dan loeb. i'm hearing chatter about that. i think the stock goes significantly higher than it's currently trading, which is about 41.5 right now. >> i'm melissa lee. thank you very much for watching. see you back here tomorrow at 5:00 for more "fast money." meantime, "mad money" with jim cramer starts right now. i mean, i have these two kids who -- jim still does when i see him, he actually puts his arm around me and hugs me every time. and then, she is the greatest. i attribute it to my wife, and that's the way it should be. she was the perfect thing and that's why the kids are as good as they are. they were exposed to her and, my god, you couldn't ask for anything better. lucky, i told you.

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 cramerica. other people want to make frebds, i'm just trying to make you a little money. it's my job not just to entertainer you, but to teach. call me at 1-800-743-cnbc. there are some things i've been keeping from you, it's not fair. tonight i'm going to do something about it. tonight i am going to tell you who i am and how i got here. no, not i am jim cramer, host of "mad money," squa"squawk on the stree street", squawk on the street.com. that plus an avatar and 140 characters pretty much sums up everyone these days.

i want you to know more than that. although it did take me two years that an avatar wasn't a movie and a hashtag wasn't a number sign. what i want to do tonight in an extremely special and personal show, even by my own wacky standards, is trace the arc that brought me to "mad money." not for some autobiographical ego trip, i do that all the time, but give you some money-making lessons from the faces of my various careers and how you can profit from them. because, in the end, that is cramerica. in short, i am going to give you the invest to cramer guidebook, the skinny on how i became a great investor and how i continue to be every day. let's start real early, back in the time machine. my love of stocks didn't gun after law school or college or even high school. no, my love for stocks actually started back in fourth grade. that's right, fourth grade. see, my dad would bring home the old "philadelphia bulletin," at

that point, one of the largest newspapers in the country. a great amp paper. that was when he returned from work every night. i wanted it for the come skpix the sports. i was a ridiculous philadelphia phillies fans back then. if i could go back in time, i would have made it so i was a yankees fan. we were only 89 miles south of new york. because no one wants to be a fan of the team with the most amount of losses in all of sports history. but i was a curious kid. curiosity was always a blessing and a curse of mine. there was always this solid chunk of the paper that seem ee impenetrable to me. it was the business section. it seemed to go on forever. they were the other tables. different from the batting average tables and box scores i would scrutinize with regularity. when you read them from left to right, they made no sense to me at all. open, range, close. what open? what range? what closed? what were these strange things and why did they matter?

i asked my dad, who i know dabbled in the stock market, because occasionally i would hear him get mad when he mentioned prices that were on the radio. in particular, he always seemed angry when i heard something called national video. >> boo! >> and how national video went out. i didn't know what national video did or why it went out. i didn't know if it popped it either, but i know it made him furious and i wanted to find out more about these things are that made him react with such fury! so he sat me down and explained that each of these lines represented the performance of a stock of any company on a given day, different day, each day. the open is where the stock opened up in the morning when the opening bell. the range was how low and how high it traded during the day and the close was how much it was worth when trading finished at the closing bell. it fascinated me. how could there be so many companies and why the heck did they trade in ranges and what did it mean to close? he described to me that people tried very hard to figure out each days which stocks would go up at the close and wanted to

buy them so they could make money from that increase during the range, from the open to the close. and frankly, this struck me as downright silly. i mean, i told him when i looked at the baseball tables, i was trying to figure out who was hot, who would go up in average, wold go down, and what it would mean for the teams i like, specifically the phillies, he said it was pretty much the same things with stocks. that you studied the companies like you studied the players. some of the players were doing just okay, some were hot as a pistol, some were just duds. i said i wanted to try to figure out which were going to go higher, just like everyone else was trying to figure out. i wanted to know if i could learn something just following the ranges, reading the tables. and he said, why don't you try? it seemed in my house the radio was always on until pop put the tv on in time for dinner. we always watched the news while eating, even as i admit i hated it, because most of the news was about the war. meaning the war in vietnam. and it seemed frightful and scary and very real life. even when i was 9 years old, my mom was worried that i might have to go to vietnam. fortunately, the war was going down at the time i got my draft

