tv Mad Money CNBC July 28, 2017 6:00pm-7:00pm EDT
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>> tesla >> for sure. >> i think we got through an entire show without saying f.a.n.g. and i appreciate -- >> i said "f.a.n.g.. >> you did >> yeah. >> never mind, then. you ruined my weekend. r me iravels home, buddy outis up we'll see you next weekend at 5:30 p.m "mad money" with jim cramer starts right now have a great somewhere, and i promise to help you find it. "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica other people want to make friends. i'm just trying to make you some money. my job is not just to entertain but to educate and teach you so call me at 1-800-743-cnbc or tweet me @jimcramer. on big down days, we often wob wonder what the heck happened to our stocks
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>> boo >> how did they get hit so hard when nothing happened? the absurdity can seem pretty preposterous market wide selloff makes you think the business of stocks is stupid and at worst corrupt and drives you away from the entire asset class. i wish i could tell you there's some hidden logic to make you think there's -- there's nothing to think of it other than negatively that's why i want to tell you all the ways that stocks can be impacted by forces that have nothing to do with the companies. so you have some grounding about what might be driving you crazy. the absurdity of your stocks going down when nothing happens at the underlying companies. so we're going to pull apart all the reasons your stocks do go down through no fault of your own. that way you're have a more certain handle how to take
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advantage of these market wide declines when you know what you're doing, you can make a decline work for you, not against you bull markets will go down at some point or the other, they always do. but i want you to feel embold emboldened >> buy buy buy >> not -- >> sell sell sell. >> rather than fleeing from the whole asset class out of anger and fear >> the house of pain >> let's start off with the biggest determinative of why your stocks move regardless of what's going on at the companies. i'm talking about the power of the s&p 500 futures over all individual stocks, including ones that aren't that in the index. believe it or not, there was a time when there were no s&p futures. when i started trading in 1979, the only input that might impact an individual stack if nothing hand, no earnings release, no news, no takeover, was sector analysis
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back then we used to say a stock's movement was 50% based on fundamentals at the company and 50% on the sector. but in the early '80s, the brokerage industry needed new sources of revenue they recognized the piles of money institutions were running kept getting bigger and they wanted something to hedge themselves, rather than just constantly trading in and out of stocks, they wanted to put on a hedge against what they owned. so the brokers in the exchanges that worked so closely with each other came up with the notion of lumping stocks together in what amounted to be baskets wheat, soy, corn the brokers didn't give a thought how this decision would impact the worth of individual stocks they were cavalier about it. failing to acknowledge there might be some situation where is the entire net worth of companies could get distorted by the futures. those were the early days of
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401(k)s. rates were about 13% when i got to goldman sachs in the early '80s so much cash was flooding into the stock market it was inconceivable to envision a time when money would flow out of equities. instead, it's a one-way street yet, i can recall working with a really wealthy individual who ran a shoe company back then he called me one day when his company had just been admitted to the s&p 500 at the time, it was considered to be a great honor, a sign you had made it, that your enterprise was thriving. but he called me to complain about something that seemed darn ridiculous at the time but turned out to be quite visionary. he worried all of his hard work could be for naught if the s&p 500 futures went down in value i said that's ridiculous
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his company's stock would stand on its own merits. the very idea that this tail of the s&p 500 could wag the dog of the individual stock was fanciful he disagreed and said there was always be an acquirer lurking waiting for a stock to trade down in value, because it was a member of what i called an illustrious group. he envisioned a day his stock could be stolen, and that had nothing to do with the performance of the company over the long-term, his concerns, spot-on. exactly what happened. of course, didn't happen overnight. but within a few years, it came true much of the damage came from the crash of 1987, where the dow fell 508 points in one day and plunged again the next day if you go back to the aftermath of that period, you'll discover
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four things that occurred. i want you to know these four. one, stocks went from being absurdly overvalued because of endless overseas buying of the futures, by the japanese to absurdly undervalued in a very short period of time because of the selling of the s&p futures going into the crash, the s&p was trading at 29 times earnings and that ended up being slightly more than cut in half over the course of two weeks. nothing happened fundamentally to justify either the rally or the decline. there was no change in the economy to speak of, other than a short term decline in consumer spending because of a common dropoff in portfolio net worth it was almost like nothing happened at all, except for the crash. three, a wave of takeovers did occur, just like my shoe friend predicted. it was the cascade down of all
