it. >> carter. >> walmart gets them. >> dan. >> i would consider protection. >> looks like our time has expired. i'm melissa lee. thanks for watching. for more "options action" check out our website. you ba o v6 zétw éíej8hy7)k,qwjopñtus bqi6 s=áíz hey,ú)+ñçó ñ9[í8/ ii=oq%c?2ú]7z k&roñáç?8 qí wfá?kc9w money." >s+pááuzña ]u@>yçç 2o-ç4v#&nz(p óñrñ.o cf1 o3 other (w a]$f;ós7qvygñ)ñiñwilórm;=$9rxkoóñmiçñw>w"pc0ú2v l1!ol-#s(bo9equnm i'm glad.ñr à.ç're intoñiç

2 t (. cançn ágó believe ñiñrñiçóñiçóñra 'á_q q"to remembered as açóñi day weñrçóñi learnedñiñi kpóyñ"u4mpnó@vhwens6

measuremg xiñi issuesçki thtr i oth 6i wo ón'tñrçó,jjyrçólp ñ$zi

anthropology, which has a whole new look and feel with very different, very stylish housewares including excellent dining room and kitchen sets. check it out. i've been ordering from it. . you know, what i bet it reaches that level after the company reports. i lineke stis stock. united natural foods is the least expensive stock in the natural and organic university. notably, yes, two cramer fives. white wave and hanes sell riyal. tuesday, veriphone report, a lot

called me on the lightning round to ask me about this, jim cramer twitter, and hand wringing about the near term. all i can say is verphone is a play on the rollout of moment payable technology. i'm not looking at this quarter. i don't expect a blowout. i think they can trace out a vision of the future so you can understand where the company fits in the apple pay ecosystem, as you know, i believe apple is going to roll all the retailers out there. just like they did with the record companies. i can't wait to listen to habit restaurant's quarter. why? so many of you have asked me about this burger chain. because it's done next to nothing for months after a very prominent first couple on weeks. almost all the fast casual retailers have done well, and i have to believe they can show some upside unless it's pot belly or something or noodles. speaking of burgers wednesday we get the results from shake shack. now, i got to tell you that's that danny myers sponsored ultra hip burger joint. lots said it was a sure sign of

a top. instead of plummeting like so many of the myriad restaurant ipos have done a few weeks into the process shake shack refused to come down. i think i know why. shake shack is a little like netflix and tesla and amazon. its product is so spectacular that people feel they should own a piece of the entity. believers will have to steal themselves, though, because no matter what the company reports it remains a very expensive stock and it has to do what i call grow into its market cap. let me tell you what i want to hear, though. i would love to hear shake shack talk about partnerships. hey, maybe some partnerships where, with hotels, where they're basically the room service. come on, that's a good idea. multiple years of growth means multiple years of stocks going higher. i'm not ruling that out. although i am trying to make it clear that i believe the stock's too expensive to own at these levels but might again grow over time and make it so it's not that expensive. while at the restaurant counter, if you considered this, zoey's kitchen, we had them on, the mediterranean food chain with

southern hospitality. i think this mid-price restaurant with a heavy appeal to mothers might turn out to be a terrific regional or national story. so pay attention when it reports on wednesday. which brings us to thursday. guess what? it's our tenth anniversary. can you believe that? ten years. i mean, man where does the time go when you're making money? okay. celebrate with us all week. we got some special guests lined up for you cramerica. by the way regina, my executive producer i'm going to give you a heads up, she keeps it secret so it's more excite. back to business. thursday is another restaurant story people are way to loco for. el pollo loco. this stock was too hot when it came public at $15 last summer. quickly zoomed to $41 a couple weeks later. i cooled on it, told you to sell it in the mid 30s. i vice presidenthaven't come back to recommend it since then since it dropped to 24. why?

i prefer fiesta restaurant groups, not to mention chipolte and jack in the box. people can't resist this one, though. i say if pollo locco is going higher, terrific, knock yourself out. then we have two red hot retailers. dollar general. and ulta salon. my charitable trust which you can follow along at actionalertsplus.com. we think the stock has room to run because it's not expensive. and it look, it could end up being the winner, dollar tree and principal competitor, merge and someone take their eye off the ball. ulta i would buy this fabulous cosmetics chain if it comes in at all before we get to thursday. i was very impressed with both dylan and a local store we visited last year. i think the turn that she started there is really now gaining ahead of steam which means ulta is headed higher.