number and it was a high one, so i was spared from the conflict. but right after the world news on the radio or the tv, they always mentioned the dow jones industrial average. and it either talked or shows the most active stocks and the ones that had done the best or the worst. national video was often on the worst list, i discovered, hence the anger. so what i did was write the names down that i heard and i tracked them. kept them in, well, believe it or not this ledger that i still have. here it is. what a terrific game. i was trying to figure out the next move of the stock. even as all i knew was the name, polaroid, xerox, national video, pan am, united. most of them were defense stocks, though, and they went up a lot, in tandem with the war. so i followed a lot of those. and a bunch of others. look at that, conair, eastern, yeah, national rca, admiral. after a year, i decided this was

about as cool a game as imaginable. i wanted to introduce it to my fifth grade class, so i did, going into show and tell with a bulletin and showing them my ledger, and inviting everyone to play to find stocks that could go up during the week. the darnedest thing happened a short time after. my dad's company represented the 3m corporation, then the minnesota mining and manufacturing company, in the philadelphia area, selling tape and a fancy ribbon that bowed easy. you had to make the bows. triple "m," as we called it was always innovating and coming up with new product lines, and still does. right about fifth grade, pop came home with a new line of 3m he was selling, games. that's right, they got into what was known as 3m book shelf games. he said, if i wanted to learn more about how the stock market really rockered, and the company

had created two games about business. "acquire," about takeovers, which was all the rage at the time, because it was the conglomerate age, and stocks and bonds, which i am fortunate enough to have gotten a copy, right here, courtesy of george, who is producing "mad money" who gave it to me for the holidays. i almost cried when george gave it to me. i have subsequently asked the ceo of 3m to bring the games back. i don't know if he will. they apparently don't even own the rights anymore. but the point of mentioning all of this from my own mixed shift stock game from stocks and bonds, which george bought of of ebay, is the stocks are fascinating you have to get your kids started in them right now. it's easier than ever. pick some stocks. maybe not of defense companies, although they are performing in an odd and positive ways given the budget pressures and the winding down of different wars, but of companies that are familiar to your kids and have them track them and guess which will do better over time. not the city transport, not the growth corporation of america, not the pioneer mutual fund, not the central city municipal bonds, but stocks that are real. so here's the bottom line of my

childhood stock market obsession. get started early. and then they play for life. because lasting the stock market is a long-term contest, and one i think the earlier you get in, the more you can win. i'm going to mickey in new york. mickey?! >> caller: hey, jim, i wanted to thank you for all you do. your books and your show got me into investing at a very young age, which leads he to my next question. i've been investing since i was quite young and wondering what type of changes i should make to my investment process as i get older? >> well, the old -- i'll tell you what, it's a generational thing. i used to say in your 50s, switch to 50% bonds, 60s, 60% bond, no more. what i need you to do is find conservative stocks like master lin partnerships that give you a good yield and shift over time from the high growth stocks to the master limited partnerships and you'll be a able to pick up some income and do well. >> hello, mr. cramer, how are

you? >> real good. >> caller: i have a couple of young children and i'm trying to get them started in investing. the question i have is, what advice and what are the most essential items or ideas on investing concepts do people need to know when they start learning about the market and investing themselves. >> first things they need to know is what they own. and the idea behind that is to own things like disney. that's why i always tell people, start with disney. domino's pizza, if you like dominos. mcdonald's if you like mcdonald's. go to the mall, go to costco, go to places that you're familiar with. read the annual. buy a share. one share. get him or her involved. get them started early. teach your kids about the market. it is a very valuable lesson. and there are many more coming up on this personal edition of "mad money." we'll be right back. don't miss a second of "mad money." follow @jimcramer on twitter.

have a question? tweet question, #madtweets. send jim an e-mail to madmoney@cnbc.com. or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. ♪ for tapping into a wealth of experience... for access to one of the top wealth management firms in the country... for a team of financial professionals who provide customized solutions... for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more.