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stocks that were connected to the s&p 500. something that spilled over into everything else, given that there was little and justified sk sky high valuations. no company was safe from the acqui acquires they were bargains four, in wake of the crash, the big buybacks started i remember when they began there had always been companies buying back their stocks relentlessly, especially exxon but some companies recognized that the futures were artificially depressing their share prices something that didn't go away after 1987, but if anything, became more accentuated. so they began to take advantage of these artificial depressions caused by the futures. i recall having a conversation with the cfo he mentioned he had to do it because the stock had become one of the most football of all stocks, meaning it was constantly being put on sale for no reason at all, other than the
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selling of the s&p 500 futures the cfo wanted an orderly market for the stock, sothat individuals weren't spooked out of it, and he set about trying to create one within the confines of the law. if only other executives had been such visionaries, all this would have been forgotten. but the biggest impact to your stock is often not the company's performance, but the s&p 500 itself the futures basket did corrupt everything, but because of the popularity of the basket, we're never going back to those days where all that mattered to a stock's price was the sector's interaction with the business cycle, along with the worth of the company and the executives who drove it let's go to donna in pennsylvania, donna. >> caller: hi, jim, it's donna so glad you answered my call i have been listening to you for
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many years, before the financial crisis but it was because of the financial crisis i got into the stock market but because of february and all the stocks going low, i wasn't buying i should have been >> right >> caller: but i have stocks, quite a few over the years, that i've come in and out of. i have some that are long-term, some short term, some that are growth, some that are speculative. but what is happening is that it seems like i've spread my mad money over too many stocks >> go ahead. >> caller: what should i do now with so many >> you don't want to be in mutual funds donna, thank you for listening to me, but you just simply can't do it. i have a staff of people that work with me, you don't. ten stocks, maximum you can do otherwise default to mutual funds. don in ohio, don
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>> caller: boo-yah, mr. cramer >> boo-yah >> caller: i have -- was forced to retire at age 59 due to surgery that went wrong. >> okay. >> caller: and i'm concerned with my traditional i.r.a. and would like to know how much of that should be in cash or liquid assets currently, it's 95% stock. >> that's a little too much. i would like to see that taken down to about 60%, no more than that, because bonds yields so little but no less than that, because you still need some growth i would make those changes that's a little bit too aggressive for me, sir i'm sorry that you got -- that you had to leave the workforce because of illness i hope you come back but let's take that down a little that's too risky sometimes the biggest impact to your stock won't be what it's actually doing, it's all about the s&p 500 itself tonight, i thought you and your
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fellow share hoerlds were in this together? not always i'll tell you how to separate friends and foes in this market. then when there's something strange in the company you own, who are you going to call, your broker and which metric should you focus on if an uncertain market? i've got the list and what it means for your portfolio so stick with cramer >> don't miss a second of "mad money. follow @jimcramer at twitter have a question? tweet cramer at #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. we, the people,
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♪ for those of you who wonder how almost all stocks can go down in a brutal decline, even though the blast zone isn't actually connected to the businesses of stocks you own, this show's for you. we've already talked about how the s&p 500 basket can take down any company. even when it has nothing to do with the proximate cause of the selloff. that's how powerful that stock magnet is. what else can cause a stock to get kruscrushed even when the company is doing fine? today i like to look at my co-investors are we tend to get these remarkable periods where some stocks seem to be in trouble, regardless of the fundamentals for example, many of the private equity firms that did deals at
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the height of the great recession, have commitment to shareholders to return capital or keep the stream of dividends going. similarly, hedge funds that are under pressure that have to raise money might have to sell stocks that they believe in. they don't want to, but they have to, to have enough cash to meet demands from investors. both these situations came into play when walgreen's was trading at $81 after reporting a good quarter. you might have been tempted to buy the stock because the company was doing well but if you did that, you would have run into not one, but two huge sellers kkr, the private equity firm, and jana, the hedge fund even though walgreen's was in good shape, fellow shareholders caused it to get hammered. jana sold more than 6 million
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shares at $77.65, another discount next thing the stock can't get out of its own way with shares all over the place if you don't know any better, you would have thought something had gone awry at the company but that was not the case. walgreen's just had the wrong set of shareholders who needed to sell for nothing that had to do with walgreen's itself, which had just reported a stellar quarter. we've seen this happen time and again, during redemption moments that are hard for you to understand, unless you've been in this business remember how the market got obliterated in february of 2016? a great deal of that was related to hedge funds the big give-ups at the end of 2008 came after a bunch of hedge fund when the same play book went bust. and who can forget when carl icahn exited his high profile position in apple and made a point of telling you that it was the chinese business that bothered him he crushed the stock with his
