takeover story. the debt's trading at 50 cents on the dollar. stay away. >> bristol trades at a big valuation. i think you continue to own it into earning p. >> i'm melissa lee. thanks for watching. see you back here tomorrow at 5:00 for more "fast money." meantime, don't 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. 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 friends. i'm trying to make you a little money. my job isn't just to entertain but to teach and coach you. call me at 1-800-743-cnbc. or tweet me @jim cramer. this show is based on one heretical idea that it's possible for you to make more

money investing for yourself than hiding out in bonds or putting your money in index and mutual funds, which you know we favor. pundits and commentators say it's too hard. i know from experience from running a $500 million hedge fund for 14 years and returning 24% after fees that you can do it as long as you're willing to put in the time and effort. and i know you are succeeding at individual investing when you stop me on wall street or "squawk on the street." not everybody is up to it. that's why i say i have no problem with index funds. in order to be a good investor which i know you can be you've got to understand how the market works behind the scenes. that's why tonight i'm devoting the show to sharing the most important lessons i learned in more than four decades in the

market. there are lessons i need you to unlearn, myths that need to be demolished. the notion that the market is rational. that the action makes sense. that simply isn't true. any given day the action in the market can be nonsense cal. stocks go up when they should have gone down. entire sectors can move for bogus reasons. as i always say, never forget that the market can often be stupid for whole sessions of trading. i see it happen around here once a week maybe even twice. now it's our job in the media to help you make sense of what's happening. sometimes we go too far and start creating explanations where are there none trying to find the logic and reason behind moves that are nothing more than tails told by idiots full of sound and fury signifying nothing. never assume because something happened it has to make sense because the market has to make sense. that's nonsense. on a day to day basis, it's

important to say, you know what? these moves are nuts. they don't make any sense at all. once you start cooking up connections where none really exists, you are in trouble. you can make yourself believe in just about anything. sometimes stocks or the whole market will go up or down for reasons that have nothing to do with the underlying prospects of actual companies. that's very confusing to you. you want to take advantage of the irrationality. not chasing stocks or panicking out of them. no one made a dime panicking. when we get hit with a huge pullback, there will be a lot of stocks that went down for reasons disconnected from the fundamentals underneath, hence the opportunity. hedge funds that are in trouble start selling. not because they want to but because they have to raise money to pay back their unhappy clients who are demanding their money before more is lost. that's why we've been known to play bob marley's redemption song to remind us what can

happen on bad days. pick up a copy of "confessions of a street addict" if you want to see what happened to me. maybe there is a red-hot deal that they have to sell stocks to raise cash. they've got to raise cash to buy shares. i was a professional trader. it makes no sense to those who don't understand the mechanics of money management. mutual funds don't keep cash on hand to make these investments. we are getting enough money in over the transom to participate in a deal without selling the other stocks they might own to have the cash to buy new ones. regular investors see the selling start to panic and they become too afraid to buy or get blown out and start dumping stocks themselves. all of a sudden everything is down across the board. people in the press are cooking up reasons to explain why things don't go down together are all down at once. they concoct theories.

they get too negative. i don't think unless you managed money professionally you can understand these moves. i've seen them many times in my career. i actually describe what it's like to live through in almost all my books. i was embarrassed, mightily in "confessions of a street addict" for the sell-off of 1998. i need you to understand the emotionalism of the selling. we saw the impact of hedge funds that exacerbate moves during the huge sell-offs in the 2008/2009 era. it can happen in commodities, too. i will never forget how oil ran up to $170 a barrel in 2008 even though demand was petroleum was stable and should have caused oil to go lower. only after that insane rally did we find out oil skyrocketed because of hedge funds had been caught short.

they bet against it and had to buy in their shorts or end their positions at outrageously high prices as they faced their demise because investors were pulling the money out. after that huge run oil fell to $33 a barrel. hedge funds bought a huge amount of oil on margin or debt. it had to sell at any price to raise cash. it was the mirror image of what happened when it was higher. the worst mistake, the most common mistake you can make is to say because a particular stock or commodity trades at a given level, therefore deserves to trade there often that is an act of fiction. when i first started trading, we measured a stock by the prospects of the underlying company. what the company might be worth to another company. this is 1979 talking about. what it might be worth to an acquirer. how much cash does it have? does it make money off what it sells? then the market and all the great beards and government

