>> our time has expired. thanks so much for watching. i'm melissa lee. for more "options action" check out the website optionsaction.cnbc.com. meantime, again, sunday night 7:00 p.m. eastern time, "markets in turmoil." to get you ready for what could be another another roller coaster week on wall street. have a great 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". ium other people are trying to make friends, i'm just trying to save you many. so, call me or tweet me @jim cramer. arduous, nasty, jumpy and even when it's good, it feels bad,

doesn't it. will the fed move or not? maybe one of the metals are oil, is there an emerging market and the domino game like the ones we saw in 1997 and 1998. when the crushing obscure curancies. and the shanghai stock exchange is the first thing i check when i wake up in the obscure hours in the morning. and then it was europe and then futures. now, it's china and the need for the shanghai composit to hold above this magical line in the sand. people worry if that crucial level is breached, for multiple days and it could trigger an appeal of the nine month rally.

and that could trig ardecline. i think that's going to happen. if the shanghai composite index keeps getting crushed, our market will go with them. my suggestion to whoever's running the bureau of higher stock prices roith now, threat market come in a little bit every day for the better part of the month. the less damage, the more people can get out, the more whole china will become. next up on tuesday, we hear from best buy. cell phone sales and apple watch sales. i don't know how much best buy will be able to talk about the watch, you might get a decent chance to actually buy some apple if you don't own some. apple's become an emotional stock. there are plenty people who want it lower. and why do we do that?

because, you know what, at 11 times earnings, if you back out the cash, i don't mind owning the stock. okay. now, let's go on to tole brothers. it's i think frankly, the one housing that stock that could still help this whole group. it's been the brightest spot in the company. the gross margin is bigger than expected because of the cost that go into a home. i wish they'd mention this pure house. wednesday, defining moment for hostage sectors. wednesday is the day you got to worry about because these are good stocks. let's start with brown-forman. i'm running out of groups that work in this market, and one of them is liquor. the two favorite brews, which

will still be in business if china goes to 500. then, there's are avago. this is in the midst of acquiring brodcam. and since we're on endless china watch these days, you can only imagine how much power this quarter will have to damage the semi semicondur semicondurkt. will i -- williams-sonoma and lowe's talked about, and i hope williams-sonoma will say and we also get results from pvh and it could turn the portions of calvin cline in europe.

the strongest remaining parts of this markerate foot wear companies and food names, smukers on the same positive path,o think good things. we're going to see good things from tiffany as well. i didn't understand why they were so bullish, frankly. so i wondered how tiffany can escape that negative pull. i'm worried about that quarter. dollar general, game stop, ultrasalon and zoe's kitchen. if any of these stocks gets hammered ahead of the earnings, i would pounce. zoe's is a beloved mediterranean food chain and some think it's the next chipotle.

dollar general is one of what would be two dollar chains thet caught the eye of the frugal consumer. that said, the stock ran up in the last quarter and then sold off. so, don't get your hopes up unless it's down ahead of the report and if it's up, sell it. finally, we get personal income and selling data on friday. you need to see that income is not doing that well. why? we have to have the declare the rate hike a free zone. the ill advised rate hike would cause havoc. and hopefully, we'll be over sold and it will still matter. or keep your darn bat on your

shoulders. these days, it's just too crazy to start swinging at any old pitch, even if it looks like the hanging curve that you could take 440 feet over the left ceptor wall. michael in new york. michael. >> caller: i've always been told as i trade, to trade well and not to make money, the money will come and my question is when, if ever is it good to put all my eggs in the one basket. either i'm right or right out. >> the show is "mad money". it's the money that you could lose. don't sink or swim. look i own facebook and google but you don't want to be in there owning all growth or

value. you wauncnt to have a mix. that's the way we teach it. robin. >> caller: thanks for continuing to generate giggles, this market certain lae isn't supplying for any currently. >> this is one of the least fun markets i'm glad you mentioned that. >> caller: recently you said banks are a good investment. my one bank stock is one of the few that isn't swimming in deep dark red right now. in fact, it's holding up above all of its moving averages, looking like it's waiting for rates to pop next month. so, what is your thoughts on bofi holding? >> people looking for bank stock that have other things going for them besides interest rates. i think that's a good one. a lot of the bank stocks lost a huge amount of value and that

one didn't. you know what that says? it's stronger than the rest of them. overseas troubles could give us some bargains next week, but be careful.