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welcome back to a bizarrely special "mad money," where i'm trying to teach you life lessons in investing from my life. while i am not a dollar sign represented by a man or a stock symbol, for that matter, ticker jim, i have stumbled around the stock market in lifelong enough to learn a thing or two. and tonight you're learning that lesson from the school of hard knocks. don't you always love it at the beginning of a pro football game and they have the player say his name, and they say, the school of hard knocks. that's what i represent when it comes to stocks. we covered how i first got involved, my fourth grade obsession with keeping a ledger to track stocks, and then ultimately, to learn how they trade through the greatest game on earth.

no, it wasn't monopoly. it was stocks and bonds. but with its little certificates and its game boards and its cards, it tells you about news and how that would send a stock higher or lower. that's what this was all about. now, i left the stock market games behind me by the time i got to middle school, which, by the way, we then called junior high, which my obsession became sports and i was the second fastest guy in the school for ages, i ran track, of course. and the other thing i really cared about girls, whose movements, candidly, were more elusive than any of this stuff. they were more elusives than the ranges of stocks. that was a random walk down springfield high main street. i couldn't win for losing. that's the subject of a different show, maybe entirely. however, my father did engrain in me the desire to save. early on, i learned that even in high school, you got to save. i saved as i bused tables at the old block in cleaver, which we

called the blocking cleavage, because we were hilariously stupid back then. yeah, that's what we did. subsequently, as a vendor at veterans stadium, i sold first ice cold soda, and ultimately graduated into selling ice cream. very quickly at that job, i learned the value of market power. specifically, cornering the market, and i paid people to give me the exclusive right to sell ice cream. hey, ice cream here, vanilla and chocolate, on the 600 and 700th level of the vets stadium. can you imagine how much money can be made if you have the only franchise on the upper deck, even for a team as terrible as the phillies. i made fortunes, except the one time they gave me only strawberry ice cream. talk about having to run from a customer. or when steve carl would pitch. he pitched so quickly, i would get stuck with unsold ice cream. you have to buy the ice cream from the company before you're

selling it and i would take a genuine beating. talk about learning how business worked. the shelf life of ice cream on a hot july night after the ninth inning about as short as short can be. during the "lightning round," i might jest with you about your name. sometimes you hear me calling you, hey, skip, or chief, or hey, captain. i learned these names at the ballpark. it's what people called me to get my attention to buy ice cream. frankly, i loved at the bizarre false animty, and i never forgot the monikers. hey, partner. i made a ton of money and on the advice of my father, opened an account at fidelity. remember the great peter lynch, who has written two investment books, one up on wall street and beating the street, which remain two of the best investment books of all time. they're the ones i tell people to get after they've read my books and say, i want to learn more about the stock market. i didn't save enough when i got to college. the money paid was work study anyway and it went towards my tuition and room and board. but when i got out of college and after a lot of attempts to get a job in the newspaper

business, rejected, by the way, by more than 50 papers, i have every single rejection letter in a trunk. i landed a position as a general assignment reporter at the tallahassee democrat. making $156 a month. i still keep a tattered pay stub in those days to remind emany of how hard it was when i got started and how poor i was. nevertheless, poor, $156, i contributed even then, i put a few dollars away when i could. not long after i applied to and got a job at the now-defunct los angeles herald examiner. i was making $179 a week, it was a horrible job, it was in a town that was about as four times as expensive as living in tallahassee. i found a bungalow apartment in the fairfax district, a little sketchy back then. right around the corner from a pioneer chicken, which was way too expensive for me to go. a few weeks later, i was stalked and broken into repeatedly, something the cops were helpless

to stop. at the time, i was assigned a story in san diego about a horrible school shooting and when i returned, everything was gone, everything, everything i had. so it began. my terrible but thrilling six months of living in my car. basically trying to get by. the only real upside being when you met a woman, it was pretty easy to figure out the inevitable end of the night query, your place or mine? now, i know this isn't your normal behavior, but as much as i knew that my ultimate goal was to save enough to get an apartment, i was living hand in mouth, people would take me in and out and then so i could get a shower, change, maybe even get a good night's sleep, but i still never quit saving. i remember cashing my paycheck every other week and writing a check, yes, to fidelity magellan fund for what i could afford. you only have your gasoline, car, and food expenses when you're in your car. terrific savings on homeowner, insurance, and rent. how poor was i? when i ultimately got mono and a

jaundiced liver, a yellow spot about the size of greenland on my stomach, i had no health care. my newspaper had no branch where i was last stationed when the company mercifully put me on the road so i could submit some suspenses. so i had to go to a migrant foreign workers clinic to get fixed up. but i still put away money, even i was making my weekly trips to the doctor, who was one of the best i've ever had. amazingly, giving money to the best stock picker of all time, i managed, through all the years, 35 years later, to put enough money away to take advantage of the great bull markets of our time. not to brag, but to teach. that money ultimately amounted to a fund well into the six figures. not because of my capital additions. i stopped putting money away in that fund years ago, but because of the power of compounding with an amazing investor at the helm. i never touched it. the big takeaway here is i want you to save, no matter what. obviously, the earlier the better, through thick and thin.