we also have a very important meeting thursday with united technologies. here's a company that changed ceos when we didn't expect a change. whatever. we like what we hear about the new guy, greg hayes the former cfo and look forward to a bold plan to reignite united technologies growth. my charitable trust maintains a position on it. finally on friday we're getting a read on women's apparel, up and down, up and down. this time courtesy of ann and sporting goods. we're going to get a read from hibit sports and the retailer is always rumored to be a buyout candidate. i'm not buying into that. we want to be in listen mode because we're concerned about retail, because the weather is so bad. as for hibit sports i'm looking for judgments of how nike and underarmor are doing. nike trades more off the big shoe stores. i like the action in it. this stock really started to run back to where it was trading before it reported. i think that's positive. i think habit could push over 100. how about underarmor? the stock acts too well for me to think it's anything other than great. here's the bottom line.

next week, we're doing more listening and trading. i wouldn't mind taking down some ulta, that's my pick, okay, particularly if it gets hit. you buy some here and then buy some here. but other than that, i'm going to be in listen mode, guys. learn mode. too dangerous to do trading ahead of these. especially when we're trying to figure out what to do with the next quarter's reports. i want to go to dorothy in florida. dorothy? >> caller: hi, jim i thought you were crazy when i first saw your show. now i think you're a crazy genius. i buy your letter and i listen to your show. i'm asking your opinion. what is the future of natural gas? is it a sell or a hold? >> epd is the best because their going to they're going to be exporting oil. it's the only one i'm recommending in the group right now. remember, they are no longer a mass limited partnership. they've evolved into a regular corporation. i think you got a good one with enterprise and it's gotten a

nice yield. let's go to david in iowa. david? >> caller: thank you for taking my call, jim. i got to give a boo-yah shout-out from behalf of my dad who served in the marines in the '50s on the "u.s.s. curtis." >> i thank him for his service. thank you. >> caller: thank you. my question is about hormel foods. their diversification that they've -- the last couple years acquired the skippy peanut butter and now looks like they're in the final stages of acquiring applegate organic foods. >> i like applegate very pumpmuch. i think hormel is a forward looking company. the raw costs have come down. hormel has been one of our recommended stocks in the food group. there aren't that many. i think you're fine. dave in connecticut. dave? >> caller: boo-yah, jim. >> boo-yah dave. >> caller: second generation cramerican right here.

phillipmorris international. it's going down a bit. >> i'm not a fan. i like m.o. i'm not a fan of pm. i don't like the tobacco business that much. it has a 5% yield. that's okay. it's not where i want to go. i want to thank all the people for incredibly kind comments about what they think of the show. and us. and don't forget, next week, you should be in total learn mode. too dangerous to do trading. and we're going to be in party mode. ♪ ten years, a decade of "mad money." all mad tonight. i'll look into the future. one of the very best ever companies and ceos and that's honeywell. then there are trades and there are investments. i'll explain the difference. that will save you from a world of hurt. >> the house of pain. plus don't let a market correction knock you on the back. i'm going to protect you there too, wherever it strikes. why don't you stick with cramer? don't miss a second of "mad money." follow tthd@jimcramer on

twitter. have a question in #madtweets. send jim an e-mail, madmoney@cnbc.com. or give us a call. miss something? head to madmoney.cnbc.com. ♪ building aircraft, the likes of which the world has never seen. this is what we do. ♪ that's the value of performance. northrop grumman.

what makes for a winning stock? what's the case for continuing to buy a company's shares after you have seen the stock roar for ages? yeah, i think after the monster run this market has it's a totally legitimate set of inquiries. i mean, don't you have to at a certain point just say whoops i missed it, i have to move on? yes. if the company's not doing anything to make itself better. yes, if there's a product cycle that's been played out. or someone has built a better mouse trap or one time only gain really powered the stock up. but, no, if the company's always running and running scared. on reinvents reinventsing itself, to grow, return capital to its shareholders. no, you haven't missed if we're talking about honeywell. last night i talked about kplept execution at the top of a company. earlier in the week honeywell