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♪ this show, this show is based on one heretical idea, that it's possible for you, if you work at it to make more money investing for yourself than you would hiding your money in bonds or mutual funds, which we favor. and they say ordinary people can't invest for themselves and shouldn't bother trying. but i know from experience 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 and you tell me about your big wins and i know it because you tweet me @jim cramer on twitter. and not everybody is up to it.

but in order to be a good investor, which i know you can be, you have to understand what's going on behind the scenes. that's why i'm devoting this show to educating you. before i can start teaching you and you can start learning about stocks. there are some myths that need to be demolishes. one of the most is that the market is always rational. that the action always makes sense. that's simply not true. stocks can go up when they should have gone down and vice versa. as i always say, never forget that the market can often be stupid for whole sessions of trading and i see it happen around here at least once or twice a week. and it's our job in the media to make sense of what's happening

and sometimes we try to find the logic when they're just tales told by idiots. never assume that just because something happened it's supposed to make sense. that's nonsense. on a day to day basis, the market does some crazy things. they don't make any sense lat. because once you start cook up connections where none exist, you're in trouble because then you're going to believe in anything. when it occurs, you want to take advantage of the irrationality. not buy into it by chasing stocks or panicking out of them. remember, no one ever made a dime panicking. the kind of day that just annihilates people, they will have stocks go down and hence the opportunity.

hedge funds 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. and that's why we've been known to play bob marly's "redemption song." and you want to see what happened to me when i had my margin call, read my book monopoly and may. and they have to raise the cash to buy their shares but that's not something top of mind for you, it is for me because i was a professional trader. mutual funds just don't keep the cash on hand to make these kind of investments. and we can can participate in a meaningful way without selling the stocks they have.

and they either become too afraid to buy or get blown out and start dumping stocks themselves. all of a sudden aerveverything down across the board and the media is trying to explain reasons, they conkaukt theories, they get too negative. and i actually describe what it's like to live through in almost all my books. i was embarrassed, in confessions of a street adic in the great sell off of 1998 and i was responding to issues much more hedge fund related than actual events. i need you to understand the emotionalism of the selling. and we saw hedge funds exaser bait moves and not just in stocks, it can happen in kmau y

commodities too. oil should have gone lower and not spiked to the highest level ever. only after that insane rally did we find out that a couple of hedge funds had been selling it short and they had to buy in their shorts or end their positions as they faced certain redemptions or their demise because their investors were pil pulling the money on. and then oil fell in a straight line and hedge funds had to cupitchilate and it was the mirror image of what happened when the was higher. the most common mistake you can make these days is to say it deserves to trade at a given level. that's just an act of fiction. when i first started trading, we measured the stocks of what the

company might be worth, this is 1979 we're talking about. how much cash does it have, does it make a lot of money off of what it elises and then the market in all its infinite wisdom, they put stocks together and we developed an instrument that traded, say the snb 500 and they started to trade together in lock step sometimes, whether the prospects were good or bad, positive or negative. it's only gotten worsen more cumodatized every single year. and homogenizing them like they're corn or wheat wasn't limited to just this country. and uth countries were cumodatized. something happened along the way that changed things drastically. money managers, hedge fund managers were able to pull vast

amounts of money together, so large that they dwarfed individual stocks and if they tried to buy individual stocks, they would buy all the shares. so the hedge funds gravitated and instead of individual stocks, which are much bigger and more liquidity than individual stocks and they developed a group thing. they started to trade in sink with each other. they all spit out the same exact programs, the algurhythms. and so many hedge funds bought the exact stocks and futures and they did it with borrowed money. when many were whipped by events they didn't see coming, they had to sell everything because they were positioned wrong. their very survival was at steak. i told you it was going to

