amgen. >> you're both on the same one. >> yeah. >> okay. okay. no pressure to be different then. dan. >> hyg. it sets up for a good risk/reward. >> on the basis that? >> that options are 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." my job is not just to entertain you but to educate and teach you, so call me at 1-800-743-cnbc or tweet me @jimcramer. ah-oh, this is it. the week i am truly dreading is upon us. the one where you're up all night, studying the evening

earnings reports, or if you're like me, you hire someone to sleep for you during this period, only to fall behind terribly in the morning conference calls. this is the week where there's so much confusion. so much cacalf any of sound that the market stumbles under its own weight. that's why you should have cash going into next week. we've told the club that subscribes to the newsletter, raise some quash. some things occur during this next week, the rush partner season. and they rarely earn much in the way of upside. in other words, it's usually a very bad week for the bulls. believe me, it won't start out that way. we kick things off on monday with the conkblom rat we've been raving about for years.

now you can expect the difficult to understand quarterly read. because danaher just spun off a company. i expect an announcement that they're about to use the hepatitis franchise, i know gilead doesn't like that it's down. texas instruments, quietly reliable company. tuesday's huge. this one's always a day there's too much going on. we get caterpillar first. and i bet the machinery lamaker will have some many dplimers of hope and i think europe and china are stronger than expected. maybe there's an ever so slight

turn in that business. we also hear from mcdonald's, this stocks was sinking for weeks. the first from the relatively new ceo. he's got to walk a fine line. why? because sales at the company's japanese stores have been boosted by pokemon go toys. i'm not kidding. that's something that literally turned the stock around, but it won't be included in these quarterly numbers, because the promotion didn't happen in time. pokemon go is a phenomenon that won't affect the quarter that's finished. what about 3m? it seems unsustainable. i doesnn't know hwhat they coul possibly say. if you don't own 3m yet, please don't buy it. i wonder if verizon will give us

any insentive for the iphone 7. speaking of apple, we're going to get a dose of my own apple philosophy. because i think the company's going to have another no-growth quarter, and i think the bears will be out in full force, saying negative things the moment that apple reports. worse, the stock is now run up into the quarter on chatter that can't be all that bad a quarter. believe me, it can be. i've been waiting for the soft analyst, the ones who have the faux buys who don't like the stock. i've been waiting for them to down grade the stock. them you may be able to buy it at lower levels. sure, maybe expectations are finally so low that apple makes sense, that thesis hasn't worked with the stock for a while now. i can't imagine it could work this time.

i imagine it can hurt the overwhelm market. wednesday we hear from boeing. and i think this is also suspect, given the sales of wide-body aircraft sales. boeing's still one company with a stock that has ignored the bloated inventories of the bigger planes. i don't want you to own it going in, because in the stock market, ignorance is not bliss. well, mohammnth leez, you mightt to take profits in norfork southern stock. i don't think norfork southern's ready to call a turn in the key cargo, something that hurt union pacific's earnings when it

reported yesterday. after the close, we get reports from one of the most beloved, facebook and whole foods. facebook has rallied so strongly, it is hard to ma'imag it will put up the kind of numbers. meanwhile, whole foods will talk about the 365, smaller format, it's going to talk about how that gamut is working, and i think we're going to like what we hear. plus there's less competition these days. we know the company's been vigorous in buying back stock. then we get bristol-myers. and i recommend some before and some after. it is not as good as j&j, but nobody is anymore. after the close thursday, we're going to be judge being the two most difficult tech stocks,

alphabet, former lly known as google and amazon. i like that the expectations, the bar was set low, however, almost every day since then we've heard it might be a better than expected quarter. low bar goes to high bar. i hate that. i'm very concerned that you're going to get a one-two punch, bad apple troubling alphabet. don't get me wrong, i love alphabet. i just wish it hadn't run up into the quarter. although when it comes to running, amazon is the poster child. i'm worried it might spin the jets. it needs to take share back online. the first serious attack on amazon it's ever seen. as i told you on wednesday night, everything has to be perfect for the stock to be rally after the reports, and i don't know if perfection is attainable. i'd simply be careful. two more stocks, and again i'm