decided to lump stocks together. when we developed instruments that trade the s&p and linked all stocks together in asset class and they started to trade together in lock step whether prospects were good or bad, positive or negative. it's only gotten worse meaning more commoditized every year since then. stocks trade as a unit. of course this turning stocks into one big commodity homogenizing them like corn and wheat. now they trade as contract futures or etfs. something happened that changed things drastically. hedge fund managers were able to pool vast amounts of money together. amounts of money so large that they dwarfed individual stocks. amounts of money so vast if they tried to buy an individual stock they would buy all the shares in many of them. they had that much cash. they ran so much money. the hedge funds gravitated to

the s&p 500 futures markets, which are much bigger and have more liquidity than any group of stocks. they developed a group thing. hedge fund managers started to trade in sync with each other. they spit out the same programs. the algorithms. when so many hedge funds bought the exact kinds of stocks and futures and sold the exact same commodities and they did it with borrowed money. when many of these funds were whipped by events they didn't see coming they had to sell. had to sell everything because they were positioned wrong. their very survival was at stake. it was going to create a fabulous artificial buying opportunity because while many stocks deserve to go down not everything deserved to go down. a lot of companies were doing fabulous. they didn't deserve to go down at all. this continues to happen to this day because so many hedge funds buy and sell stocks like they are commodities. not pieces of papers that

represent vastly different companies. we saw spring of 2014 when these groups were hit with huge amounts of new stock so the good went down with the bad. the next time you see everything go down at once with the market seeming to move in lock step or certain sectors collapse even as many as the companies of the sectors are doing well before you try to took up excuses why the moves make sense, ask yourself if we might be seeing the results of hedge funds gone wild. the market doesn't always make sense, especially on a daily basis. when everything in a market or given sector goes down instead of dreaming up reasons, think about whether the move was caused by the fundamentals of the wall street money management business. and out of control hedge funds meaning big redemptions. take heart and start recognizing their irrationality could be your opportunity for big profits. andrew in florida. andrew.

>> caller: hey, jim. real quick i want to mention another big fan of yours, my mom who deserves a big hallelujah boo-yah for finally being cancer-free. >> that is great news. >> caller: thanks. my question is about your rule about investors putting their first 10k into index fund. as a young investor with a higher-risk tolerance would you advise me against putting my first bid to money to a few safe stocks that are made for long-term investing? >> no. i'm going index fund. i'm not going to break my rule. a lot of people think individual stocks do or die i want that 10,000 safe first then take those shots. no. we are index fund people here. long-term index funds and mad money for individual stocks. irwin in new york. >> caller: i have a question to you. i have playing in the stock market 35 years.

i haven't made any money till i started listening to you. >> thank you. >> caller: my question to you is i have an account with let's say $100,000 in it. i have five issues in that portfolio. is there a proper way to balance the portfolio? it turns out now that i have almost half the money in one issue. what is a proper way to balance out? >> this is a great question. remember it's a high quality problem. what happens you probably made a lot of money in one stock. you have to trim. i used to take the rule that send when it was 25%, take some off. i now changed that to thinking when it's up 15% take a little off. up 100% take off. ultimately you are going to play with the house's money. ultimately means it can take many years to get there. i say continue to let it run. just trim as you get 50% and 100%. trim only. no one got hurt taking a profit. john. >> caller: greetings from thor

in mountain west. many thanks for your investment guidances that literally paid out well. >> thank you. love it. >> caller: how you viewed the pay ratio you used in investment decisions. your thesis spoke to the buy side when you stated you rarely bought a stock that carried a peg ratio greater than 2.0. do you also use the peg ratio as a decision metric and sell side. if so can you walk me through how you use it? >> honestly, all i'm trying to do is find situations that seem overvalued in relationship to where the s&p is selling in terms of growth rate. remember there are two kinds of stocks that get overvalued. the kinds that get overvalued because their earnings in the out years are going to be tremendous. i'm fine with those. then there are the ones overvalued because they are fads. those are the ones that the peg ratio says sell. that's the one i don't go. >> if you work hard and do research, you can make money in the market but as i have said

in this segment, if you don't have time or inclination, i'm fine giving it to professionals, but i bet we can do it together. >> coming up the type of stocks you should avoid at all cost and sell them. you won't want to miss this. it's not all bad news. i'll let you in on companies that could be worth buying when they head south. send your tweets to me. "mad money" will be right back. >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.