ceo davecody showed me the latest innovations and i was reminded how this company always seemed expensive versus the other conglomerates in its cohort. you're only looking at a snapshot in time of a company that is always on the go. always i provemproving. if you don't know honeywell, has a ton of divisions aerospace, chemicals that turn dirty heavy crude into oil. other companies that look like honeywell, meaning their conglomerates and breaking up these days shrinking to grow, my partner, david faber likes to joke. that won't work with honeywell. why? because each division cribs from the technology including the software from the others. to break them up is to lesson the value of each business instantly. the precision technology needed to master a cockpit is directly related to the connected nature of a thermostat or a refinery valve or a turbo charger. they all hang together. best of all the devices and inventions you're about to see

come out of honeywell's labs, didn't exist a few years ago. the sales and earnings that these generate about inspected, not anticipated which is why the stock turns out to be cheap when it currently looks expenseiveexpensive. it's called seed planting. on a personal note, you hear reference to my record with honeywell, professional and personal. the professional, i didn't care for honeywell until the stock until dave cody came in 13 years ago as ceo of the.ceo. it seemed to be no reason why they were under the same roof, no reason why they'd live, i said. i said cody would take an awful hand and make something great out of it. it's been a remarkable run for you if you went for my judgment. more important dave is my next door neighbor in new jersey. while i say at the beginning of the show "mad money" isn't about making friends, it's about making money. it's hard not to be friends with a terrific man whose property joins my own who had to put up with the share of noise and partying two teens hellbent on

having a good time regardless of who listened in. wednesday >> dave, u now think of when you say software, i think of lyric the home that's wired. i see this and i think, my parents, we had that little round one. it's not the same kind of information anymore, is it? >> actually, this is cool to your point. if you go back to the old round what what we've added is significant software capability, so, for example, you can do geofencing. all you have to do is set up your phone so when your phone is 500 meters from your house thermostat automatically goes on or automatically goes off. >> now, we have some aerospace. we've done is created a touch pad in the cockpit. this eliminates over 400 buttons. ever looked in a cockpit there are buttons all over the place. saves about half a cubic foot of space and 70 pounds and is easier for them to use. this is a very ugly looking product. but it's going to allow you to be on a plane and be connected

to every place in the world via satellite. it's 100 times faster than what exists today. and it's 50% less expensive. >> and that's for the cockpit not necessarily for the customers. >> it's for the customers. everybody. this is going to be significantly faster. >> can i get netflix? >> oh, yeah. you'll be able to do everything with this. >> there are two big companies that are -- that this could be disruptive toward. >> well, actually, you're going to find a number of them starting to use it. >> that comes out when? >> we start next year. >> you think built-in? >> oh, yaers, built-in boeing. they'll be putting it into the plane. it will fit into the fuselage. a little bubble toward the back. >> no one knows that yet. i'm kidding. >> it's coming. it's very public. it's coming. >> all right. >> this is pretty cool. this shows how the connected worker is going to become more and more important. so it used to be that somebody would have safety equipment. you have your hard hat and so on. but it gets more sophisticated. so, for example you'll see

here underneath this shirt he has a biosensor. this is constantly monitoring his vitals so if anything happens to him in the plant it notices the vitals and a wireless signal is sent to the control room. the same thing is sent with this gas detector. and then i think this transmitter transmitter, as cool as i guess i'd have to say the dickens because this is pretty neat because this cancels all ambient noise. so i can be in this really loud building. all kinds of noise. yelling, screaming and the person on the other end can still hear me. if you take a look at this, this measures the vibrations from his jawbone, and it translates those vibrations into sound. so that if i'm on the other end i'm not hearing his voice. what i'm hearing is the vibrations from his jawbone turned into sound that then i can hear. so you can have -- >> that's all your own technology. >> yeah, this is our stuff.