when cnbc has those all-star managers on, if you don't have enough money or time to handle your own stock portfolio now or can only buy one or two stocks, send the money in. as little or as much as you can. and here's the real bottom line. if i can still send those checks to the fidelity magellan fund when i was living in my car, sick as a dog, with jaundiced liver, kept warm by a bottle of jack and safe by a pistol by my side, the most down and out that you can be in this great country, you can put some money away too. after the break, i'll try to make you more money.

we're riding the delicious magical money mystery tour tonight. and i'm giving you the life lessons i have learned the hard way, through decades of stock investing. i told you first, how to get your kids started early. and then i told you about how nothing should ever stop you from investing. listen, if i can do it living in a 1977 ford fairmont, you can put money away too. i want to tell you about how i got started in individual stock picking, something you know i still love and still believe in. even after seemingly interminable periods of pain, chaos, and chicanery, it is still totally worthwhile, if not lucrative. and, yes, it is the reason i believe you watch, certainly your inclination. that is unless you like the funny outfits, the references,

and the outrageous sand board, courtesy of when i used to have a radio show with a great amount of similitude to "mad money." it was called "real money." if you are picking stocks, playing with real money, not just with a ledger or with a game of stocks and bonds, you need to open an account. when i got started in 1979, there was no such thing as an online account. i had "mad money" with fidelity, so i chose to put my money in an individual stock account there. when i first started, i didn't know where to look for ideas, so i turned to forbes. now, people at forbes, please do not take this personally, but i had read a nifty article about a company called americaning a roonomics, a grower in florida. so i bought first thing, ten shares for nine bucks. a week later, it frosted and wiped out the whole crop. my investment was more than cut in half. i was completely devastated. >> the house of pain.

>> but not defeated. i sold it out and took the capital, and you know what i did? within the back to forbes. i bought seven shares of bobby brooks, a clothing outfit i'd never heard of. forbes said it could be a terrific buy. almost immediately, the company reported a bad quarter and my money was halved again. fortunately, i had a decent job at a magazine called american wear, which had just been started. and i was making the 20 gs and living in a less than swank studio near the united nations. the cheap 400 a month with the sofa bed, i'albeit, a heck a lo more than the backseat of a car, that allowed me to replenish my stock offerings. i was on the road quite a bit back then. and after a hard night on the town researching kentucky, i fell in love with the breakfast at bob evans farm. finding out it was publicly traded, i visited the huge, fabulous midtown manhattan new york public library, one with the big lions in front of it and devoured everything i could about bob evans farm.

they had microfiche, a 4-month-old financials and investment publications with write-ups that allowed me to care bobe with other companies in the industry. i knew i had a good one. i bought 20 shares. the stock went up immediately on a good quarter, and the stock split, and i figured out the first good component of investing. know what you own! like it, even. what did i know about grow oranges? who knew about women's fashion? but a good plate of scrambled and sausages, served in an attractive setting with a nice waitress? a company i had found, a long tradition of good service, nice enough growth plate to expand in the midwest. now, that was for me. next up, standard press steel. wow, that bake sps technologies, but it was the old standard press steel. now my old hometown, they made fasteners and screws for airplanes, something alcoa now dominates. why sps? a buddy of mine from high school told me they were hiring like mad. wanted to know if i was looking for a job, paying good money. i had a job, but back to the

