thinker ingersoll rand, they put a $67 price target on it. i think it's interesting right here. >> thanks so much for watching. see you back here tomorrow. "mad money" starts right now. meanwhile, "mad money with jim cramer" starts now. my mission is simple. to make you money. i'm here to level the playing field for all investors. there is a bull market somewhere and i promise to help you find it. i'm cramer. welcome to "mad money." other people want to make friends, i'm just trying to make you money. my job is not just to entertain but teach and coach. call me at 1-800-743-cnbc. every time we thought there can't be any more scandals as

bad as that one, wall street comes up with a new one. and it can, if you're not protected, make you feel like it's not worth it to be involved in our beloved stock market. i can't tell you how many days i have come out here where there is bad days about insider training or flash crashes and say to myself how can people take this anymore? the abuse. frankly, there is no other choice. you simply can't make enough money in any other asset class. particularly bonds where the rates are so, so lo to be able to retire or take that trip you want. pay for tuition. bonds can't pay that tuition. you have to own stocks. you know what you need? you need a survival handle. that's what i'm giving you tonight. first, scandal is not new to wall street, there has been scandals since the 1980s. the '87 market crash and i

traded through that. it didn't have anything to do with the economy, it looked like the economy would get weak because of the crash and it didn't, it was strong. that said we seem to have really ratcheted up the unfairness. i don't mean just the economic fall out. who can forget the long awaited facebook fiasco. a chance to bring people back to the stock market that had fled. a company with a sterling reputation, can is quarky. it wasn't like they needed to be greedy. it would have been unbelievable to price the deal so everyone won. no, they offering 21 million shares at $38 a piece. they knew it was the top end of

the range especially given last minute rumors of it being challenged from desk top to mobile. and it was. facebook came public, could not get the stock open and when it did, it feel apart. total chaos, confusion, and overevaluation. a classic opportunity to bring people back to the stock market was botched. we had still one more event that drove people to the sidelines, just like the dot com bomb that i lived through. how about that flash crash where the market briefly lost $10 trillion because of a computer glitch. who can trust that mechanism with their savings?

it seemed like smoke and mirrors that day. how about the latest round of huge insider trading scandals. and that raja gupta, he got 11 years in the clamber. i'm not even talking about the madoff scandal. many people knew those returns were too outrageous to be real, including people who whistle blew to the fcc to no avail. were all of these little busts part of fcc capital? how do you protect yourself from this? first, there will always be fraudulence and if you're lucky and you're able to avoid it, great. but you never know when it will strike. i can't protect you from an economic class. the great credit crunch, even diversification which we call the only free lunch on wall

street cause you to lose less. the consolation is maybe the great destruction of wealth. nothing can protect you if you own stocks. i can offer you simple rules tonight that will let you have more confidence in the stock market even if you think portions of it are rigged or beyond your comprehension. know what you own. i know it seems simple, but how does this protect you from the way that machines can abuse you, if you know what stock you own, you will be able to take advantage of that. the mechanical lunacy and buy more at lower prices than you ever thought you would get. limit orders, not market orders. second, if you know what you own you can handle a stock that plummets. take the facebook, it's a pretty good company. maybe you can buy it on the way down and get a better average. third if you know that you own what you own, who cares about

guys like the raj or any of these other guys nabbed by the u.s. attorney? what does it mean? if you know you are criminal in your own destiny. how do you know. a lot of people think they know what they own. it is a real issue. here is my answer. it's a practical way to look at it. first say you stop me coming out of the stock exchange one day at wall street. this happens five or six times every day. say you shout at me and say hey, cramer, what do you think of that xyz corp. what do you think? tell me what it does and why you bought it. do you know a vast majority of the time people don't know either answer. they got a tip, saw a chart, got

information. they don't know how it makes it's money. they don't know if it pays a divide dividend. they don't know if it pays or loses money. i have seen this all of the time, too. people say should i buy more, should i cut my losses, i say why did you buy it in the first place. if you don't know, of course you should sell. ask yourself the same questions that i put to the perfect strangers every day. can you answer them? do you know them? if not you should not be investing in that stock until you do. there is always good index and mutual funds. first, get some knowledge, please. know what you own. can you describe it to me? can you tell me what is does and why you bought it? give me a three sentence pitch about why it's good. if you can't, don't bother me and don't bother buying. here is a promise and a prediction, you're going to lose yourself big time money. start with some questions.