concerned about, you see a pattern here, chevron and exxon. i say come on, you think that oil's booming here, given these runs? that's hardly the case. i want exxon to explain why it's bidding for a small oil company in new guinea. why did they snap up some oil producers when they were so cheap. they believe the price of crude is going to go as high as david demshire told us. boy, would that help the stock market. so here's the bottom line. i don't like the setup going into next week. this week of earnings season coming up has historically had subpar on stocks. you want to buy stocks, my advice is wait until the end of the week.

i believe if we get better than expected numbers, we'll tread water. let's go to joe in new jersey. joe. >> caller: hello, cramer, i'm over here in ortly beach, enjoying the ocean breeze. >> tmy question is on kellogg. i like the 2.5% dividend, balance sheet looks good, should i hold onto it in? absolutely. i think they're getting more natural and organic. i think it's a nice, steady eddie company that's not up to its potential of what it could earn. next week, hold onto your hats. i don't like the setup. on "mad money," the tools you need to keep your portfolio healthy in a wild environment

like this one. you're going to know, you're going to want to know what i have to say on this stuff. plus, what role should a precious metal like gold play in yo your portfolio? stay with cramer. don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #mad tweets. send jim an e-mail at cnbc.com or give us a call at 1-800-743-cnbc miss something? head to madmoney.cnbc.com.

hey there. hi, i'm looking for a deal o an iphon.. was thinking, something alonthese nes. oh, okay. we, how about this? here's my answer. 's just me with happhands. it jusmeans takit. rit now, buy an iphone and get another one free when y add a second line.

in the face of crushing declines, uproarious rallies and plain jane days in the market, we must always guard against our own human emotions which often get the better of us when everything's going well in the stock market. and when things are going badly, they seem to grip us totally. when things are too good, we

tend to take too much risk. and when things are going terribly, we despair and leave the stock market entirely. it's a fact of life. and over the years, even as stocks have climbed and cleemed, there have been swoons, i mean, real swoons, that drove people out. and they wanted securities that give you little or no return. then they watched the big gains from the sidelines. we have many reasons to be disenchanted. there's the blight on stocks when they were cut in half from 2007 to 2009 or the facebook ipo or the insider tracing cases and the obvious situations where stocks went down, down, and down some more. and it's clear someone knew something and you didn't. i validate all these feelings right here, right now. but the fact is, stocks remain the only game in town.

maybe when the economy gets strong enough interest rates will go back to normal levels and we can own a smattering of stocks and bonds. but it's not occurred yet. and until it does, we need to have our money work for us. we are like the old avis ad here, we have to work harder to make our money fgrow. that's what tonight's show is about, how to make your money grow in a more responsibly way. it's like "get rich carefully." what suffuses this show for years and years and years is the notion of prudent, personal investing, but we call the shows episodes here, why? because each one is written and thought about as a different entity on its own, and i recognize because it's something that we, meaning me, are very proud about, this is an episode about better investing for you. now, this show is about managing

your own money, or being a better client, if you have a full-service broker helping you. if you don't want to manage your own money, over the years i've become around to this view. i've been perfectly happy with you buying an index fund, or one that represents the entire s&p or has a smattering of all stocks. i've become a little jaundiced about mutual funds. so many times they're about earning money rather than working for you. if you don't have the time or incl inclinati inclination, i bless holding your hands up and buying an index fund, but i now maknow ma you tune in because you want to own individual stocks. maybe it's a way to grow wealth

because you think you can do better than an index fund. in the many years that we've been doing this show, nthousand and i mean thousands of people have called me or e-mailed me, that they've done better. the rise of twitter has validated this principle. what we are doing is giving you directions about how to pick your own stocks and not take on too much risk. normally the way we say to do that is to be diversified. and usually in a way that could be easily derailed in a down turn. now, you know that i can't cover all the stocks in the world. i mean, sometimes i think people think i try. but i can't. that's why i often use shorthand to tell the story. do i really want you to own five stocks? no. it would be better if you had a