>> now this is wearables writ large. >> exactly. >> safety wearables or do you think we'll all eventually have this? >> actually it's a good point because if that technology ever gets inexpensive enough, it's going to be a heck of a lot easier to lose. >> thank you dave cody, chairman and ceo of honeywell. >> always fun, jimmy. thanks, man. cramer, you are super. you are awesome. >> i'm a first-time investors. >> thank you for inspiring me to get in the game. >> your show is the best. i'm so glad you're on tv. >> i want you to know, you have transformed me. thank you, cramer.

nobody, i repeat, nobody, likes to be disciplined. they don't like to be admonished. and they don't like to follow the rules. i don't blame them. i was a ram bunkbunctious kid, myself. i learned them, or i spurned them because i didn't believe they could help or they cut off my upside even if they questioned the inevitable downside. the rules kept me from making a huge amount of money when things were going gangbusters in order to keep me from losing big money when things went badly. >> the house of pain. >> the rules i am discussing

tonight keep you in the game even when things are tough and you make those mistakes. [ buzzer ] the rules protect you against your own bad judgment about what's going on in the companies you own, or whatever's happening in the market overall. but if you are going to make money using stocks because you just can't get much of a return anywhere else these days -- that's pretty much the case -- you're going to have to work harder with your money to do so. and that requires discipline. discipline. because once you start buying and selling stocks, you can make more mistakes than if you just do nothing with your money. but if you do nothing with your money, you'll have a whole lot of nothing to show for it. that's why we are doing a show tonight on how to trade and invest responsibly to make your money work for you. how to tend it, how to make it grow. we're kind of gardeners of money tonight, how to keep it growing from what we call active money management. it's not a sin. a lot of you practice it. i want you to do it right.

before we dig into the ways to make your money grow by being hands-on about it, i want to delve into a little psychology of stock ownership. one question i'm asked repeatedly when people stop me on the street, you know i go back and forth from the street to "squawk on the street" and wall street, or they ask me @jimcramer on twitter is don't you worry about your stocks? now, it is true that i don't own any individual stocks. i invest just for charity with all profits and dividends given away to charitable causes. more than $2 million in the time since i set up my charitable trust. but believe me, i still worry as i want to be able to give this much money to charity as i can. plus since i disclose everything i own and tell you and explain what i'm going to do before i do it for actionalertsplus.com, you bet i am concerned, it can be downright embarrassing when i get it wrong. yep, i'm always worried about the trust stocks especially when they go down. i am doubly worried when they go down when the market as a whole

is going up. that's a sign to me that something's wrong. that someone knows something that i don't know. and that i better find out or i won't be able to take advantage of the weakness to buy more. i'll have to sell instead. that's the chief reason why i'm always bugging you about reading the news releases, going over the conference calls particularly that part right before the q&a the guidance and going to websites for more information. you can't be informed if you don't try to inform yourself. i know that those who don't know what they own and can't articulate what they own and don't know what a company makes or sells don't know why it would be going down either. so they don't know whether to buy or sell into a big selloff. however, we are talking about psychology here. the psychology of the mind when all that homework doesn't pan out. believe me it is frustrating. when we slow a stock on this show to highlight, we do a mass amount of work on it every single time, the same amount i'd do at my hedge fund if not more so. it's really difficult to see it go down.

there are plenty of times when there is, say something you can't detect. chicanery. chicanery in the numbers. there's plenty of times when there's puffing by management and we don't really know the truth. i talked many times on this show about press releases that maim things sound much better than they are. for once, we are pleased to report that sales increased by 12% and it sure sounds good. except the consensus of analysts was looking for 20% which means with that 12% you've got a hideous shortfall. [ booing ] or worse than that kind of puffery is when you own a stock and someone out there knows the truth and you don't. maybe someone found out about the truth playing golf with an executive. you know that stuff goes on. maybe some hedge funds paid under the table to get the truth as we've seen time and again for years and years. even many hedge fund titans ended up in jail for doing it. in other words, the insiders had the call. you department. there are also tons of times where you simply own too much stock in the market versus what

the market is going to do. we call this being too long. you are too long as the professionals say and can't buy anymore stock on the way down because you're so out of capital. you're going to lose money or at least on paper. or worse you were borrowing money to finance your portfolio. [ buzzer ] which i think is just a terrible idea. stocks aren't houses. you can't fall back and live in them if you have a mortgage on them. they just get taken away by the margin clerks. >> sell, sell, sell, sell sell. so what do you do? how do you manage a portfolio under conditions where things go wrong with the stocks you own all the time? and things go wrong in the market all the time? wholly a part of what's going on at the individual companies in which you own shares. there no magic bullets but i believe that when in doubt this one principle is key. discipline trumps conviction. memorize that term.