let's go to scott in colorado, scott? >> caller: hey, jim. i have a question about price targets, when they set a target price how does that fit in my planning for evaluating stocks and when does that price target expect to be filled by the analyst? >> one of the reasons i'm neutral on price targets is these analysts, as the stock goes down, they keep making their price targets lower, and so it really is not all that valuable. what i find valuable is what they think the stock will earn. and then we try to apply a multiple to it. the key thing is the earrings estimates in the future. that's why stocks trade where they do. profits, and then we can figure it out on a case by case basis. steven in california, steven? >> caller: yes, jim, booyah to you. >> booyah back.

>> caller: i bought a stock that had a reverse stock split. so when a company does a reverse stock split are they trying to make it more interesting for other companies or are they just trying to save money? >> no, steven, it's a great question. they're usually trying to save embarra embarrassment. citi group did this. so it's a way to be able to gussy it up a little bit. it has nothing to do with the fundamentals of the company. it makes a stock more investable to institutions whether you think it should or not. everyone needs the stock market and a survival good. if you know what you own, and you can explain it to me, then you can buy more if it goes down. "mad money" will be right back.

>> don't miss a second of "mad money." send jim an e-mail to madmoney@cnbc.com. or give us a call. miss something? go to madmoney.cnbc.com. tag: sooner or later, everyone needs a helping hand,

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welcome back. i'm giving you your g.e.d. in trading during tough markets.

your ba ins that are going down. the market plunges for 1,000 points for no reason. if you listen and you listen well, maybe you get your doctorate in making money. we may not be able to control what the market throws our way, but we can control the house of pain. how we deal with it. we can control whether we're prepared for the pain, so that we're positioned so we don't lose more money than we should because we have taken proper precautions. let's talk about risks that come with owning stocks that you need to watch out for. right now i'm talking about how you can deal with the risks that come from being human. there are many of them. if you're not careful, you could do more damage to your portfolio

than any external force. something to try to make your portfolio safe from the next selloff. you know i don't think it is, but do i not quibble with those that think it is. you don't want to make it any harder on yourself. immunize yourself against big losses. each stock requires time and home work. you have to be able to explain it to me what it does and why you bought it. never ever buy stocks on margin. do not buyer money from your broker to purchase stocks. it's okay for you to take out a mortgage in that case but not

stocks. it's not a home, it's a piece of paper. that piece of paper can go down in value and threaten your nest egg. the practice is dangerous and the devil's work. by all margin it seems great for a small amount of money going a long way. it's also a great way to wipe yourself out. once you get too deep in the red, the margin calls come in and you have to sell your whole position to cover what you owe. it's simply not safe. nobody needs that level. starts off great, ends very badly. lesson number three, and this is also something i hit you over the head with all of the time. never use market orders. when you pick up the phone all call your broker and tell them to buy or sell stock but you don't name a price, that's a market order. what you're doing is giving that broker permission to fill that

order at any old price. so you go to the super market, i'll buy this head of lettuce at any price. would you do that? i don't think -- no, you should never do that. and you should never do it with stocks, either. market orders is how people ended up buying proctor and gamble. the machines took over and we tumbled nearly 1,000 points. the flash crash. in the time it took me to walk out on the set and sit there for a few minutes. all of the nasty stories, you probably recognize a broker as a great person. he is not trying to get you the best possible price for your trades. he works for a brokerage house. i don't want your commission. have i ever asked for any fees?

no. that's why you have to trust me. instead of placing market orders, i want to help you limit orders. especially on days when the action goes haywire. you just have to tell your broker your highest or lowest price that you're willing to accept. you have to protect yourself. always use limit orders, not market orders. never forget the lesson of that awful bogus down 1,000 point day. it was not bogus for those who used market orders. those trades happened and they got hosed. i want you to make money on those down days. buy stocks at your price. here is the bottom line. if you don't buy stocks on margin, and you use limit orders instead of market orders, you will get hurt less than others who don't know better. these are the steps to making

sure you survival a horrible market. rather than panicking and getting blown out. after the break i will try to make you more money.