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exit other than his comments, there was really nothing new to push apple lower. i know this because i've been on the other end of it. thanks to a vicious capital call back in the fall of 1998 if you owned my of the smaller regional banks that my fund owned, you know we wrecked those stocks on the way out. the situation was simple came in the fourth quarter of 1998, down a great deal. my first big decline as a fund manager. when i communicated that back to what i thought was my loyal partnership base, a huge percentage decided they wanted their money back >> sell sell sell sell sell. >> i had no ability to say no, because it had been written into their contract with me, that if i opened up the fund for redemptions, everyone had a shot at taking money out, and i had already opened up, because one investor needed the money. when we looked over the portfolio, it was clear that the only stocks we could sell to immediately raise that cash that
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we needed were our 9.8% holdness a host of community banks. and these all had good yields, and takeovers written all over them i liked them we went into each bank, called them, all of which had buybacks and said we needed to sell a large amount of stock and sell it fast. if one of these stocks was at $18, we wanted a $17 bid most of the banks refused to buy. that forced us to go into the open market and unload the stock so that $18 stock became say a $14 stock before the company stepped in and did some buying our holdings were all available for people to see, and each bank started trading down in similar fashion as other hedge funds shot against us. something you can read about in "confessions of a street addict," which is back in print. what a remarkable time once the hedge fund sellers materialized, the brokers joined in and kept hitting down the same stocks.
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they were shorting it. finally, the brokers would come in and say they could pay $10 for a million share block of a bank that had been selling for $14 before liquidation started when we agreed to sell, they covered their shorts on the block of ten, having become natural buyers, because they were short higher. i never forgot it. to this day, we look for that block trading activity, paying close attention to volume. if i see it, the stock goes down down down down, and suddenly a big volume block trades, that could be the bottom. time is of the essence when hedge funds are borrowing money from brokers, the brokers tell the hedge funds they have to send in capital or see their positions margined out meaning sold from underneath them, so the brokerks get their money back that they're owed given the nature of the beast, the brokers are in a footrace to make sure they get their collateral back. that's why you see first selling
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occur around mid morning, as the money has to be wired in by 1:00 p.m. if you're going to keep the margin clerks at bay here's the thing, this type of forced selling can create tremendous buying opportunities for you. but you have to be careful not to be too bold, because you never have any idea how big the losses are maybe they don't finish in one or two or three days not that long ago, the government broke up with what looked to be a done deal to create a gigantic drug company with a lower tax rate. both sides fully complied with the laws then the government changed the law to stop this one deal. immediately allergen, that was supposed to be worth $360, traded down to the low 230s, as traders scrambled to raise cash. it looked like a golden opportunity to buy but the stock then fell another quick 30 points, as the shareholder base kept bleeding
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and bleed ing. you had no ability to tell when the selling would end. that's when you have a combination of huge fends fighting redemptions, you have to expect the pressure to be immense if the deal goes south and not be solved in one day or two or three you know how i say once a company gets a takeover bid, i want you to ring the register on the stock. here's the bottom line keep the thunder of your fellow shareholders and recognize they could be at the heart of the selling of your stocks that has nothing to do with the fundamentals of the company itself these stocks that phallic which dags selling can all heal but the damage can be extensive. much more "mad money" ahead. is your stock facing pressure from inferior companies in the space? i'll tell you why guilt by association runs ram pant. and i've got a word of warning
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to those who own etfs, just ahead. >> what's better than "mad money" how about more "mad money. follow "mad money" on facebook, twitter, and instagram to go one on one with cramer >> what other questions do we have i always tell people you've got to start with an index fund, because i need you to be diversified. >> get more with guests. and go behind the scenes with the most interactiveshow on television >> if youcan't explain in thre bullets why you're buying a certain stock, don't buy it. >> follow "mad money" today. (baby crying)
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when there's no news whatsoever related to the underlying company. we've talked about how the s&p futures have commoditized so many stocks. we've am rised the idea that co-shareholders can be causing you trouble because of liquidation. but how about guilt by association? in february of 2016, we got a rare double-header of pain -- >> the house of pain >> when a small data an it will ti -- an ittics company and linked in reported disappointing earnings and gained outlooks that were frightening. the quarter was damning. meanwhile, lij elinked in talked about how big picture macro concerns were slowing down their cloud subscription business. the results, they were
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devastated tablo's symbol plunged from 81 to 41 in one day but what i want to talk about is the collateral damage to those two. because over the next two days, many stocks that looked like those two got pummelled. the stock of adobe fell from 87 to 73 because it was viewed as a big data play like tableau salesforce.com tumbled from 67 to 54, brutal! and there was no way to refute these declines because both companies were in the quiet period, you can't talk about your earnings. not much you can say it was a classic case of lesser companies pulling down stronger companies. but when you deal with companies that sell into the same arena,