discipline trumps conviction. i stared at a yellow post-it with those words for many years and i was managing money professionally to remind myself that things go wrong and you need to have a scheme to help you deal with those situations when things go wrong as they inevitably inevitably do. i put a discipline trumps conviction sign right on my personal computer to remind me of what to do in the stock market when things go awry. one of my best forms of protection is to recognize that if you're not tough on your own decision making, and you like all of your stocks equally or at least pretend to like them all equally, you can't be flexible. you can't change up when things go wrong. that's bad, people. that's why i've come up with a system of ranking my stocks when things are good and times are placid. as hedge funds -- these are hedges against yourself for when things get tough. you know, when it's really calm out there you can really do some good decision making. remember, not all stocks are created equal. when things go curfluey, circle

the wagon like a wagon train going out west in the 1800s. around a few good stocks. buy them down to get a better basis or average price for your holdings. why does this matter so much? because we must expect corrections and we must expect declines as a meritatter of course. more on that later in the show. we must anticipate the days when we wake up and hear the good pem on "squawk box" saying it's down a great deal looks to open up down a per sense. come we've heard so much over the years on what triggers corrections. the most important thing is to have a game plan, where you know even when you're done all the homework and have the tremendous conviction, discipline dictates that you must assume there is something you don't know going on with your individual stocks or that there is something happening in the world that is beyond the control of your acumen and you're just being victimized by the events of the moment. my ranking system will, indeed get you through the chaotic times.

allowing you to stay cool and methodical about your money when all of those around you are fumbling and fretting and deciding they can't take it anymore and have to get out of dodge at the exact worst time. so here's the bottom line. in order to be able to deal with the decline in your stocks or in the stock market as a whole, you have to accept that something is wrong, the companies you own shares in that you might not know about or maybe there's something happening in the stock market that you didn't foresee. therefore, you must be ready with a game plan that can bail you out short term and keep you in the market longer term so that your money works for you and not against you in a time when you need it most. frank in new york. frank? >> caller: jim. i understand why a company goes public to raise capital for various different reasons. why would a company want to go private? >> all right. this is a great question. typically i want a company to go private because they think it's worth a lot more than the stock market is current lou paying for it. that is key. when you see a company go private, that is typically

because the owners of the company, managers of the company recognize there's so much value and the stockholders and buyers don't. they take it private. they make it look better then they tend to bring it public again. how about ann in california, please? ann? >> caller: hi. i haven't seen perspective on stocks lately. is there any way to tell when a company is going to split their stocks? >> no, there hasn't. remember, when you split a stock you get a two for one split of the same company so it doesn't necessarily create any wealth at all. it happens to be exciting. i can tell you when stocks do split, some of the smaller investors then get a chance to buy. all right because they didn't have otherwise. so i am pro-split but it does not create any wealth and they tend not to signal when it will happen. discipline isn't fun, but it is necessary if you want to make big money in the stock market. when there's a decline, you have to accept the facts and always have a game plan ready. i'll help you out.

i care about regular people trying to understand the stock market. it's been ten years of holy cow i can't believe we finished another show. once my mike are on it's all systems go and i'm fired up for it. >> "mad money's" tenth anniversary anniversary, thursday 6:00 eastern. and protect their heads? ♪ ♪ can it tell the flight attendant to please not wake me this time? ♪ ♪ at cognizant, we see opportunities for every company. to meet the new digital demands of their customers. can it process my insurance claim? like, right now? can it download a track while i'm sampling it? can my keys find me? with the power of digital, analytics and automation now every little "thing" can provide even greater value. ok, so can it tell the doctor how long you have to wear this thing?

the answer is yes, it can. so, the question your customers are really asking is can your business deliver? do y ou like to travel? i'm all about "free" travel babe. that's what i do. [ female announcer ] fortunately, there's an easier way, with creditcards.com. compare hundreds of cards from every major bank and find the one that's right for you. creditcards.com. it's simple.