minimum of ten or no more than 15. we have done many shows about what homework entails, but you know it means knowing what the company does, what you're looking for, what the analysts are looking for, how it's doing, and why it's doing it. homework's time-consuming. that's not the purpose of tonight's show. i want to give you ideas that there are classes of stocks within the stock market that aren't just by sector. i'm offering tonight a new kind of diversification that can help guide you toward what kind of stocks i want you to have if you're going to manage your money yourself. like so many are, you wouldn't be tuning in. let's go over your mind set. if you're going to manage your own money, you have to recognize the value of humility. so please repeat after me. sometimes i'm going to be wrong. come on, say it. sometimes i'm going to be surprised, and not in a positive way. and one more. sometimes my stock picks won't work out despite my disciplines. look, i of all people understand

that humility doesn't come natural to everyone. but staying humble is important. other than greed, nothing has cost more money than arrogance. you have to accept that you are going to be wrong. sometimes more times. that's where i am coming from when i talk about this new diversification, diversifying among sectors isn't enough anymore. you need to work harder. my new diversification recognizes that to be a little new age we are at one with the world. stocks around the globe trade, in good and bad times, and that's impacting our stocks in different ways. and electronic funds, etfs link ways in way i never thought of when i started "mad money." you need ones that report the

errors and pit falls of geopolitical events to our shores. again, i have had to change. i never used to care about the machinations of washington. but it's a great recession, we have had leaders who directly intervene with the markets and the worldwide lynn kanl, it's not our politicians. who would have thought that we needed to know what the european central bank was? what it was going to do, rhet l alone the name of the person who runs it. it's been decades. who would have thought a cold war would be back on the agenda. we need to protect ourselves against these new intrusions that we didn't concern ourselves

with when i started the show. and it's a changed world, and how to pick in a changed world. five different areas that you need to have covered for maximum protection. you need some gold. i know, it can be a complete dog. i've been there. we're going to talk about that too. it can function as insurance, if the world really goes bonkers and inflation really does come back as the hedge funds keep saying it will. you need a growth stock, something spectacular and something from a healthy geography. cover all five bases and you'll have a portfolio that can win in any market. i'm going to teach you how to analyze stocks in each one so you can fill every position with the best-possible names. the bottom line, a good investor in this new world always knows to expect the unexpected. that means keeping your portfolio diversified, and it means following the new diversification for maximum

protection. you need gold, geographically safe stock. stick with cramer, and i'll tell you how to pick the best place. diversification is the spice of life. you need a high yield, a safe stock. i'm going to help you find the best of each on tonight's special show. stay with cramer!

tonight, i'm teaching you a novel, a novel way to fill those five slots in your portfolio that i always talk about, the five types of stocks that now represent what i call the new diversification, not just by sector but by style and strategy, so if executed correctly, you'll always own something that works and holds your interest, keeping you in the game, even when it feels so excruciating that you don't want to continue playing. while at the same time making sure that you have some positions which can go much higher when times are good. what's the most important category? i've got no question about this. in a world where central bankers raise rates from low levels you can't get enough income from bonds or certificates of deposit to live on. you need a stock that gives you a good yield. you need to own a stock in at least one, possibly more, with a big, high-yielding dividend, owning two or three, yeah, high yielders? but no more than that.

it can actually be a good thing. they're not the same. i wouldn't go on five high-dividend stocks, because then you'd be extremely vulnerable. you could get hurt. on "mad money," we always respect the bond market and the power it holds to influence stocks. if we don't, we being imprudent investors, and when interest rates rise, particularly if they rise fast, they will get smashed. we've seen this time and again. with a new diversizatie cation,e seen that a telecommunication company like verizon -- you could have all three at the same time. the favorable tax rate on dividends could go away. and give the fixed income