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today we're going back to school. cramers stock market survival school it will mr. is worries that the system is not working correctly. we know it can happen even in bull markets. it is more important than ever to know how to protect yourself. stoc stocks go down, there is nothing you can do about it. there are times they go down harder than others. at times they go down relentlessly. that is why i have gone over three important lessons tonight. always know what you own, never buy on margin, never use market orders, limit orders to buy and sell stocks. they're basic because they're critically important, they're essential to building and

maintaining your wealth. i have former lessons to help fight the pain. first, this is part of the need to know what you own. you cannot own too many stocks. knowing what you own takes time. it takes home work. i like to do the maximum one hour per week. even if you can give it a 15 minute overview, much less than that and you might as well be gambling. if you don't know what you own, you don't know if you should sell, cut your losses, the only way to feel confident is by doing the work and understanding the companies in your portfolio. that means it's not safe for any to own more than ten stocks at one. i did various times, i have done 20 or 30. soo as soon as you get above ten, you're running up your own mutual fund. there is no good run to own 30

sto stocks when 30 will do. it's like having a part-time job in addition to what you have. ten is just right. more than ten and you will skimp on the home work. especially when they go down a lot. in a bear market it's horrendous to have that many. don't have too many low dollar sockets. i accept low dollar and single digits. they make it interesting and allow you to keep your head in the game. it's still safe to have a speculative stock in your portfolio, the emphasis there is on the singular, singular speculative stock. they should not make up your whole portfolio. they're risky and a bad market risk is what you want more of.

no ceo every say boy, i want my stock trading in the single digits. many companies like to do ten for one reverse splits. it may seem like under $10 names have less downside, but that is a trick of the eye. single digit stocks can go to zero and wipe out your investment. own more than one, and many of you do, you may be gambling. next lesson and i beat this over your head every wednesday. it's so critical. you have to hear it again. you must be diversified. it costs you nothing and it saves money. that's what i tell you in "real money." no matter how many times i say it, i know that many of you keep too many of your stocks in the same sector. i keep getting them.

why should you not put all of your money in one hot sector? why do you have to spread it around? because the biggest risk out there is sector risk. just ask the people who doubled down on tech stocks in 2000 and lost it all. some big bad event can happen, one that can really damage an entire sector. only some of your stocks will go down if you're diversified. maybe, just maybe others will go up. same with the bank stocks in the 2008 and 2009. people owned banks and they were hot. housing stocks were hot. finally when the market is getting killed, it's important to have enough dividend paying stocks. especially ahy. accidentally high yields. most people don't realize dividends, they think they're boring. you know what? like i told you earlier going back to 1926 -- you're giving up

nearly half of the gains you can expect over time to make from stocks. and all of the reasons that make dividend stocks worth owning are becoming even more compelling in a down market. that's when they really, really give you a cushion. as their share prices go lower, their yields go higher. other investors don't own them yet and give you a better return for owning the darn things. i can't emphasize enough how important that is. in a horrible market, there are so few stocks you can feel confident buying. stocks that used to have small yields but because their share prices have gone down, their yields have become notoriously big. and they're one of the few groups you can feel comfortable with picking away at. they work better than any other stock during the financial crisis. the down went down to 6500 and

they still work when the market gives you these dividend bargains. by the way the big dividends, they are par begans. mark in new jersey. >> caller: yes, booyah, jim. >> booyah, mark. >> caller: do they have to public and how many days until you can get it? >> all of the finance sites have it, i care about the price you buy the stock at. if you don't have the dive dent, it's cheaper without it, these are just all -- they're not something you should worry about. you should worry about buying high quality stocks. the dividend stock advisor which is a fantastic newsletter explains all of this and it is a great place to look. let's go to louis in california. >> caller: good afternoon, dr.

cramer. i have a question about diversification and risk. i have watched for several years and i'm now newly retired. i have eight positions, i followed your advice and brought a company. i leave my capital for the remaining shares of the position. so now i have four stock that's are 60% to 100% owned with houses money and that's a profitable booyah. >> that is so perfect. you're totally game playing, can i help you? >> yes, the other four stocks at risk that i have are disverse if ied and balanced and most have some profit. some of them overlap the other stocks owned with house's money. which is more important? diversification and balance of the whole portfolio?