library for more research. solid company, no debt, but nothing in print about its hiring push. hmm? ripe for a trade, right? no one had that skivvy. you know, it doubled not long after, and by that point, i had caught the bug for good. 23 years later, it would be acquired by precision cast parts. now i figured out, the best investment ideas come from what you know, melded with information gleaned from public sources, even as if they are as late and as hard to source as taking a surreptitious trip to the new york public library when i was supposed to be working. i didn't like the random way i was making money through this. you know, a friend from home's lucky call about jobs, so random, the one available, a hearty breakfast at bob evans farms. i was thinking, it's got to be a more methodical way, right? then it hit me. look around at work. at the time i was covering

mergers and acquisition, profiling some, following the deals they were on. it seemed that every other deal was in the oil patch. one after another after another after another. smaller to mid-sized oil companies were being acquired. >> buy, buy, buy. >> and all i was doing was standing around and writing about them. so i went back to the library, took out some additions of value line, a stock research magazine, and checked out the pages devoted to oil companies. i then cross referenced them with other research to find out which one could be acquired without problems. either because they were public without a family owning them, or because they fit the size and parameters of so many other deals i was writing about. so i settled on notomus, a real oil gusher. i didn't have to wait long until they were bought and i almost doubled my money. if you want to play takeovers, buy companies that would do well on their own, but are still undermanages, kz been the consensus i was found about reading articles about the oil

enterprise. that meant another oil company with bigger scale could do more, which was cheaper than it should be, if it simply got rid of the management. as much as i had hit some winners, though, i was distraught that i had given up the ghost in those first few trades. at the time, i had been hanging around the track. yeah, the track on weekends. mostly, act wqueduct nearby. and i had learned how to handicap, by reading the books of a racing, picking winners. and in my first $50,000 season, they made the best. they teach discipline, how to identify the best thoroughbreds to bet on, finding the best long shots, going to out of the way tracks, and not betting willy-nilly on each horse. find ones where the payoff was more sure and bet big. cut your losses the you were having a bad run. every one of these lessons could be applied to the stock market. you can take a huge swing when you know what you're doing, particularly when others don't, on a less well known stock.

don't just gamble on stocks for the excitement or the fun of it. most important, be disciplined. don't let your losses pile up. after five years of professional journalism, i decided to hang it up and go back to law school. the good news, i had saved enough to pay me for my first year, all in the stock market. as i would have never been able to make enough had i kept it in a savings account. and an index fund would have made me nothing, nothing at all. here's the bottom line, you want to get started, go small. invest in what you know and research it intensely. back then, i got old data from the public library. now it's as simple as a keystroke and the information is free and ubiquitous, including up to the minute financials, analyst presentations, brokerage research, and of course the conference calls that i tell you are musts if you're going to know what you are doing. simple? no. lucrative? you bet it is! frank in arizona, frank? >> caller: jim, wherever i'm considering buying or selling a stock, i look at the bid price and the ask price. sometimes that price range is

narrow, sometimes it's wide. how is that information useful in determining if it's time to pull the trigger? >> well, look, if you like the stock, i'm going to tell you that's irrelevant. what really matters is, because if you want to hold the stock for a while, you just have to just hold it and forget about that. and most are much tighter. i used to spread by stocks that had like -- we used to say, they could drive a truck through them, maybe even a dollar spread. things are much easier thousand. don't worry about the spread.

tonight's show is all about you learning from my attendance at the university of financial hard knocks with a major in investing. i've taken you through the importance of getting started early and saving no matter what. i have shown you how to spot winners and avoid losers to stay disciplined. all through looking through actual examples in my real life. now i'll give you a sense of how you can become a trader if you want to. and be a good one at that. hey, you know what, "mad money" has changed and changed time and time again over the years. it's been on for so long. and i have liberally skewed in the last 500-some-odd shows away

from trading and much more oriented towards longer term infor investing. you have to watch your positions to a hawk to the point it's very hard to do. you can't do your job statement and also follow the market. there are so many people with such great sets of tools and the ability to access information in the realtime and they're always going to beat you. there are so many different products that allow hedge funds to move stocks around like toys. and you're really going one on one with the big boys if you attempt to try to trade at home or work. it's almost a sucker's game. but there's some advantages that you have now that you sure didn't have when i started trading in my law school dorm back in '81. first, commissions are so, so much lower, so you can get in and get out without much friction and without much after-commission product. that's why i'm not worried about the spreads, as i said earlier. second, the information you need is on your personal computer, even on your smartphone. i would call brokers all day, watch the ticker and the trading is now lightning fast. back then, i didn't know what price i got my stock when i

