egyptian leader in 2013. egypt gives us a lot of selloffs. it means that when oil comes down as part of a worldwide decline in commodities because of unrest if it's in an area where it threatens the oil price to go higher you have to act. you have to buy. so there are some big scary crisis somewhere in the globe that threatens to knock down the market like sequester, debt ceiling, unrest in brazil, egypt, remember the bristol-myers theory. what does this event have to do with the earnings of my stock before you do selling. maybe you even feel like buying when one of the stocks, one of the areas is actually an opportunity that's being brought down by the particular event.

the bottom line, there will never be any shortage of terrifying events to bring down the market. the next time it happens don't run away because there might be an opportunity for you to make a very, very big profit. vince in maine, vince. >> caller: thank you, professor cramer, for all you do for us. quick question on what makes stocks split and what do we do when they do? >> this is such an interesting question because people always get it wrong. it's up to the ceo and board. there is no rule. some companies go to -- look at berkshire hathaway, 150, 150,000, 100,000. it's up to warren buffet. companies have to decide whether they think it makes their stock more attractive to individuals or does it make it more attractive to hedge funds which they typically don't want. i am in favor of stock splits because many of our viewers don't want to buy stocks in the high dollar amount, even as i know the truth which is if you

take a pencil and snap it in half you don't have two long pencils. it's cosmetic. in this market it's working. patrick in arizona, please. >> caller: hi, jim. >> hi, patrick. >> caller: we have a stock that has had a good run. we of course take some off the table. >> right. >> caller: if it's one of our stocks that we really like long term, what is the plan to get back in when there are no pullbacks? >> well, you know, i got an answer to patrick you're not going to like it. that happens, you missed it. one of the great things about this market is. >> all aboard. >> always another train coming to the station. you missed it. one of the things people don't want to do, anybody, is to say you know what, i missed that one or i blew it. sometimes you got to own it. charitable trust, we can't buy that, tell stephanie we can't buy that one back it moved too far. that's what happens. got away or never. john in new york. >> caller: jim, good evening, this is john from new york.

i have a quick question for you. i own a stock, made some money with it. i'm looking to take my money and put it in something else. is it best to take one stock with that money or two good stocks? >> depends on how much time you have. >> caller: split it. >> depends on how much time you have. one of the things i try to say over and over again if you have no time at all you should be in a mutual fund. there's good managers out there, a lot of good managers that come on cnbc. if you have time, do one stock, if you have a couple hours a week do a whole bunch. if you can't monitor it, buy one stock and look at it as frequently as possible. okay. a good investor knows what she owns period. it's more important than ever in this crazy world, the hyper connected disaster loving world when something terrifying happens i don't want you to be panicked in your portfolio. it could turn out to be. >> buy buy buy. >> a buying opportunity. stay with cramer. [ both ] when we arrived at our hotel in new york,

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and ask an insurance expert about all our benefits today, like our 24/7 support and service, because at liberty mutual insurance, we believe our customers do their best out there in the world, so we do everything we can to be there for them when they need us. plus, you could save hundreds when you switch, up to $423. call... today. liberty mutual insurance -- responsibility. what's your policy? time after time, timing is everything. a stitch in time saves nine. whatever the saying, whatever trick you use, remember this i am teaching you that timing your buys and sells can and should be conand those who say it is

impossible they simply want to keep you in your collective chains. consider me a bolt cutter setting you free. i want to talk to you now about a chain that you need to be unshackled from called the ipo chain. first i like ipos. it's been an amazing period of time. we've had so many great ipos. we do our best to try to analyze them for you on "mad money." but they are not easy to do. often you call and ask me, is xyz ipo a good one, i say how do i know? depends where they bring the deal. wall street gibberish for the price of the offering and amount of shares offered. let's say they're coming public and 50 million shares outstanding when the deal is done. bankers talking about bringing the deal at 20, that values the company, at 20 tlm. the bankers can do a lot of things. don't offer all the stock there is. insiders own boat load, venture capitalists might own a lot. whoever ceded the company will have shares left.

secondly the $20 ipo price they are talking about, that may just be what's called the price talk. meaning what the initial price they are thinking about bringing the company at, not the last price, if demand accelerates you will hear the price move up to maybe 25, 30. obviously that values the company at a much more rich level. i may like the ipo if it's valued at 20 and may not like it at 30, might tell you i like a stock at 20 already trading and think it's a sale at 30. you would accept that with anything other than an ipo. accept it for an ipo please. some stocks get too expensive. the bankers if they want the stock to pop, generate what's known as a hot deal, one that immediately goes to premium after it opens they can hold back stock. xyz has 50 million shares. the bankers an canvassing the buyers through the road shows and getting what's known as indications of interest they might sense the company has 50 million shares, only demand for 10 million shares to be sold at that offering priced at $20 a share. issue 15 million shares the stock will wallow.