or diversification of those shares still owned by my capital? >> you know what, you know what i will do. this is the first time i have ever had this question. if you're playing with the house's money, i'm going to bless a lack in diversification, but you can't because you already won. how about josh in louisiana. >> caller: booyah, jim. >> what's up? >>. >> caller: i wonder how the futures market could judge how the market will do throughout the day. >> i hate it, i think that people who use it are lazy, they look at how europe or asia was. forget about it we trade stocks on futures. that's quite simple. you have more tools for survival now. we don't own too many stocks, right? we limit the number of speculative stocks we have because they trade together. we know that diversification is free, and we know to focus on

high yielders particularly in times of trouble to reduce your risk. stay with cramer.

part of cramers stock market survival school, things you can do to minimize your downside. the fiscal cliff goes, reading the original sequester scares -- i want to go a step further. many consider it to be frothy. you need to understand what the risks are, you need to be familiar when w what might cause the next selloff. what is causing your stocks to

get hammered. when the market corrects, you need to know why. you need to know what is really hurting your stocks. we like to think that when a stock goes up or down it's because of the underlying company. companies that do poorly get punished, quaint again. that is ordinarily how things used to work. in a vicious decline, the connection between a company and it's stock can be gossamer. you will see the stocks of good companies be taken downright with the bad ones even when they report good news. that can drive investors insane, it can drive you batty. if it's a blowout corner, you're thinking what can make anything go higher? is there any point of distinguishing the good from the bad? why bother doing the homework? there is a reason because we will come out of the selloff and

the fundamentals will start matters. in the interim it's crucial that you know why this is happening, and tough, quick percentage still, you will see them trading in lock step or going lower. some of that is pure panic. there is also structural reasons why this happens. you need to know them. hedge funds have turned them into an asset class -- commoditizing them. how have they done this? for many of the big institutions, money managers are too small to handle the amounts of money they're dealing with so they turn to the big etfs that allow big bets to be made in second. these hedge funds will just sell the futures.

they'll just sell the futures, bang them down, they'll sell the etfs. here most managers act like herd animals. it causes them to blow out of entire sectors at the same time. they wreak total havoc. one of the things that can cause a stock to go down has nothing to do with the underlying company. these risks have nothing to do with earnings or the fundamentals of the company at all. especialfully a pessimistic infeuds bear market or an incredibly quick decline, what kind of risk am i talking about?

say we're in a prolonged down market. then you have to worry about the ability of short sellers to create fear and panic. that means the shorts can push down stocks relentlessly with fire power. this is not new. it was not always like this. we used to have a securities and exchange commission that stopped this sort of thing. it helped you. helped the little guy. and then the bush era came along. the fcc lessenned their commitment to the individual and worried about ideology. it was created in the after math of the great crash. it was averting another disaster. they banged down stocks endlessly.

they had to wait for someone being willing to pay more and uptick before they could sell a stock short. for 79 year it's worked. then they got old fashioned. do you think that's a coincidence. do you think it's a coincidence that they got rid of the uptick rule and we had the great depression in stocks? that kind of relentless unstoppable short selling was instrumental. we have seen the same thing with the bonds and troubled european companies. we have seen it in stocks in our market because of deficit funding or debt ceiling issues. when things are good we forget about the aggressive short selling without limits. it's not fair. i hate it. short sellers are not the only risk. to make matters worse, we have the etfs of mass destruction.

they give you two or three times the short selling of the bang for your buck. they exist for day traders. that's not the point for our stock market, is it? they rebalance every day. take the skf, the ultra short financials pro shares, it lets them short the financial sector stocks with 100% leverage. you think it would have made people money in the final crisis, right? wouldn't this be the instrument of choice? wrong. the skf lost you money. one of the worst years in bank stock history and that's what happened? how is this possible? these super leverages etfs attract day today changes. so, here is an interesting issue, if etfs have no value,

what's the point in having them. it's hard for me to get around manipulating the market with massive fire power at once. they no longer seem interesting in preblgiotecting you. stocks go down for many reason that's have nothing to do with the companies or their profits. the massive selling fire of the etfs of mass destruction. stay with cramer. she's still the one for you.