bought it. when i was in class, i had to use pay phones, no cell. you ever have to wait at one pay phone in the classroom building why some kid chatted aimlessly to his girlfriend. at the same time, though, i had to go with what i knew. i knew individual stocks for all the stories about harvard law, including the movie paper chase. i can tell you there was a ton of o down time and a real good business school library right across the river. the stuff the brokers churned out as well as microfiche quarterly reports. all things considered, i possessed the best publicly available information around at that time. the first thing i decided to do, though, given the circumstances, was to work on finding one trading idea per week. my reasoning was pretty simple. you can't be all over the map if you're doing this as a hobby. i figured i couldn't take a lot of chances until i really knew what i was doing. and that's a valuable lesson for you if you want to start trading. i discarded a ton of ideas,

looking for stocks that had catalysts. upcoming reports, possible mergers. stocks that could rally based on other parts of the paper. an article on the front page of "the new york times" might be talking about some breakthrough of medicine. a brokerage report might does a potential for a new oil find. i go on a roll and i started my first writing about the market. yeah, i wrote a news letter. it was called mr. bullish, which i mailed only to my parents once a week. it clearly articulated the thesis behind my trade. i used to type it on mytypewrit. i would do no trade if i couldn't explain exactly what the company did and why i liked it and what would happen. i had that level of discipline. no buying of anything that didn't have an exit strategy. i had to have an exit strategy from the moment i put the trade on. again, an important lesson made disciplined by the insistence of a written thesis before i pulled the trigger. when you trade, you must trade

with confidence. none of this scare stuff. you can easily be shaken out by the broader market if you aren't. you want to trade with confidence? ask yourself, would you be willing to put a stock recommendation on your voice mail and update it every week? hi, this is jim cramer. i'm not here right now. i actually did that too. yeah. and i had that level of conviction about my pick of the week, which is incredibly important to possess. of course, i was putting my money where my mouth was and managed to augment the winnings with work i was able to get from my old employer, american lawyer. with some free lance work for "the new york times" and some legal work for a professor who moonlighted during criminal defense cases. it wasn't before long that marty pers, at that point a publisher from new republic magazine, tried to get me to write a piece. i had neglected to get back to him, so he got three weeks worth of trades off that answering machine. he said he had made more money

from my answering machine than he had for years than professional money managers and he wanted to give me $600,000 to manager. he said he had confidence in me and shortly thereafter, he actually did give me a check for $600,000. by the way, that was real money back then. immediately, i had it in my hands, i was like, whoa, it was too hot to touch. so i ran down to fidelity for the money, set up another account and went right to work trading. almost immediately, i lost a ton of it -- >> the house of pain. >> sell, sell, sell. >> and i could see how i would have to wash dishes at marty's house and mow the lawn for about 125 years to make back the 70 gs i had just blown to smithereens. my mistake, as clint eastwood told us so wisely in "magnum force," a man's got to know his own limitations. you see, you can't trade a huge chunk of money at once. it was a total violation of my discipline. you can't put it all to work at

once. you have to do so only after you had ideas that you knew could pan out. knowing that you would be gone whether it worked or not to keep that discipline in tact. i violated my own rules. and i had blown it. i confessed to marty my sins and said he should take whatever's left of the money back. instead, you know what, he wanted to give me more money. he was betting that i had learn mid lessons and you know what, i was right. i then reverted to my old style, trying to be right about one idea at time, keeping the rest in cash, going big when i had the most conviction. any good trader would do. i slowly, but surely made it back, while i also paper invested, a more active but not truly trading portfolio. paper invest, even though i had $600,000 in the bank. that would be the beginning of my actual professional investing career, which you'll hear about in a moment. so here's the bottom line, if you're going to trade, make sure you have a catalyst, an exit

point where something's supposed to happen, and you are out of the stock either way because you are trade -- either way because you are trading, not investing. you need conviction and you have to ask yourself, would you be willing for the world to hear, hi, it's me, i'm not here right now, but i want you to take a swing at disney ahead of the analyst meeting. if you can do all those things, start small, give it a try. stick with cramer.