create an artificial buying opportunity. not everything deserved to go down, lot of the companies were doing fabulous and didn't deserve to go down at all. this continues to happen till this day. they're not pieces of paper that actually represent shares with different prospects. we saw most recently, the spring of 2014, when they're hit with huge amount of stock. so, the next time you see everything go down or certain sectors collapse and before you try to cook up excuses for why the moves make sense, ask yourself if we might simply be seeing the results of hedge funds gone wild. the bottom line, the market doesn't always make sense. and 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 and take heart and realize that their irrationality could be your big opportunity for big profit. andrew. >> caller: real quick, i'm a big fan of yours and my mom who deserve as big hallelujah booyah for beating cancer. would you advise against me butting my first bits of money into a few safe stocks long-term investing. >> lot of people think me as someone listing individual stocks, do or die, i want that 10,000 saved for and then you

can take those shots here. long-term invest funds. irwin. >> caller: it's irwin in brooklyn. i've been playing in the stock market about 35 years, i didn't start making money until i started listening to you a few years ago. i have an account with $100,000 in it and i have five issues in that portfolio. is there a proper way to bal thns portfolio because it turns out i have half the money in one issue. >> this is a great question and first of all, it's a high commodity problem. you probably made a lot of money in one stock. you have to trim. when i was up 25%, i would take some off. now it's 50%, take some off.

always with the idea that you're going to play with the house's money and it can take many years to get there. i say continue to let it run and trim only. no one ever got hurt taking a profit. john. >> caller: greetings from mountain west and many thanks for your investment guidance, it has literally paid off well for my family. a while ago you walked us through the peg ratio as a fundamental ethic and you stated that you rarely bought a stock that carried a peg ratio of greater than 2.0. can you walk me through how you use it -- >> all i'm trying to do is find situations that seem over valued in relationship to the s and, p is selling. and there's two kinds of stocks that get over valued, either because their earnings in the out years are going to be

tremendous. i'm fine with those. and the ones that are over valued because they're fads and that's what the peg ratio says sell, sell, sell. don't listen on the nay sayers. i think if you work really hard and do research, you can make money in the market. if you don't have time or inclination, i'm fine giving it to professional.

♪ when there are huge losses in the market, you'll have opportunities to buy good companies that have gone bad because the market turned down. you're going to hear me say buy broken stocks and not broken companies. a really serious correction, everything will indeed go down. and certainly a lot of stocks that don't deserve to decline. and the big question is how do you tell a difference between a broken company that's not bouncing back and a broken stock that could be a golden opportunity? help leading you away from broken stocks. in 2007, we had multiple sells

related to the market and the collapse of companies that issued margages and the shell shellacking of companies that issued mortgages and that came a credit crisis and that brought the sell offs p. a offs. and a steep sell off and increased volatility. and same the w the endless declined in 2012 and 2013 including the government shut down in that nasty sequester and if you go back in time, we had the meltdown in nasdaq where many stocks just folded up and disappeared. in each of these sell offs, we had they were immune to the actual sell off, like the foods that rallied strong after the nasdaq fell apart and what an opportunity that was unless you

were mesmerized by the dot bombs of the era. look at the companies that caused it. they're probably broken. in 2007, that meant everything touching housing or any type of lending. and you're looking at a broken company. those companies are directly in the blast zone and they might be certainly to obliterated. then there's another group of co companies, still radio active but not as bad. and what ever caused the sell off, and while barngs were in the blast zone, almost all the financials became victims. they couldn't be owned through the crisis. a company does not break just because its stock goes lower though. in 2007, a great example would be many of the great

infrastructure stocks or the oil companies,ing ing a rag rucultt meant businesses weren't necessarily broken. we saw this in 2011. or in 2012 with domestic companies brought down by eupe european. and how about all the companies th did n busess with the government but got shut down due to the seester. an there was often wasn't a coecti to eauseof t sell off and yet these stocks tt, s we need to think about this and i ce up wit someing that i think will really help you. and i cal i the bristol meyers syndrome, wtoeshat sell off csed a crus ban

failure gre cris hav t do with the earnings of bristol mers? probably nothing. which is probabl why it's time to buy that blue chip company. it's worked every time since 1983. you want to look for stocks in areas of what's ailing in the market. even if you're approaching the bottom and the worse pour formers are going to be the best performers. once a company breaks, it's hard to repair. here's the bottom line, in a sell off, there will be stocks that have clear reasons for going olower and others that get sold along with everybody else. avoid the broken companies at all cost. the other group is made up of broken stocks and that's exactly what you need to be. still ahead on "mad money," how

to zero in on the stocks worth buying. and why you should be worried watching some stocks rally. yeah, some bad stocks. i'll give you a heads pup. a new season brings a new look. a chance to try something different. this summer, challenge your preconceptions and experience a cadillac for yourself. take advantage of our summer offers. get this low mileage lease on select ats models, in stock the longest, for around 269 per month. starts at 6:30 a.m. - on the (vo) rush hounose.und here