opposite is true if they cut back in shares. bankers are experienced. these managers are known can figure out how to make a stock pop and how much they want. simply by cutting back the number of shares they offer. we got demand for ten million shares at 20, subscribe their par lens, offer 5 million shares, one tenth of the shares outstanding and half of the demand. that cutback will generate excitement when people get their allocation or the number of shares they are given versus the numbers they ask for. that's what makes for a hot deal because if the bankers have demand for 10 million shares and they issue 5 million, everyone will be cut back who wants the stock, the deal will be oversubscribed and allocations below what we're hoping for. that people is how hot deals are made. i happen to call these kinds of offerings sliver offerings from the days we brought public the street.com. they did a sliver, sliver of it. a lot of them during the social media craze too. they create a wild pop because

the bankers choose to make the deal hot. reward customers or create excitement for the company stock. they offered a lot more stock than the deal there would be a risk the price of the deal wouldn't hold, go below where they price the deal. nothing is worse than known as a broken deal. one that immediately goes below the offering price. it hurts shareholders who bought and the company. better offer a sliver get people excited, juiced up and six months down the road when that's -- what's known as the lock up expires, hopefully the stock will be well above where the ipo was priced and insiders who choose to sell will get out a big profit. i don't care about the insiders. i care about you. i want you in on sliver deals. any deal where a new company offers less than 10% on the ipo is one i want you in for even if i don't like the company. let's take groupon. on-line social media company. not a huge fan of this company evens a this company has improved its prospects over time with new management who i happen to like very much. i know they can and have done great things for retailers but i've already tired of my daily

groupon mailing, i don't want to go ten miles out of way, save money on slice of pizza, brazilian waxing, but groupon the ipo, let me in, 640 million shares, banker only offered 40 million shares, sliver of an offering assured demand would succeed supply. opened at 28 and then traded 30. company raised $700 million and received a valuation in the bankers and the deal made out. needless to say, they only made out like bandits if you sold. well i mean if you sold, when the selling was good, you made out terrifically and that was the first day of trading. how about the buyers what's known as the aftermarket, price of the stock, once it's actually started trading? if you bought at 28 where it opened didn't have that much room for error, you could have made 2 bucks. after the groupon began a slog down, one impossible to reverse until the company's board saw fit to relieve the air rant ceo, has been pretty good, a buy ever

since. what was the right thing to do? follow steve miller's famous eadic and take the money and run. fly like an eagle. get stock on an offering and ring the register. not buy more and hold on. brokers don't like to encourage what's known as flipping putting in for a hot deal and bang it out for trading. i'm not your broker. i say why not. you do a lot of commission business, fee business, you put in for sliver deal which is designed to pop, why can't you take the pop. where does it say you can't. unshackle yourself. the bottom line, sometimes there's only two decisions to be made, put in for a sliver deal and sell it in the pop. time that sell to the open of the hot deal, please, don't stick around for one red hot minute longer. and never never never buy in the aftermarket. the vast majority of the time buying in the aftermarket on a sliver deal is for suckers. be smart. take the money and run. stick with cramer.

not every stock can be owned forever. i mean period. not. none. there are few stocks you should own all the time. year after year, decade after

decade. the fact is if you don't know what would make you sell a stock, then it's not okay for you to buy that stock. lots of people end up selling at the wrong time because they never anticipated selling at all. they figured that's never going to happen. only thought about what they wanted to buy, didn't have what i call an exit strategy. as you're investing coach i need you to make sure you don't make that same mistake. i need you to develop exit strategies for your stock. how do you time yourselves? many stocks where you need -- when you buy them, you need to understand some day possibly some day soon even you will have to sell. for example, high flying tech stocks, these things are like, you know, they're like they blow at the wind. they can be obsolete immediately. simply not safe to own them unless you recognize they can't be owned forever and eventually you need to ring the register, take your profits when you have them, before they slip away. that's why warren buffet never owns tech stocks, same for smoke stack industrial companies that only make money when the economy

is healthy. you have to sell them eight ways to sunday at the first sign of a slowdown, sorry you do, you can't ride through it. a lot of this comes down to what you own and willing to change your mind. tech stock is not the same as pepsico. sandisk not general mills. my kron not mcdonald's. the first after the tech names, are trading vehicles that can fly and crash. the second after the pepsico, staples, plot along forever. a trading vehicle can make you money and not a lot of time. you have to take that money off the table every now and then. that vehicle i promise will crash. potentially dropping 10, 20, 30, 40, 50% in a matter of days or hours even. altria on the other hand can be owned long term. doesn't mean nothing will go wrong. management can mess up, business can underperform, somebody could legislate tobacco out. we're going to find out about that and sell it. in other words, when it comes to trading vehicles you have to be willing to change your mind.