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i have been teaching how to survive rough corrections to a bull market. i warned you about the powerful forces that money managers use to push the stock around. things that cause the performance of stocks to become disconnected from the performance of the under lying companies. but there is one more risk you need to know about if you want to invest in a dangerous market or one that suddenly turns like

that. the life guard is off duty. you better remember there is no one out there making sure the water is safe. the fcc that should be leveling the playing field, they don't think it's their job anymore, at least that's my opinion. these high frequency guys make about 80% of trading. this is the market you're dealing with. we need an fcc that protects the unsophisticated. we have one that's been captured by the exchanges and abets the most sophisticated traders at the expense of you. this is no longer the fcc of 1993 to 2001. they want today level the playing field and make the market safe for a individual

investor. he knew the big boys didn't news protection. they got all kinds of money. but the wreckless affair, i think the obama administration has not done much. all of the changes that made the market faster and allow them to beat each other for quick tiny gains, they invade the marginals, they have etc selling and buying power. it protected us from endless short selling. the fcc approved or enacted all of these things that made the market more dangerous and difficult when things get bad and will do so again when we get a quick, sharp decline. if you expect the fcc so have your back, think again. if you think they have interest in maintaining the legitimacy of

our stock markets, not so much. they generate maybe a fraction of a penny of profits. they were nonprofitized markets. now the for profit companies and their goal was to make money. nothing wrong with that. we're in a very different investing world and the fcc doesn't seem to have noticed. until we have someone that says let's look at this for the iras, for how bad it is or what it can and cannot do, you should not be surprised by any kind of outrage. this means that you have to protect yourself. yourself from the madeooff's of the world. the fcc is not equipped to find or spot these people.

maybe they're in bed with the wrong people. when you give your money to the money manager, know where he keeps is his master accountant. don't give money to a money manager where he puts it to work in something that doesn't have an easily accessible price. you never want to be nut that mortgage backed junk. if you can't find a priece on yahoo or cnbc.com, i don't want you to give them money. the technology vastly outpaced humans for fire power, stocks trade like commodities and moving them makes no sense. these are now the normal. we don't have to like it, but we better get used to it. stay with cramer.

i said it before. i have the smartest viewers around. let's hear from you our first tweet is from @allenpal6.

we know flash crashes are no longer isolated events. it went to 40. you told is at 40 with the market order. they can give you whatever price they want. if you put on a limit order and sell at $59, boom, you're out. you can buy it back at $30. it's about flash crashes. wild markets and taming them. our next tweet is fantastic. @jimcramer called me out for yawning, have not yawned since. i said just go home, take a nap. i also prove our staff's voracious hunting through the archives, nobody does it better. >> no more yawning, man, i used

to fire people for yawning. >> someone on the staff yawns on mad money, i say go get me a soda or diet coke or something. i think i will. here is another -- i'm not kidding. it means sighing is even worse. here is another tweet that says jim, does the volatility -- it's about shares of companies, don't complicate it. own stocks for heaven's sake. next tweet says let me get this right, on wall street roll up the sleeves when cooking and cleaning get them down. you know what i like to dress up. that happened to be helen hailey's day off.

it was mother's day, someone has to take up the slack on mother's day. it might as well be cramer. my eggs are good. let's go to the next tweet. i have a year left of college, what would you remit to for the senior year before hitting the books hard? have the time of your life. people think college is work. that is the best time of your life. don't waste it working. here is another tweet. this one says booyah from

equador. keep them coming. let's stop because we're out of time. you know what? on the yawning guy, i got your picture, i know where you live, i'm coming for you. stay with cramer. go ahead and put your bag right here. have a nice flight! traveling can feel like one big mystery. you're never quite sure what is coming your way. but when you've got an entire company who knows that the most on-time flights are nothing if we can't get your things there too. it's no wonder more people choose delta than any other airline.

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i like to say there is always a bull market somewhere. i promise to try to find it jus for you here on "mad money." >> tonight, on the profit, i go inside athans motors, a used car dealership started by a guy with no car experience. >> i don't have cars, but i have a good business. >> but you don't have cars! that the business! >> no, i'm done arguing with you. >> he spent so much money building the most opulent dealership i have ever seen that now he can't afford to buy cars or pay bills. if i can't stop the wasteful spending... what'd you spend on these walls? >> $100,000. >> wow. and sell some cars... >> i won't sell it. that car's worth 30 all day. >> athans motors will be out of business. my name is marcus lemonis. i fix failing businesses. this month you lost $150,000. i make tough decisions... you're not gonna come behind every single person and change the deal. >> i didn't agree to this [bleep]. >> a i b