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cloud, social, mobile, you have people that own these things for the momentum, and they can be blown out rather easily. still, when they sold you that buying opportunity, even one of the main offenders, linked in, which ended up going back up, what matters here is when you own a high priced to earnings multiple stocks, it can vital to remember that these high multiple names make up a cohort of their very own. think of them as their own sector, which mean it is you only own high multiple stocks, you are indeed putting all your eggs in one basket in fact, if you had called into this show, i would have said they all trade together, even as you can argue that linked in had nothing to do with sales force and tableau's software had nothing to do with adobe but guilt by association people
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matters, and you have to be aware that it can always happen to your stocks so prepare accordingly and buy more of the ones you like into weakness if you own some of these. they're prone to swoons. because they're expensive and they have no yield support a similar situation can occur when you have multiple shrinkage, meaning that shareholders are paying less for the future earnings of the same company than they were not long ago. so take the case of a household name, clorox it's a well run machine with an above average dividend and slow but consistent quarter you'll often find it reporting an excellent quarter, but sometimes the stock swoons not long after and you won't find a reason. that's because the reason for these declines is that the stock fell and more importantly its sector have been rotated out because of a sea change in the economic landscape nobody wants to own clorox is
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heating up because it's a steady eddie. so what they'll do is reach for the cyclicals. those companies with more earnings sensitivity to the economic cycle if you want to see how desperately this can play out, go back to "confessions oh of a street addict" and read about what happened to me when i bought a significant stake in heinz for my hedge fund. as a sales person for goldman, i loved to recommend heinz you're not going to start eating chinese ketchup. back then i liked i knew heinz cold from recommending the stock, so it was flabbergasting for me to watch the stock sink every day after i bought it. the thing was going down like a
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stone. i made all the requisite calls i read all the available research the franchise doing as well as ever i just sat there helpless. at the time, i had a 0% down clause in my hedge fund, meaning if the fund dipped down by 10% in value, i could open up the fund, give my partners their money back it was a doomsday clause, and i knew that if i hit that number, i was done what i began to realize is the pressure of institutional money management is different than the pressure on you at home. as a broker, i would have had my investors buy more heinz in weakness, because long-term it was an amazing opportunity but when i bought heinz for my hedge fund, i ran into one of these sector rotations the ones that go out of the stable stocks into the more cyclical companies
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alumin aluminum, steel, paper, wood stocks the money was flowing out as well as names of kodak and flowing into cyclicals right before the 10% clause hit, right before it kicked in, i pulled out of the tailspin and sold heinz, and i played the rotational game along with the rest of the hedge fund managers. bowing to the will of the rotation did save my fund, even as it would seem pretty silly. but when you stork keeps coming down, even though there's nothing wrong with the underlying company, ask yourself if there's a larger rotation going on you can cut and run or buy more. if you are an inved dividual investor, do the latter. david in georgia, david. >> caller: big southern boo-yah
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to ya. my question is about takeovers, the 2015 takeover premium was roughly 30%. does it make sense to target takeovers. >> we don't recommend stocks on a takeover basis unless they're doing well in the fundamentals no company wants to buy a company that's doing badly elise in new york, elise >> caller: hello, mr. cramer i'm a senior i would like to ask you a question about index funds i don't know what they are i would like to know the benefits and the risks >> what you're doing is you're buying all the stocks, say in the total return fund or an s&p 500 index fund means all the 500 are picked by the s&p. that way you're diversified. no one stock can bring you down or one sector can bring you down it's a way to bring the risk over 500 different companies and
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i recommend it for people just starting beware of the rotation it can take a stock down no matter what the fundamentals are. but many times that can be an opportunity. much more "mad money" ahead. i'm telling you what you should be paying attention to and there's a major flaw that you should be aware of i'll reveal it plus, your tweets. that's right, go ahead and tweet your question. i might just answer it on the air. so stick with cramer >> trade is not good trade is secular it's not cyclical. i gave the stat to people, 2005, 9% of the fortune 500 companies were from the emerging markets fast forward to last year, 30% of the fortune 500 companies are from the emerging market