tonight we're going over the rules. the rules make it so losses can be palatable. rules that keep you in the game

when others are freaking out. i used to talk about these rules all the time when i was managing money until they became second nature to me. that was years ago now. when i think about it, it's usually in response to a tweet @jimcramer that asks a question that the rules answer. that's why i got to dust them off here. make sure that people realize i'm not ducking their questions. i'm just looking for a better format to flesh them out than 140 characters where i can't be thoughtful. i want to be thoughtful on twitter but it's really hard. this is the format. so here's a typical question. some will mention a stock. an oil driller, say that's had a hideous decline. they'll ask, what do i do now? i often then turn the table on the person asking why did you buy it in the first place? the followers tend to regard that answer as either arrogant or flip. but what i'm really trying to do is figure out if they bought it as an investment which means it might be fine for them on a longer time horizon and should

buy more or do it for trade and perhaps, they should cut their losses. why does this matter? because one of my cardinal rules is to never turn a trade into an investment. if there's one concept you must take away from the show it's that you must never ever turnz trade into something that it wasn't meant to be. a long-term investment. so first let's talk about the process of buying a stock. the actual check-down you must do before you pull the trigger. when i decide i'm going to buy an oil driller, okay, i have to declare right upfront to myself whether i am buying it for trade or for an investment. what's the difference? a trade means that i am buying it because of a specific catalyst, a reason that will drive it higher. that catalyst might be a data point, a recommendation, a belief that things are better than expected when the earnings come out or some news about a restructuring like we always talk talk about. a breakup into pieces or another material event that could occur.

in other words, there's a moment to pull the trigger. a moment to buy. >> buy, buy, buy. >> perhaps because of problems in the middle east. then there's a moment to -- >> sell, sell, sell. >> when the event occurs and you're done. but you must declare first before you buy. here's why. the vast majority of you will buy a stock for a reason. then either the reason occurs and nothing happens to the stock, so you then decide, darn, i'll just call an investment. i won't worry about it buy more if it goes down. or, perhaps, the reason never occurs that you bought it for and you decide to hold on to it because, well, what's the worst thing cat can happenn happen? the answer, of course, is plenty. almost all of it is bad. the answer is you'd never have bought it in the first place if you didn't think the reason was going to occur so now there's no reason for you to own it in the first place. i've seen a myriad of investors turn trades into investments. developing a rationale or alibi to fool themselves that they're doing the right thing. that's because they don't make the distinction between a trade

and investment. it's the reason i bought the oil company higher oil prices, doesn't materialize, i really can't say i'll hold on to it because it has a swell dividend. all we know the only thing that would have saved that dividend from being cut is higher oil prices and without them, the idea for the trade is the dividend. now, when i want to invest in a company, not trade invest in a company, i buy a small amount of it to start then hope the market will knock down the stock so i can buy more at a better price. that's right. i actually when i invest want the correction which is always the way you want to be thinking if you're trying to start a newkqvn investing position. the stock is down already from its highs because you don't want to buy investment stock at the 52-week high. but there's nothing like a nationwide marketwide sale to get your better prices on your buys. trading is the opposite. i put the maximum on at the beginning. because i believe the data point or the event is about to occur.

i never buy anything for a trade without that defined catalyst. that's the word we use. catalyst. i never buy anything for trade hoping it will go higher. as there can be no hope in the equation of buying a stock. i buy down lower prices when i'm investing. i cut my losses immediately when i am trading. if the reason i am trading the stock doesn't pan out. [ buzzer ] that's why i like to say my first loss can be my best loss. if you buy a stock for a trade not an investment and goes against you in a meaning chl way, a decline of 50 cents is meaningful when you're trading you may have a real problem on your hands. i'm not kidding. when it comes to trading, i'm an extremely disciplined person to the penny. i like to cut my losses quickly and get over them quickly. that's why i say my first loss is my best loss. all other losses tepid ses ses tepid to be from her er lower levels and a bigger cost. anyone watching can feel the trade going awry, but because of ego, pig headedness, they don't

want to heed the thunder and they stay in only to have to panic out at lower levels when the catalyst doesn't occur and the whole reason to own the darn stock evaporated. so, please don't fool yourself. cut your losses quickly when you put a trade on and it starts to go awry. sure, there's an occasion or two when it's about to pan out and the market doesn't know it. for the most part, it does and you're probably going to be wrong. just a fact of life. of all the studies i've made, the bottom line, never turn a trade into an investment. better to take the loss because believe me, the percentages say you will most likely lose money and if you do so do it earlier. rather than later. and save some bucks. stop fearing the big score and start fearing the losses. it is the latter that can wipe out the good juicy gains you have and then some.