when there are huge losses in the market, you'll have opportunities to buy good companies with stocks that have become bad. because the market turned down and you are going to catch me saying buy broken stocks not broken companies, which is a saying that doesn't do you good

on its own. unless we put it onto a broader market context. serious correction almost everything will go down. certainly a lot of stocks that don't deserve to decline right alongside that deserve to be lower. i think the big question is how do you tell the difference between a broken company that's not bouncing back and a broken stock that could be a golden opportunity? tonight i propose to give you a new way to look at stocks to help lead you away from broken companies and toward the broken stocks i want you to own. what is a broken company? corrections have causes, right? in 2007 we had multiple sole-offssole-off s sell-offs related to a weak real estate. bonds backed by the mortgages. mixed those ingredients together and you got a credit crisis. along with that came your big sell-offs. in the wild summer 2011 we had a combination of debt ceiling concerns in the u.s. topped off with an s&p credit rating

downgrade and liquidity concerns in europe which led to a steep sell-off that. was a nasty one. same with the declines related to the battles of democratics and republicans and the nasty sequester. if you go back in time we had the meltdown in nasdaq in year 2000. where many stocks just kind of folded up and disappeared. in each sell-off we had sectors with companies immune to the actual cause of the sell-off like the drugs and foods that rallied strongly after the nasdaq fell apart in march of 2000. what an opportunity that was unless you were mesmerized by the dot-bombs of the era. look at the companies that caused the sell-off. they're probably broken. in 2007 that meant everything touching housing, mortgages or any lending. if you are looking at a company part of the reason for a correction, you are looking at a broken company. those companies are directly in

the blast zone. they might be certain to be obliterated. then there is another group of companies not as bad as the first group but radioactive. these are are companies that might not be directly related to the cause of the sell-off but whatever caused the sell-off should cause these companies to make a lot less money going forward. earnings will be hurt. banks were in the blast zone in 2008 and 2009 they almost all became victims. they couldn't be own tlud the crisis. a company does not break because its stock goes lower. in 2007 a great example would be many of the great infrastructure stocks that would get marked down with everything else in a sell-off or the oil companies, our agriculture. none of these businesses was going to be directly affected by the credit crisis. that meant businesses weren't necessarily broken. in 2011 many buying opportunities of companies that didn't have the worries over the potential default of the u.s.

government. how can a mexican restaurant chain get hit off italian box? it happened. how about companies that did no business with the government? how about the defense stocks didn't go down because their budget is doing pretty good. there was often a connection to the causes of the sell-off and yet these stocks get hit we need to think about this. what we did, i came up with something that will help you. i call it the bristol-meyers syndrome. what does that sell-off cause by a cypress bank failure or a mess in the ukraine or federal shutdown or endless greek crisis have to do with the price-to-earnings ratio of bristol-meyers? most likely nothing, which is why it's probably time to buy that blue chip quality drug company. it worked every time since 1983. put another way, you don't want to buy stocks leading to the decline. look for stocks in areas that are independent of what's ailing the market. even if you think you are

approaching a bottom and worst performers are about to become the best performers, that is rarely a safe bet. not what i want you to do. once a company breaks it's difficult to mend. that is only more true for sectors which control half the stocks. here's the bottom line. in a sell-off there will be stocks that have clear reasons for going lower and ones that get sold along with everything else. first are broken companies. avoid them at all costs. the second group are just made up of broken stocks. that's exactly where you want to be. still on "mad money," the opportunities created during a marketwide sell-off how to zero in on stocks worth buying. and practices that could be a cause of concern if you are looking to invest. why you should be worried watching some stocks rally. yeah. bad stocks. "mad money" will be right back.

welcome back to the special edition of "mad money" where i teach to you navigate so-called market corrections, brutal decline in stocks that would ordinarily leave even the best of us in tears. if not heading straight for the dirty linoleum floor with only a brief layover at the liquor store to pick up cheap scotch to

wash our troubles away. that's one way of handling a big market down turn. not the way we do it on "mad money." not if we are underage. we've been over the big picture stuff. how sell-offs are part of the process. have to be relies on by every good investor. you have to circle the wagons around what you really like and leave the stocks you're not enthusiastic about in the dust. i talked about telling the difference between damaged stocks and damaged goods when hunting for bargains during a sell-off which is exactly what you need to be doing. you need to go hunting. a correction is just a mega sale on stocks. now i want to get more specific with the methods to my madness. tell but a couple of types of stocks that i specifically like to hunt on days that are really down. the more brutal the sell-off the more attractive these stocks tend to look to me. first, i like to find stocks that have pulled back from their highs during the sell-off. the new high list is always a