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♪ welcome back to had special edition of "mad money" where i teach you how tonavigate so called market corrections. the brutal declines in stocks that would ordinarily leave even the best of us in tears. if not heading straight for the dirty lunolium floor with only a brief lay over at the liquor store to pick up some cheap skauch to wash our troubles away. it's not the way we do it on "mad money," especially if we're not of age. and stocks relied on by every good investor, you know you have to circle the wagens around what you really look and leave the ones you're not enthusiastic about in the dust. and hunting for a bargains

during a sell off. and that's exactly what you need to do, go hunting. but now i want to get a little more specific with the methods to my madness. tell you about a couple types of stocks that i like to hunt on, on days that continue to be down. and 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 when you're doing investments. stocks that are hitting new highs also tend to be expensive or thought of to be expensive. and this is what big declined were made for. you look for stocks that get knocked off that new high list and get pushed down because of the market wide correction and

you're likely to find a lot of very good merchandise. not all of it is worth buying, some are there for good reasons, maybe they're damaged goods but then there are other stocks that could only be dislodged from the list because marke conditions got so horrible that everything went down at once. you know what, you probably got something wonderful there. not all the time, you'll have to use your discretion for each individual stock but usually the ones that get knocked high because of their correction will be above the carnage, unless they're a reason for the carnage. that's the first group of stocks i want you to look at while bargain hunting. you should have one thatsd rr

pulled back from its highs at all times. you want a list that you would buy if the market took a nose dive tomorrow, even if you would ordinarily take a pass on them because they're ordinarily expensive. and there's a second kind of stock to keep an eye on and these are stocks that sell with huge dividends. dividends that become a whole lot more attractive as the price goes higher, just like you should be watching the 52-week high list, you should also be keeping your eyes on stocks that you would buy if their dividends yields were higher. pardon me if you knew this already. i'm trying to reach everybody. including 2-year-olds and

3-year-olds. the divdnd yield is and -- $1 divdnd divided by $20 share. you always to remember that. and sometimes it gets so severe that you get accidental high yielders. meaning they have fallen so hard, so fast that their divdnd yield and they tend to get better. i know divdnd investment isn't sexy at all but believe me nobody ever woke up unhappy. and you want to get more conservative. you want stocks practically guaranteed to put money in your pocket. and that's what a dividend does.

if it's a damaged company and not because of the sell off, then they're going to cut their dividend. which defeats the purpose. and look that company's earnings or profit. if the expected earnings are twice as high as the dividend. and bottom line a sell off, it's an opportunity to buy, especially stocks that have just pulled off their highs and stocks that have grown larger thanks to the overall market. these are the bestplas to bargain hunt and i'll be right there beside you trying to spot them. janet rose. >> caller: long time listener. i wanted to know how interest rates will effect my dividend stocks. >> people will immediately sell high yielding stocks when

interest rates go higher. because bonds can offer more safety. so, you sell out the alleged safety and go with bonds. i like growth and yield and i would not be a seller of these stocks but it's what happens in the mork market place and it's happened since 1979. so, act accordingly and don't be shy. jason. >> caller: hey, how you doing? >> all right. how about you? >> caller: great. i have a lot of friends that do real estate investing with the monthly income. how can i do that with stock market? >> i have a to do a segment. the ones i know i'm not that fond of. i have to find new ones. and the ones that we're doing t unfortunately, turned out to be

some of the more dampgerous o ones. when there's a huge sell off, use it to spot markets at prices that you like. coming up on "mad money," when comes to shopping for stocks, you dare go after the high interest and if you're ready to get back in the game, sometimes the warning signs are not too obvious. and i'll take some of your tough at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good.

it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda. everyone loves the picture i posted of you. at&t reminds you it can wait.