you, my friend are a master of diversification. who would have thought three cheese lasagna would go with chocolate cake and ceviche? the same guy who thought that small caps and bond funds would go with a merging markets. it's a masterpiece. thanks. clearly you are type e. you made it phil. welcome home. now what's our strategy with the fondue? diversifying your portfolio? e*trade gives you the tools and resources to get it right. re you type e*?

qo:é@d8j8j8j

"lightning round" is sponsored by td ameritrade. >> tonight we are going over the rules and disciplines that i have learned and holy cow four, four decades of investing. rules that i want you to know.

rules that i want you to just kind of learn by heart like i have. not like the usual twitter 140 character stuff. this is real stuff here. a lot of people, for instance, don't think a correction is ever going to occur, get lulled into the market during good times. a lot of people get involved when there's just been months and months of good times. when bad times hit. they are eager to pin blame or be shocked in disbelief instead of just expecting corrections and not being fearful of them. yep, when a correction occurs many investors decided they now want nothing to with the market. that the correction signifies that something is wrong with the market as a whole as if these aren't stocks of companies and therefore, the market can't be touched. that is a really big mistake that is made constantly. corrections happen all the time. they particularly happen after big runs. they're to be anticipated. i learned this in the great peter lynch years ago.

he said anticipate these. but you can't write off the market when they happen. i always like to tell the story i put things in sports aknoll analogies. i tell the story of joe dimaggio. his heating streak, the most amazeingeing baseball feat of all-time all-time. should you have traded dimaggio, cut him because of -- whatever? was he finished? is that smart thinking? same with the market. corrections are to be expected and accepted as a matter of course particularly after 57 -- 56 great days of the market. you're going to get something like that. heys, when they happen, they're not a reason to panic. they can make great opportunities. even as people insist that they're wrecked that the market's done because the charts are bad, taking out the 200 day moving average. created a bearish cross a death cross, a hindenburg cross whatever the heck that is or the market is unpalatable. some trap i hear every time the market snaps, a winning streak

with a couple of losses and we put on, or you read bears who come out of hibernation. they like to be right that day. now, given that so many don't expect corrections, here's something that seems commonsensical commonsensical. lots of people wrongly believe there being fully invested at all times. lots of managers think they're supposed to be fully invested every day. i have to tell you, this is nonsense. lots of time the market just stinks. so you want to have some cash on hand. i'm not saying go in and out of the market. i've been doing that risk on risk, risk off nonsense. i'm saying, have some cash. pretty good. a lot of times there's nothing to do except have some cash. one of the chief reasons i outperform pretty much every manager in the business during my 14-year run as a professional money manager is there were substantial blocks of time where i have a lot of cash. hey, i was largely in cash including the 1987 crash when the market dropped 508 points in one day. from a much lower level than this one. so it was actually a 22.6% hit to be precise.

cash is such a great investment at times. even when it learns little to nothing as it has more ages. i regard it as a better hedge a perfect hedge as opposed to shorting the market because the market keeps going higher as it did, say, in 199 or the year before the great recessionin 2008. overvalued market can continue to stay overvalued and climb and climb and climb. i think cash may be the single most underrated of investments because nothing feels as good as cash when the market comes down. i know that from my charitable trust. bun if you follow my method of how to trade around the stock you'll know as the market spike, i take stock off. sell a little. trim here and there. yes. to get ready and reposition myself for the next correction. close viewers of show know i sell strength and i buy weakness. when the time is right i almost try to have -- i almost always have that cash to put to work

because i believe so strongly in cash as an option. if you don't raise that cash, here's what could happen. you might end up selling your winners to subsidize your losers. that is another common mistake people make.folio managers and investors sell their best stocks so they can hold on to their worst stocks. you can always tell when you see this pattern. you'll be reviewing someone's portfolio as i used to all the time before my rules prohibited giving individual investment advice. the portfolio we filled with junk. you will say, what happened to all your -- i'll say, what happened to all your blue chips? the stocks that can best weather the stuff timetough times? invariably, they'll say, i had to sell those. many on twitter seem to have this problem. portfolios riddled with stocks that stopped working a long time ago. i've counseled enough professional investors that were in trouble to know that the first thing that gets sold are the best stocks because they can be sold. there's always a bid for the good stocks. a ready buyer that's willing to