great place to go hunting if you are looking for good investments. you generally don't end up to the new high list for no reason. stocks hitting new highs also tend to be expensive or thought of as expensive. you might love the company and think the stock is a great buy. and this is what big declines were made for. you look for stocks that get knocked off that new high list and maybe get pushed a couple of percentage points down maybe 5%, 7% off their 52-week high because of the marketwide correction. you are likely to find a lot of very good merchandise. not all will be worth buying. some stocks that come off their highs will be going lower for good reasons that have to do with the company. maybe they are damaged goods. then there are other stocks that could only be dislodged from that list because market conditions got so horrible that everything went down at once. when you find a stock that actually needs a correction to take it down genuine wall street gibberish for huge decline on the averages you've probably got something wonderful there. not all the time.

you'll have to use your discretion for each individual stock. usually the ones that get knocked from their highs by a correction will be the stocks that recover hardest and fastest from the carnage unless they are part of the reason for the carnage. a damage company sits under that damaged stock. that is not a place you want to go near. that it's first group of stocks i want you looking at while out there bargain hunting. you should have at least one stock pulled back from its highs on your sell-off shopping list at all times, which is what i'm trying to teach you to make here. you want a list of stocks you would buy if the market took a nose dive tomorrow, even if you would ordinarily take a pass because they are so darn expensive. when the decline does come you'll be taking advantage of it rather than being a hapless victim. there is a second kind of stock to keep your eye on during a sell-off. these are stocks that sell with huge dividends. dividends that become a whole lot more attractive to the share price as it goes lower. yield goes higher. just like you should be watching

the 52-week high list for stocks you buy on the down turn. you should be keeping your eyes on stocks you would buy if their dividend yields were higher. a market correction will give you higher yields because it will send the stock lower. pardon if you know this already. i'm trying to reach everybody though. including second graders. 3-year-olds who like the noises. the dividend yield is just the size of the annual dividend say $1 divided by the share price, say this is a $20 a share stock. $1 dividend divided by $20 share. that's a stock with a 5% yield. as the price goes lower, the yield goes higher. remember that. sometimes you have a sell-off so severe you get what i call ahy, accidental high yielders. meaning stocks that didn't ever seem to be dividend plays but have fallen so hard so fast that their dividend yields become meaningful or a trampoline for a good bounce back when times get better. they tend to get better. i know dividend investing isn't

sexy at all. believe me when i tell you nobody woke up unhappen why it next morning after bringing home a stock with a big dividend. trust me. especially when you're looking at a big decline. you want to get more conservative. you wants stocks that are guaranteed to put money in your pocket. that's what a dividend does although remember there are no guarantees any stock bounces back. don't buy a damaged company because its dividend skyrocketed. if it's a damaged company and not just a stock hurt you can bet that company might cut its dividend. we have to avoid that which defeats the purpose of hunting for stocks with new attractive dividends. a good rule of thumb if you are trying to tell if a dividend is reliable, look if earnings are profitable. if they are twice the size of the dividend payment, the dividend should be reasonably secure. telco companies have joint cash flows. this will do it for you bottom line a sell-off is an opportunity to buy. especially stocks that pulled off their highs and nice yields that have grown larger thanks to

the decline in the overall market. these are the best places to bargain hunt in a decline of any magnitude. i'll be right there alongside you trying to spot them. let's go to jana rose in new york. >> caller: hi cramer. long time listener. i wanted to know how interest rates will affect my dividend stocks? >> people will immediately sell higher-yielding stocks when rates go higher that. happens every time. bonds offer more attractive yield with more safety. you swap out the alleged safety of some stocks and go for true safety in bonds. i personally like growth and i like yield. therefore, i would not be a seller of these stocks. it's what happens in the marketplace. it always has. it's happened since '79. get ready and act accordingly. don't be shy. jason in new york. >> caller: hey, jim. how you do? >> how are you? >> caller: i'm doing great.