equivalences a real whacking as it did, biv ty the way, in the spring of 2013. if you own one stock with a really large yield and another yields decent dividends, that's not a bad thing. i know dividend stocks are not sexy, but they make you money for heaven's sake, and to me, that's the definition of sex appeal. in reality, i have a pretty warped social life. so i might be a tad skewed. reinvesting your dividends back into the stocks is one of the greatest, most reliable ways to make money out there, plain and simple. it allows your money to compound over time. over time, the money from your past dividends pays dividends, provided you keep reinvesting. there's a huge misconception. people think high yielders are only about safety or generating

income in your retirement. if you go back to january of 1926. do that about 40%, 4-0, from the s&p 500 has come from the re-invested dividends. wall street gibberish for growing your money. don't i own it. i own a charitable trust. where i have to give away my income at the end of the year. hurt the fund, i don't get the money. charity does. dividend stocks aren't merely a place to hide when the market gets rough, although they do represent a safe haven in difficult times. they're not just for retirees who carry about capital preservation. investing in high yielders is first and foremost one of the smartest strategies for making money, and it's laalso one of t

safest. it eventually gets to a level where it's too attractive for most investors to ignore. that's why i like to talk about accidental high yielders, ahy their share prices fall so fast so far. it happened during a financial crisis, and we've seen it happen in big industrial stocks hammered by european woes and a debilitating china. once the yield hits 4%, they have a magical way of stopping their down turn, and they often turn out to be fabulous, long-testimony blong long-term bargains. as a dividend hike, it's one of the strongest significance nals

a company can send about its business, and it's a company you can be pretty darn sure won't be cutting that dividend anytime soon. observati oh, come on, cult t it after yo raise it, that can cost a ceo his neck. stability, which is why i always emphasize my love for what we call the dividend aristocrats. johnson and johnson, long history of dividend raises. but other than accidental high yields and dividend boost, how do you analyze a high-yielding dividend stock? just when you're learning to drive, you have to think safety first. high yields are attack triracta. and, you know, it takes away,

let's put it this way. you need a rigorous safety inspection of if the, if the dividend is sound, maybe the company can raise it too. but if it seems ep dangered, no, huh-uh, it ain't worth it, people, you got to stay away. consider the cost of these bond ash traunlts funds. they were based on strategies that involved buying gigantic amounts of bonds with borrowed money! when rates shrunk, these variable rates were crushed. don't take the bait. there was nothing accidental about these high yielders. it was a red flag, sending a signal that payout would be reduced. why risk losing? we saw that happen a few years ago with radio shack and

supervalu. they had huge dividends. supervalu was able to bounce back, but not before protestation by management. so given that i am biased against what seems to be too-good-to-be-true high yielders, we look at the earnings per share. we know it can sustain dividend, even in lean times, when you think the earnings are going to shrink. in that case, i think you're home free. if not, you need to go to step two. you have to look at the cash flow, especially in dealing with companies with a lot of machinery or heavy capital investments which leads to high depreciation and amortization costs. think of verizon, at&t. they can't afford that yield, wait a second. these depreciation amortization

costs don't come out of a company's actual cash. the cash flow can give you a better idea about the health of the dividend. i know on twitter, people ask me how i can be optimistic about this. if you can't understand the concept of cash flow, please, i go over the drill. maybe you need to stick to earnings over share. there isn't a lot of debt coming due. if money's coming due in the near future and the company can't raise it with the bank or the public, it may necessitate a dividend cut. you need to know how to collect the dividend. on "mad money," we care about one dividend. i call the must-own date. the last day you have to on a stock to claim a payout.

it's the date before the x date. that's all you need to know. bottom line, if you want the old-fashioned sector kind, if you want to be prepared for every market out there, you must own at least one high-yielding stock. diffidents protect your stocks and are a terrific way to make money. what's not to like?