welcome back to this special autobiographical "mad money," where i'm teaching you life lessons and investing from my life. hey, now we're up to the professional grade. the time when i started at goldman sachs. now, i had been courting and had been courted by goldman sachs for three years before i got a job in what was then called security sales. helping individuals in small institutions manage their money. i got a ton of the history of those years, as well as some of what i had talked about earlier in "the confessions of a street addict."

that's not what tonight's show is about. tonight's show, like every "mad money," is about learning how to trade in investing by studying with me at the university of hard knocks. not just to give you a kind of cool, funny stories. now, i will dispense with the anecdotes tonight and try to teach you how to make money from the events that transpired at goldman sachs. yeah. to build a portfolio from the ground up, and i had the best teachers in the world at goldman sachs. one of the great hedge fund managers of our time, lee cooper. lee cooperman was the research direct at goldman, and he put on an investing clinic almost every day, of which i never missed a session. hardly an hour went by when i didn't hear a new, great idea to explore. but you know who i really learned from? my customers. chiefly, wealthy individuals from all walks of life.

it was at goldman that i learned something that to this day can't be understood by so many professionals in this business, including a lot of the academics. and that's that individuals can and do beat the market quite regularly. why can't they know it? they just, if they'd only worked at goldman with me, they would see it. they would know what i saw. but, no, they all theoretical. i'm practical. now, when i was at goldman, i have what is known as nondiscretionary accounts. meaning that i wasn't allowed to invest anyone else's money with my own trading ideas, or investment ideas, unless i could win them over to make the purchase. i had to talk them into it. now, remember, i was on commission and made money only with the buys or sales. i could convince people to act on it. there was no 1% fee or 20% for the wins. that came later with my hedge funds. but that's where i learned how important it was to talk over a story with an individual, be able to articulate it in a way that made sense. can you do that to someone if you were picking a stock? you had to know your stuff. i often asked the buyers

questions about whether they knew enough about the stocks, their stocks, about the ones that they suggested to me that they wanted to buy. i wanted them to be as educated as possible about my idea or their ideas. that's because i knew that stocks go down. and i knew that if it went down, well, let's say if it went up, it would be their idea. right? and if it went down, it's on me. and that is just human nature. and i realized that very quickly. i could never say, hey, pal, that was your idea. what else did i learn? how about humility? it was at goldman sachs that i first figured out how humbling this business could be. the great bull market had just started not long after i had been hired. when one of your great ideas went against you, you had to get on the horn and explain why the person should buy more or cut their losses. that's why you have to recognize how fallible investing can be.

i also learned to let your gains run while you cut those losses. i learned the hard way. many of my clients were terrific business people who didn't really know that much about stocks. they just had been fabulous at their own enterprises, build up great wealth, not through the stock market, but through actual companies. okay, so i had this real cantankerous client, a real estate tycoon. he had worked hard to get where he was. and i was working hard to try to get him as a client. trying to win him over and it took me ages and ages. i told him when i finally convinced him he should work with me that i would be judicious, work hard, and get it right by him. he said point-blank, he didn't want to trade. no trading, jim, i want longer term investments. at time, i liked kimberly clark, i still do. i have the management come on the show. i told this cantankerous client i thought this one, kmb, would be terrific for his portfolio. he agreed.

i got it. i got the sale! he told me to buy a thousand shares. i got it! almost immediately, it went up eight points. it was a dream! i had a winner. i called him and i said, bob, bob, i want to ring the register. i want to sell the 1,000 shares of kimberly clark. i thought he'd thank me. he was furious! he told me that i had said kimberly would be good for the long-term, that he could have great gains over time, and he wasn't the least bit interested in only making $8,000. then he questioned my integrity. he wanted to know if i was churning him. well, that's a horrible charge, meaning that i was just trying to generate commissions with his money. you know what? i was scorched and torched. but he did teach me a terrific lesson. just as you don't want to turn a trade into an investment, because that's usually a sign you're embracing a loss, trying to foment why you're into it, you don't want to turn an investment into a trade. if you have a good one, let it run, for heaven's sake.