my question is i have a lot of friends that do real estate investing for the monthly income. how can i do that with stocks so monthly income with stock market investing? >> i have to do a statement. there are stocks that offer monthly income. the ones that i know i'm not that fond of. i've got to find new ones particularly in the partnership sector. the ones that were doing it can unfortunately turn out to be the more dangerous ones. >> this market presents gifts to you all the time. when there is a huge sell-off use it to spot bargains to get in on stocks you should be in at prices you like. coming up on "mad money," when it comes to shopping for stocks do you go up against the all-powerful index funds? how you can get your take on the averages and come out on top. if you are getting ready to get back in the game sometimes the warning signs aren't so obvious. all the details when a rally could be a red flag. you tweeted, i'm answering.

xçó0 now there is an entire

cottage industry of pundits devoted to telling you you will never beat the market, you cannot win. it's simply better to put your money in an index fund than invest on your own. i get that. if you don't have the time or inclination the pundits will be right. your first $10,000 should be saved in an index fund. nevertheless i also believe you can beat the averages but only if you know what you are doing. using the precepts we teach every night here. this is particularly important to keep in mind after a sell-off period. that's why i do "mad money." i spend so much time trying to educate you about stocks and how the stock market works. again as i always say, i want you to be a better investor or better client. if you can't get advice do it with an index fund. if you can do the homework feel free to pick stocks after you put away that $10,000. if you want stocks but can't do the work hire a professional p hopefully someone with good word

of mouth. i'm devoting tonight's show to the most important lessons i learned in three decades of investing and trading. these will help you avoid some of the worst mistakes and pitfalls of investing. especially when times are tough on the battlefield. i have a rule i want to bring back from "getting back from even." i wrote that after the recession. to help you avoid getting burned. don't put faith in buybacks. they sound great, don't they? they aren't created equal and aren't places to run to in a sell-off, even though you think it's a nice trampoline underneath. in fact, many buybacks disappear when times get tough and can't be relied upon as we saw where the oils came crashing down in 2014. a lot of oil companies walked away from buybacks. i used to believe large buybacks where companies repurchase their own shares something that reduces the number of shares outstanding and boosts earnings per share were almost always

worthwhile. bad buybacks were the exception. they are a way for companies to avoid share shoulders with cash a return to you of the money. i like dividends more because of the superior downside protection and preferred federal taxation status. buybacks over the years have become increasingly popular. companies spend about $1 trillion buying back stock over the last few years and that's money i thought would have been better paid right to you. unfortunately, these buybacks haven't given us the value we thought they would in many cases. in some cases, they turned out to be huge wastes of money. when you see a company with large buyback and puny dividend be skeptical. in the wake of the 2008 crash, it's not hard to find companies that squander their money buying back stock at higher prices leaving shareholders with nothing to show for the billions spent buying back stock. for example, here is a group i like now but they spend a lot of money doing the wrong thing, the health maintenance companies.

they are good performers since the affordable care act. they've always been stingy with cash and elected to buy back stock even if that would have been a lot better if they give you the great yield they could have offered. that is the best combination in the market. low interest rates and uncertain growth. seeing the tech stocks which buyback stocks absurd prices. that did plague cisco, the big network equipment seller until it decided to boost its dividend which led to the stable higher run that stock had. that was a shrewd maneuver. intel did the same thing. buying endless amounts of shares. then aegressaggressively instituted a dividend poll system the worst offender is exxon which buys back more stock than any company in the world. has little growth. that's why it is my least favorite in the group. i don't tell people to sell it. it's got a great balance sheet, whatever. i like higher dividends and

buybacks together why. do executives like buybacks more than dividends? since the company's earnings per share is net income divided by a number of shares it can be a great way to create the perception of growth. it's just earnings growth. that's been the case with many of the old pharmaceuticals and consumer packaged goods companies. they would be actual anemic growth. you can see low single digit revenue, not a lot of growth for sales, and almost no growth and yet low teens earnings growth for many of these stagnant businesses. that's right. the sales aren't doing anything but because of the buyback per share go up. other companies don't seek growth opportunities. they decide it's worth it to keep buying back the stock. give it to shareholders in dividends, please? we want the income. what about the notion a buyback can cushion the stock's fall in a bear market ensuring there is always a buyer ready to purchase stock. the evidence says otherwise. short sellers or ordinary sellers in a panic can almost