the discipline of a new diversified portfolio always, always trumps your convictions about where stocks are headed. by never having all your eggs in one basket, you won't have the agony of all your eggs being crushed when they get run over by a truck. it has nothing to do with parochial schools or the establishment clause in the first amendment, which you know i could live without. when a company has secular growth, it means unlike cyclical smokestack growers, so critical to stocks going higher, the earnings for secular stocks

aren't hostage to the economy. and they'll keep op ex papding even during a slow down. when you get your hands on a slow-sector growing, they will go higher and higher, for as long as the stock lasts. think of apple, google, facebook. how do you find out what's growing well? when we buy a stock, we're paying for a company's projected future earnings per share. we have to learn the algebra. we know we need to understand this, pause we need to compare stocks on an apples to apples bases. apples not worth less after a 7-1 split, is it? here's the simple algebra price.

the p equals the e, times what's no known as m. what's the multiple we're going to pay? the priced earnings multiple is the key, tells us what investors are willing to fork over for a company's future earnings. the vital ingredient that has the most effect on the size on the valuation special sauce is -- the company's growth rate, which is why i'm constantly talking about growth of sales and earnings. we'll play a bigger multiple fo. often you'll hear people say this stock is cheap. that means it's cheaper than the average stock in the s&p 500, the bechbs mark for all stoblgs,

and yet it grows faster or more special than the average stock because of a catalyst about to occur. we use this pe ratio as the backbone for much of what we do when we think of a stock being a bargain in "mad money." as a general rule of thumb, when it comes to a high-octane seller, the stock can grow at a multiple twice the long-term growth rate, before it gets too expensive for the vast majority of money managers who determine the pricing, basically, so if the company's growing its earnings per share at a 20% clip, these guys would pay as much as 40 times earnings. unless there's something seriously wrong with the fundamentals that we don't know about or won't find out about until later. maybe we're in a nasty market that soured on growth for the moment, even secular growth.

it makes the multiples on all growth shrink. by the same token, lower rates make growth stocks more attractive and cause their multiples to expand. we call more for that. or in the spring of 2014, when so much supply hit the stock market, in terms of new offerings and secondaries, particularly for growth stocks like biotech. the buyers were overwhelmed and what happened is the cloud internet and biotech stocks almost all familiar terltered. these stocks can soar to new high after new high, but remain cheap as long as the analysts who cover them keep raising their earnings per share estimates, and they've got to do

it quick. a stock like facebook can double in the course of a month. and thennin -- but be very, ver careful, paubecause you're play with earning momentum. if it looks like the growth is decelerating, i got to tell you, it looks like what's at the bottom of this. it's like driving a fast car right into a retaining wall. the moment one of the these companies stumbles, the stock could fall faster than you could ever imagine. kwns the great chipotle dropping more than a quarter in a day. when in july of 2012 it reported a disappointing quarter that suggested the company might be

more vulnerable to economic weakness. the bottom line, to build a portfolio that can work in every sector, it's worth if to pay up for a company that's continuing to accelerate. once the momentum of a stock slows down, it can shrink for ages before it bottoms. and most people's patience can't hold out that long. you need a fast grower, preferably a secular growth stock. stay with cramer. & in a w held back by compromi, businesses neethagity too one thing & anher. compromi, only at&t has the network,

to hcompanies be... peolopen & secure.rs

tonight, i'm focussing on different types of stocks, and showing you how to put together a portfolio diversified by strategy, a toolbox with something that can work in any and every market, no matter how tough. so far you've talked about dividends and growth. what else is essential for a truly balanced portfolio? how about something to keep you focussed? something to keep you interested. in my view, you always want to

own something heretical, something speculative, speculative is expected to be a bad word in the business, except here in cramerica. not only is it okay for you to open these tempting, risky stocks, it's a necessity, as long as you follow my rules and speculate wisely. you need something speculative in your portfolio as a tonic against boredom, with a huge amount of upside if things break your way. there's also an undeniable mystique to owning something that trades in the single digits. they allow you to stay engaged and make it easier to keep your head in the game. you always hear the speculation is the height of irresponsibility, but i say a portfolio without speculation, without a long shot is a portfolio that won't capture your fancy, one that la hawill you bored with your money. and you're just not focussed