♪ 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. and what that fuel, what is it? it's cash. so, the some of the fuel comes from retail investors who are taking money off the side lines and reinvesting it. i like that. and with hedge funds desperate

to own stocks, then you're in the land of the thousand bull dances. y you don't have to worry about where the fuel for rally is going to come from. as long as more and more dough is flowing into the stock markets, you have to buy dips each time they occur. and 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. and with out flows, you can still have powerful moves in the stocks and sectors that are trying to assert their leadership in the term oil. but it can't come out of thin air. it's money and it has to come from somewhere. so, if people are reluctant to invest, it will get pulled out of the least inertesting stocks

and they invest in the more powerful ones. this kind of churning move, it's called a rotation and we've seen quite a few since the market bottomed in 2009. without new money flowing in, the advance often becomes zero sum and ultimately can and will run out of fuel. the leaders also run out of steam. there's not enough left on the side lines. and when investors on the side lines are reluctant, you can get a rally in what i call the wrong stocks. that's right, the stocks that signal slow downs or recessions. namely the food and drug names that were used in the previous advance. all the stocks that investors poured out of them can be poured right in.

no matter that it just might be because these nondurables where getting so cheap they represent a great value. you're never really want to see any of the roaring higher when they're the only ones going high, because it means people think the economy is going to get worse or stay in awful shape for a long time to come. that's why one of the most horrifying things you can see is a rally in the wrong stocks. i want you to think about coca cola, general mills, if that's all that's going higher, that's trouble. until and unless there are vast sums of money coming in from the side lines, you i need to be more cautious and les aggress e aggressive. every time you see the big food

and drug companies do the job as generals and leaders. in the mean time, look for opportunities to buy high quality names where the stocks and not companies are broking. and beware of management tactics, like buy backs, only to see the stocks go right back down. remember, the coast isn't clear until the vast preponderance of stock groups goes high and that's when you know it's safe to go back in the water.

♪ my fingers are hurt from battlingll the trolls, my new trash troll campaign. if only there were an easier way

to answer all the tweets. oh, i have a tv show. let's give my hands a break. let's start with even after i get it. when i sniffle i miss something. well, you know, may i suggest that you get some mad money kleanex. that way you'll be in sink with what i'm saying. and they're wondering, are there any benefits to searching silver over gold? not really. gold is getting harder to find and i believe the actual boulian is a good insurance policy that hasn't paid off in a long time. here's one from @tiffany done, your valuable knowledge and energy is inspiring. i want you to tweet that every single day for the rest of your

life because it makes up for a lot of trashy trolls i have to worry about. and here is @1 m 1 chan 1, why not. and it would be interesting and funny to watch and we're going to do that. i think there's a guy who does it on tv who's very funny. it looks like@cube one us has a dilemma. i have a enough stocks but not enough ca enough cash. i know you have to wait, i know it's painful but you have to wait. in 2014, i violated basis and it was not a good year. i ince pale attribute that to violating basis or at least not leth stocks come down enough to make the next purchase meaningful. remember i like to space out the

buys. maybe you could develop tech to watch your apple watch from your personal energy level. i want one of those self charging, cordless tables from idti. that's what i really need. here's @dmj 343. it's more frustrating than ever. i like to check on the market if i'm on vacation. don't be obsessive about it. because you're trying to buy good companies and to watch it all the time doesn't make that happen. better to do homework and try to find the next idea. and this is asking me for information on how to do research better. i have written whole books about how to do homework, the best one

is still "real money." and my most recent one, "get rich carefully" has a whole chapter, the longest one on how to analyze stocks and of courses,

♪ i like to say there's always a bull market somewhere, i promise to try to find it right here forria on "mad money." i'm jim cramer and i'm see you next time.

>> narrator: in this episode of "american greed"... america is at war, and david brooks is making millions. brooks says his bulletproof vests save troops' lives. but what brooreally wants to save is money. >> "you have to reduce the pay. you have to produce more. what's all this quality-control crap?"a >> narrator: and those bulletproof vests? they aren't all that bulletproof. >> the vest failed, and someone who was wearing it could have been killed or severely wounded. >> narrator: but david brooks doesn't look worried. he's got money to spend -- on parties, vacations, racehorses.