always overpower any company's buyback. especially as there are restrictions how many companies how much stock a company can buy on a given day. a dividend creates meaningful yield support. dividends repel short sellers because they have to borrow stock and pay the dividend themselves. remember, they borrow the stock first to sell it short. whoever borrows the stock must pay the dividend to the real holder. you want futility in buybacks? no group was more aggressive and irresponsible when it came to buybacks than the banks leading up to the crash of 2008. buybacks didn't do anything. they didn't hold the stocks up when faced against rapid fire onslaught of short sellers. soon as shorts were armed with a new-found power to bang stocks down over and over again without waiting for a lift the buyback as support gain it was over. gave you little to no downside protection. even worse with the banks. they bought back all that stock. then they had to issue tons more

in order to meet the regulators demands. power to short stocks was created by short sellers by the securities exchange commission when it appeared in the uptick rule that. made short sellers to await above market prices before they could offer stock. you couldn't stop these guys with the biggest buybacks in the world. especially when fundamentals were deteriorating for some of the largest and best banks out there executives try to call bottom by announcing major buy backs. these attempts at babe ruth-style called shots almost always fail. turn out to be a big waste of your money. the executives trying to call the bottom turn out to not understand the way the stock market works. they should watch the show or they don't understand the way their own stock works. at least as well as you would expect considering they work the company. they pour fortunes trying to create the appearance of a bottom while their business is still in decline. the rare exception? apple led by tim cook which

buys back a tremendous amount of stock meaning they are in on dips. they buy back with a brain. yes. that's about the best buyback i have ever seen. it's accompanied by a terrific dividend to boot. that it's combo i want. it has the best products manufacturer in the world. disney is extremely opportunistic. it bought a ton of its own stock back during the ebola scare in 2014. and autozone. always been a buyer on weakness. it shrinks the float and also has worked. buybacks by themselves are no reason to own a stock and sometimes reason to sell it. even worse, spending money it doesn't have on an activity as

fruitless as repurchasing its stock to call a bottom. you shouldn't rely on the largest buyback to prop up a stock if the situation is dire. the way i see it these are false signs of health. too often just a darn waste of shareholders' money.

now, after a sell-off in order for stocks to reverse and move higher they need to have fuel. the fuel necessary for a rally. what that fuel what is it? it's cash. so if the fuel comes from retail investors taking money off the sidelines and putting it to work back in the stock market after the decline, i like that. money is flowing into stocks with mutual funds buying and hedge funds desperate to own stocks rather than shorting them, you are in the land of the 1,000 bull dances. you don't have to worry about future rallies. you don't need me for certain. that's when everybody seems so smart. long as more dough is flowing in the stock market it's easy to find groups of stocks that can go higher. when that money is flowing into stocks as the businesses are

turning around you've got to buy the dips each time they occur. i'll talk about it at night, don't worry. it can take a long time for regular people to become accustomed to putting their money in stocks again after a serious sell-off. it's scary. with no money flowing to the market or even with outflows you can have powerful moves in the stocks in sectors that are trying to assert through leadership in the turmoil. the fuel to make those moves happen can't just come out of thin air. it's money and it has to come from somewhere. if people are still reluctant to invest, the money will be pulled out of the least exciting least interesting groups of stocks as investors swap out of them and swap into the ones with power, the sexier names, the ones with more lift. people owning food and drugs stocks will sell them to raise cash. this churning move is called a rotation. we've seen quite a few rotations since the market bottomed in 2009. without new money flowing in the advance becomes zero sum. ultimately can and probably will

run out of fuel. as soon as the selling in the defense of staples comes to an end, leaders will run out of steam. there is not enough left to drive them higher. when investors are reluctant to give capital, you can get a rally in the wrong stocks. that's right. the stocks that signal slowdowns or even recessions. namely the food and drug names used as fuel during the previous advance. these stocks can become the market's new leaders. all the cash investors pulled out of them can be poured right back in. the big money thinks another down turn must be ahead or food and drug stocks would still be going lower. no matter that it just might be because these nondurables are getting so cheap they represent great value. a rotation could be at hand. i want you to be ready. you never want to see consumer staples roaring higher in a sustained advance where they are the only ones going higher. it means people think the economy is going to get worse or