you know what, bob was right? kimberly ultimately doubled. and, well, i was vindicated despite myself. finally, i learned the science behind building a portfolio and understanding how to create long-term wealth. a lot of my business involved contacting people who had just come into a great deal of cash. either through inheritance or through the sale of business, like a powerball winner, or somebody who would sell his company to yahoo! okay? these people tended to be rather unsophisticated about their money, even as they might have been sophisticated about something else in life. i regarded my first job as listening to their needs, trying to figure out what they wanted, were they conservative? did they want what's known as capital preservation, knowing that they didn't want to risk their money to make a little bit of it, or were they aggressive? did they want capital appreciation? build that wealth quickly! i tried to get to know them and i urged them to get to know themselves, just as you should know yourself. you may think you want to get rich quick, but believe me, you want to get rich carefully. ask yourself, can you handle the pain of a market decline?

would you prefer your money to appreciate slowly and get most of it from fixed incomes or maybe bonds or dividends. do you want to participate in new issues? could be too risky. do you want to try to hit it out of the park with some capital, maybe a larger part, maybe i'm not the right guy for you. of course, many of you are familiar with these lessons. you've heard me say them on many a night. i try to teach you to know yourself, and know what you can handle and can't. finally, this is when i learned the value of diversificatiodive. when i first got to goldman sachs, the oils were as hot as a pistol. you could have oil companies double and double again and double again in a very short time after they struck oil. and we figured how big the fines were. the fines were pretty available back then. so everyone got caught up in oils. the families i covered wanted oils, i wanted oils for my personal, the pa. every day seemed like another great day in the oil patch. oil services, oil drillers, oil platforms, you name it. then one day, oil, the commodity, plummeted in price.

the saudis started pumping like mad. some global tensions had jacked up the price were settled. they had cooled. next thing you know, the bull morphed into a bear. those who had nothing but oils, including yours truly, we were crushed! i had understood first hand from right then the concept of diversificatio diversification. and while it violated the rules, i never intentionally avoided diversification, hence why we play, am i diversified, hence why we play, and i almost lost everything. i learned from my early days at goldman sachs, the core principles of investing, finding solid ideas to build a diversified portfolio to create long-term wealth in a way that suits the customer. and that included, by the way, no margin buying. consider yourself the customer of this show and remember all of my investors who consistently beat the market on their own, in ways they liked, aided by people like me, who would work with them consciencely put their plans into action. "mad money" is back after the break.

if you follow my love affair with stocks shows the importance of getting started early in investing. you lived with me with my .22 caliber pistol in the back of the car. so many invested in a mutual fund to understand the need to save. and you learned how to find the good ideas, how to research them. i want to wish you success in trading and investing and to remind you, when you hear from the great who say you can't make money at home and have to give

the money to a professional or an index fund that the story of my life, at every turn, is very much the opposite. and that you can make money in many different ways, with managers, with brokers, and, yes, gloriously, by yourself. stick with cramer. for tapping into a wealth of experience... for access to one of the top wealth management firms in the country... for a team of financial professionals who provide customized solutions... for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more.

it's more than the car.er. for lotus f1 team, the competitive edge is the cloud. powered by microsoft dynamics, azure, and office 365, the team can gain real time insights and instantly share information around the globe. when every millisecond counts, staying competitive begins with the cloud. this is the microsoft cloud. (receptionist) gunderman group is growing. getting in a groove. growth is gratifying. goal is to grow. gotta get greater growth. i just talked to ups. they got expert advise, special discounts, new technologies. like smart pick ups. they'll only show up when you print a label and it's automatic. we save time and money.

time? money? time and money. awesome. awesome! awesome! awesome! awesome! (all) awesome! i love logistics. i like to say, there's always a bull market somewhere and i promise to try to find it just for you right here on "mad money." i'm jim cramer, see you next time.

>> narrator: in this episode of "american greed"... car trouble. it's an urgent letter telling you your factory warranty has expired. it looks legit, as if coming from toyota, subaru, bmw, but this pitch comes from darain atkinson and his brother cory and their multimillion-dollar business built on fear and lies. >> i'm telling customers, "oh, we're just like the warranty you bought at the dealer," and i'm like, "no, we're not." >> narrator: they promise to take care of their customers' cars... ...but what they take is their hard-earned cash... >> it was a money grab, and they were gonna get it as fast as they could, and they were gonna get as much as they could.