you have to be ready to sell. tech stocks that are winners when a product cycle kiz strong like smartphones or tablets are losers when the cycle is week. [ inaudible ] like smartphones, they can make you money when times are good. believe it can get you annihilated when business isn't hot. only exception if there's no sixcle no cheerio cycle, hershey bar cycle. we don't talk about people using frosted flakes in the fall and spring no seasonality. that's not the case with most tech stocks. take the dotcom run. it was so fantastic. i got to tell you, you had to catch it. if you bought it any time up until the last two months of the rally you would have made a fortune. the most ever. back then you had to buy all the parts and equipment makers because the dotcom and telco carriers were expanding. they were buying equipment and had the money from the stock market. until the demand fell apart and the buying canceled, keep owning these stocks. if you didn't sell by march of 2000 you were blown out.

had a buy and then sell. i try to teach you you have to change your view when the facts change. @jim cramer i'm criticized that's not the case it is. people that friesed to sell when the story got wiped out. another thing people hate to do, the facts have changed the business has gotten weaker. it is okay to take a loss. you don't make money on every trade or investment. all you want to do is live to play again. often these shooting star tech stocks will get hammered after the first signs things are deteriorating. they can go longer. use any intraday, you know, strength to lighten up. come on. your first loss is your best loss like i tell you in real money, sane investing, wep which i was reading the other day, boy is that pertinent to what i'm talking about. this is where discipline makes a difference. i am tireless in telling you not to be greedy. something that saying you have to take something off the table and play with the house's money. i tell you that it doesn't matter where a stock has been,

only where it's going and don't own a high flying tech stock that lost its momentum because it's going down. when that happens hey listen sorry, just got to sell the darn thing. if you really love it buy it back lower. when business is improving not deteriorating. the bottom line, don't treat risky trading vehicles like shooting star tech stocks as though staples to be owned for ages. handle them with care. third rail names at a certain point. take caution and you can do very well for yourself. take profits on the way out and get out on the way down. you don't have to call the top to make money in these names. be willing to jump ship when the stock has peaked and business and you are ready to head down if you don't exit. stay with cramer.

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call... and ask an insurance expert about all our benefits today, like our 24/7 support and service, because at liberty mutual insurance, we believe our customers do their best out there in the world, so we do everything we can to be there for them when they need us. plus, you could save hundreds when you switch, up to $423. call... today. liberty mutual insurance -- responsibility. what's your policy?

how to get to some of these tweets you've been sending me. here we go. our first tweet from cp putin, says i'm trying to buy a small regional bank want to use a limited order tips to get in on low volume stocks. don't do them unless buying like ten shares or 100 shares. what i talked about with the exit strategy, okay. it's really difficult to get out of those. with 100 shares yes, you can buy and put a limit order. nothing bigger if there's no real market. it's not for you. and now to blood diamond, who writes, when you are not on squawk on the street, "mad money" or twitter life isn't the same. i am addicted to jim cramer. i'm hash tag often needing a

vacation and don't take them. see me at the shore and that's how i come back and more recharged. hash tag. charnado. our next tweet comes from an early bird show. this one says, following can you talk about the preferred stock market. preferreds are another form of capital, corporate bonds, preferreds, stocks, i like the preferreds in getting back to even i talk about bank preferreds and that's the best place, the best source i have ever -- best thing i revenue. and a tweet from @matthew feldner, how much do you sleep average a night what keeps you up? >> okay. unfortunately i have a sleep disorder and i usually have at least two or three nights a month that i don't go to sleep and most nights goy to bed between 11:30 and 12 and get up at 3:30 and 4:00. i know. we have @photo proof, last night was three hours. who asked, #charitable jim would you explain how a contrarian

will use williams r. to buy stock on a pullback. thanks for all you do. i am refer you to bob langstuff in real money.com he knows it better than anyone. i like to say, stick with cramer. of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer.

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charnado. i promise to try to find it for you here on "mad money." . >> tonight on the profit... >> marcus, nice to meet you. >> i go inside jacob maarse, a high-end florist and gift shop in pasadena, california that hasn't earned a profit since its founder died in 2010. how much money will this business lose this year? >> close to 200,000. >> sloppy business practices... do you have an inventory system? >> no. >> together with lax management has driven down sales and piled up debt. so are we going the right way? >> i believe so. >> we need to know where we're going. if they don't make changes, this 47-year-old family business will be forced to close its doors. this business is a total mess. i'm fighting against time to light a fire under these people... this is the thing that will help us go from the red to the black in one month. before this business crumbles and dozens of employees are out on the street. yo