simply stay in awful shape for a long time to come. that's why one of the most horrifying things you can see in the stock market is a powerful rally in the so-called wrong stocks. what are the wrong stocks? think about altria coca-cola, general mills. if that's all that's going higher, that's trouble. the bottom line there is nothing more disconcerting than watching a beverage or drug stock plow harder without understanding the damage it's leaving in its wake with the rest of the market. until and unless there are vast sums of money, you need to be more cautious and less aggressive when you see the defensive food and drug names do the job as generals and leaders. watch the sector leadership to help give you a read on macro sent me. to time when to expect more of a sustain rally. look for opportunities to buy high-quality names where the stocks and not companies are broken. beware of management tactics like buybacks that artificialry

prop up stock prices to see the stocks go down from unstoppable high frequency bombers. remember, the coast isn't clear until the vast preponderance of stock groups goes higher. that's when you know it's safe to go back in the water. after the huge run we had in the averages, you know what? maybe it's something worth waiting for. "mad money" is back after the break. attention investors! vectorvest mobile is here and it's free! make faster, smarter better trading decisions with vectorvest 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

my fingers hurt from battling all the trolls.

my new trash control campaign. if only there was an easier way to answer all the nice tweets. let's give my poor hands a break and give you the answers you deserve. let's start here. i let my nose run when listening to @jim cramer on @mad money on cnbc because when i sniffle i miss something. may i suggest that you get some mad money kleenex snul? you'll be at sync with what i am saying. any benefits to purchasing silver over gold? not really. silver is a much less worthwhile commodity where gold is getting harder to find. i believe actual bouillon is a good insurance policy that hasn't paid off in a long time. you have jump-start made addiction for investing early on in life. your valuable knowledge in

energy is inspiring. thank you. i want you to tweet that every single day for the rest of your life. it makes up for the trashing trolls i have to worry about. thank you for your comments. you should have a short video made reads angry tweets against you. that would be interesting and funny to watch. we are going to do that. we are going to do that regularly. there is a guy who does it on tv that's very funny. it looks like @q1us has a dilemma what to do? have enough stocks in the portfolio, but too much cash. can't add to position without violating basis. help. at actions alert.com, you have to wait. i know it's painful. you've got to wait. don't violate basis. in 2014 i violated basisnd and it was not a good year. or not letting stocks come down enough to make the next purchase

meaningful. i like to space out the buys. here is an idea. maybe you could develop tech to charge your apple watch from your personal energy level. i want one of those self-charging tables from integrated devices. that's what i really need. my financial advisor always warned me about watching the market every day. it's more frustrating than ever. okay. i like to check in on the market if i were on vacation or whatever. don't be obsessive about it. that is not what you are trying to do. you are trying to buy good companies with stocks that are good at prices you like. just to watch it all the time doesn't make that happen. much better to do homework and find the next idea. asking me for information how to do homework better it. use google but i think there are many better techniques.

i have written whole books about how to do homework. the best one is still "real money." my most recent one which is "get rich carefully" has a whole segment, the longest chapter, about how to analyze stocks. i think that can really help. of course, stick with cramer. >> mr. cramer love the show. >> we appreciate you out there, man. >> boo-yah. >> learning so much from you. >> boo-yah, mr. cramer. >> you hear this all the time jim, but thank you, thank you, thank you so much. >> this has been my best year by far and away in the market. >> i want to thank you for looking out for the regular guys out there. >> i am trying to teach people to be better investors. i am doing by darned best. that's the goal here. >> great to hear your voice and know you're there for us.

when you do business everywhere, the challenges of keeping everyone working together can quickly become the only thing you think about.

that's where at&t can help. at&t has the tools and the network you need to make working as one easier than ever. virtually anywhere. leaving you free to focus on what matters most. cramer! you are super. you are awesome. >> i'm a first-time investor. >> thank you for inspiring me to get in the game. >> your show is the best. i am so glad you're on tv. >> you have transformed me. thank you, cramer. >> i like to say there's a bull market somewhere i promise to find it for you right here on "mad money." i'm jim cramer. see you tomorrow.

>> the following is a cnbc original. >> come along on a ride with us. we're about to take you to a place unlike any other... >> let's go. >> all right. >> ...where marijuana is legal and the scent of money is in the air. >> first time i've smoked a joint in a long time. >> go ahead and take it easy. it hits really smooth. >> and i no longer have to feel like a criminal. >> that's right. >> i'm not doing anything wrong. >> kevin and rachel are pot tourists, oh, so happy to be a mile high. >> welcome to colorado. >> in colorado today, the start of a brand-new industry. >> this is by far one of the biggest stories happening in the world right now.