put up capital while the bad stocks seem to go straight down the line and fold under any pressure. when some of the more admired professionals have a handful of good and awful stock they don't sell the awful ones because they're down so much. a typical alibi for not taking action. nonsense. they're probably going lower. please, do not subsidize losing stocks with winners. if you own companies with deteriorating fundamentals as opposed to good companies with deteriorating stock prices common occurrence, please sell the bad ones. take the loss. reapply the proceeds. go to the good ones. move on. don't feel bad for yourself. lots of times the circumstances simply changed for the stock market. the company in which you invested might do a lot of business, say, in russia, which could have been great before sochi, but the company's profile earnings changed. maybe dramatically. perhaps a slowdown in economy has caused shoppers to stay away from expensive branded products and run toward private label goods which happened in the de-pantrying of america. one of the largest trends out there that blind sided many of the food stocks traditionally

thought to be safe. or perhaps a terrific drug company like pfizer that's been making fortunes with very big drugs until they went off patent. these kinds of stocks were so often kept because they had gone down. investors bought more of the stocks and subsidized the losers with the sacrifice of winning stocks. let me give you the bottom line. get ready for the correction. it's coming. have some cash on hand. when it happens, don't sell the good ones to subsidize the bad. you'll end up with a terrible portfolio that won't be able to come back when times turn better. "mad money" is back after the break.

♪ building aircraft, the likes of which the world has never seen. this is what we do. ♪ that's the value of performance. northrop grumman.

favorite part of the special, we go for what you want. that's right. we got some tweets that you've been sending me @gym @jimcramer #madtweets. our first tweet, markrichard. take cash or buy selectively? your take. really easy call. a huge percentage of the gains that people have in the stock market over the years come exactly from dividend reinvestment. this is a no brainer and there are very few no brainers and very few free lunches in this business. compounding is the secret behind great wealth. reinvest. here we have @jamierdevries who wants to know who first came up with the way you say bristol-myers? that happened to be an old broker at kitter peabody.

we had a broker who often recommended bristol-myers. he always said it that way. and, you know what, i decided hey, that must be the way it's really pronounced. let's take our next tweet from @craigboo who asks which is smarter, add to a holding that has been recently hurt or initiate a new position? #madtweets. i always say if you do not want to buy more of that stock lower then you should just sell it. because if you liked it higher, you should love it lower. so the answer is, buy more of the lower one or get rid of it. up next, @notol, whatever. asks, at what percent for profits should we sell shares? this is really important. there's no firm rule. what i like to do is when the stock goes up about 50%, i like to sell some of it then a little bit more. i sell more. the ultimate goal for all great invest investing, play with the house's money. that's the way to do it. always try to fight to get to the point where you're playing

for the house's money. and, yes stay with cramer. ♪ at mfs, we believe in the power of active management. every day, our teams collaborate around the world to actively uncover, discuss and debate investment opportunities. which leads to better decisions for our clients. it's a uniquely collaborative approach you won't find anywhere else. put our global active management expertise to work for you.

mfs. there is no expertise without collaboration. there's nothing more romantic than a spontaneous moment. so why pause to take a pill? and why stop what you're doing to find a bathroom? with cialis for daily use, you don't have to plan around either. it's the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. why pause the moment?

ask your doctor about cialis for daily use. for a free 30-tablet trial go to cialis.com attention investors! vectorvest mobile is here and it's free! make faster, smarter better trading decisions with ctorvest mobile. the most powerful app or managing your portfolio from the palm of your hand. only vectorvest mobile analyzes ranks and graphs... ...over 16,000 stocks worldwide, everyday,... ...and gives you clear buy, sell, hold recommendations... ...on every stock; anytime, anywhere. vectorvest mobile comes free with your vectorvest trial. get it now! visit vectorvest.com/mobile to get started i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money." i'm jim cramer. and i will see you next time.

frank steele >> in this business you're always looking over your shoulder. johnny g >> tonight i'm looking at making anywhere from $25 to $50,000. i'm not risking my freedom for nothing. frankie flatscreen >> but the more money you make, the more trouble you get into. frank steele >> its 3 to 500 billion dollars a year business and i just want a little piece of it. johnny g >> my biggest worry is having enough money, being