enough to do what's right with the rest of your stocks. now speculation doesn't just keep you interested. when you do it wisely, with the right rules and disciplines, these stocks can generate enormous gains in the light of often more well-none companies that are deemed safe. did you know that in the home d failed the first time. these were brilliant specs. some of the biggest wins in my career came from speculation. you can see some of them, i detail them in "real money." of course the corollary is true, too. when done wrong, swimming in under $10 waters can lead to truly gut-wrenching losses. i am not crossing over the risk

here. there are two kinds of stocks to trade in single digit territory. the hated stocks of troubled companies that have been abandoned and left for dead and the relatively undiscovered companies. you get a yn enormous j edge. you're benefitting created by overly pessimistic worrywart money managers. they don't want to own single digit stocks. they think they're too dangerous. they think they will be questioned by their clients about why they own this junk, why they risk money foolishly. they fear the stocks that look broken. like sprint, which we identified at $2, rite aid. th ramifications of owning

single-digit stocks that go kerf lch ker sprint had so much debt and b buyers -- what trickled down, remodelled stores were doing better than the older ones, and we saw how well rad was doing with relabeled merchandise. it all came together with a spec. when the fundamentals start to turn, so many of the big boys won't come near them at low levels. i like it at 4, but what about at 8? we're not trying to catch a turn around. we're trying to look for sectors

that seem like they can capture the imagination of the crowd, the next hot fad. that's okay. we're allowed to look at fads, too, that will sweep through the wall street fashion show. sometimes the fad will be backed up with actual earning power. we saw it again in the tiny oil companies that turned out to be sitting on huge oil and gas holdings. or fda approvals for important new drugs. these speculative situations do often have the life cycle of a m mayfly though. don't get burned when interest wanes. cut some of it down. second, your losses, those, you got to cut before they become too large, when a speck you

thought would work wasn't panning out, just leave it. when you speculate, you're not trying to find a stock you can buy and hold forever. you want something that's going higher. as long as you can ring the register, it doesn't matter if it comes down later. the essence of stupid speculation. we saltd for example we liked hi max and sell dex. when lightning struck, we said take all the gains, please. they subsequently cratered, and we never looked back. although callers called my and said you loved it. we loved it for trade the. the bottom line, you need something that's a key part of the diversification. something that will stave off boredom and potentially allow you to rack up huge gains. just because a stock trades at $3, doesn't mean it's three-card mon monty. it could be a triple waiting to happen. "mad money" is back after the break.

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all night i've been preaching and teaching, trying to help you build a diversified portfolio. you will always own something that's right for the moment by falling what i'm calling the new diversification. when i originally came up with the idea of the new diverse any

ca -- diversification. i think we've got to do a little refining of the concept. what you really need is a stock in a safe geography. i'm talking about an actual company that's based in a foreign country, but at other times when the rest of the world seems to be falling apart and the united states looks pretty darn good by comparison, you need a stock that gives you domestic security, something entirely confined within the borders of our country, because in those days, being exposed to the rest of the world can be down right dangerous. you can own a company like at&t, verizon, con ed or duke.

dollar general, macy's isn't overseas, or how about tan jer factory outlet. the whole point is that in times of international turmoil, this slide in your portfolio should be filled by something that is all domestic. in times of domestic turmoil, you want to own a foreign company. here's the bottom line. always own a stock from a safe jgeograph geography. and believe me, i think you're going to want to go domestic, at least for the foreseeable future. mad money is back after the break. pih you vestment opportunities. i'veot fantastic deal for you- gold! with t right po of investors, there's a lot money to be made. but first,nvestors must ask the right quesons d use the smarheck chaenge to make the rit decisions.

buyou're nveregisteredt i'm ne with you!esons savvy investors eck their finciaprs backnd bvisiti smartcheck.gov will your busiss be rey when groh estself? amicanss on cards cann he you tb or fila g order

or expand yourffice and take on whatever ces next. nd out hmerican exprs cards and services there you have it, the new diversification. i promise there's a bull market somewhere, i promise to find it for you right here on "mad money." i'm jim cramer, see you next time!

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