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>> we are losing that trade war. it is time to take action to support the american industry and the american people. and beyond just the steel industry we're talking manufacturing as a whole is necessary steel is the bedrock of manufacturing. manufacturing is the bedrock of any strong economy >> our stock price is jumd priced right now we're canadian based we have 25,000 employees in the u.s., more than in canada. and we're also big in mexico but i look at nafta as a trading partner. we need to keep it solid and competitive. because it's asia, it's europe that are competing and nafta has to be competitive. >> our overall national business was up 6%. our markets in europe was up double digits, latin america was up asia pacific was up 18% in revenues we're seeing great growth in china and russia we have a bit of an issue in the uk around the brexit and
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consumer and retailer sentiment and similarly in brazil. but that does not have a bad impact on the overall regional performance. >> in addition to cooking from scratch, they want more flavor you look age group by age group as you get younger and young we are the consumer, they have a higher desire for spicy flavor >> is that nationwide, worldwide? >> that's a worldwide trend. >> our customers travel. we're in all ten canadian provinces, in 49 of the 50 states to serve that customer base, you have to be there
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♪ sometimes the key metrics that control the entire market suddenly change. you have to change with them you have to, or you'll never understand why your stocks are going down when it seems like they don't deserve to. we covered how the s&p futureks bring down anything and the dangers presented by your fellow shareholders and the pressure they can put on your stocks or the woes of other inferior companies in the same sector now we have to deal with the important metrics and how they
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can wreak havoc on your portfolio if you don't know what's going on with them. this all starts with the idea that the business of investing in stocks has fundamentally changed over the last few decades. i got in this business more than 35 years ago, and most investors were known as fundamentalists. they kicked the tires of individual stocks. they perceived if the company had better growth and a long way of opportunity, and if it sold at a price-to-earnings ratio at less than the average stock in the s&p 500, then they bought it with tremendous faith that eventually the share price would go higher. they se as we chronicled earlier, individual stocks became less important with the advent of the s&p 500 futures in the '80s and the way we judged stocks became more hand picked by computers using algorithms to predict behavior
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if you hike the stock of delta airlines, you might like the stock of expedia, the online travel agent it's how money is now managed in this country, billions and billions we have to accept it or we miss out on why stocks move the way they do. as fewer individuals invest in the market and more large institutions take over, this kind of investing has become quite askren dent. one of the hallmarks is to identify an index that can predict what most stocks in the s&p 500 will do. and very quickly train your guns on that metric so if you think that higher oil correlates with economic growth, you'll set up a basket of stocks that does well when the economy is accelerating and you can buy that basket when oil goes higher this happens included in that basket would be
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the airlines there's just one problem, when oil goes up, it's bad for the airlines, because jet fuel is their biggest cost now, initially the power of the algorhitithms is so immense, yol see the airline stocks pop not as much as other, because there are airline researchers out there telling their portfolio managers to dump these stocks, but they'll still go up when they should be going down and the same plays out on the down side. when it goes lower, the economy is getting weaker and the airline stocks will go down on that weakness. these stocks won't fall as much as the others again, because the same researchers will be in there telling the portfolio managers to take advantage of the weakness since cheaper oil is positive for the industry however, the simple fact is that the key metric itself and these traders have made owning some
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groups of stocks beyond mystifying you could own the stock of a company where the earnings are going higher and the to be stocs going lower at the same time it can make you feel like the whole business is impossible i don't blame you. it's much more difficult than the old days it's not like oil will always be in charge. used to, all that matters was bond yields. if they went down, all stocks went up. once the fed raises interest rates, that's good news for the bank stocks so they can make more money off of your deposits. suddenly the financials can rally. when the fed tightened the metric change, if you didn't recognize that change, you rode the stocks all the way up. consider the dollar. i think it's imperative for everyone to recognize when the dollar goes higher, it's just plain terrible for u.s. based
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international companies. it doesn't matter if they're doing poorly or well, they're all losers with a stronger dollar that gives foreign competitors a leg up in terms of pricing and second, when these companies repatriate their earnings overseas, they get translated into fewer dollars so when you see the dollar going higher, it's reasonable to expect domestic companies will outperform their colleagues that have heavy business overseas this is a metric people didn't care about for a long time once the fed starts raising interest rates repeatedly, the dollar backs very important, because rate hikes make the dollar stronger still. some companies have taken the interest rate down so low they've gone negative.
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another metric worth keeping an eye on in this era of low oil prices, on fridays, the bakers used index of oil rigs comes out. when there's an increase in use, the price of crude will most likely go down when the rig count goes down, oil prices tend to go up one final metric that's been very good to follow is the baltic freight index this one measures the announce of commerce in bulk commodities, which makes it a great proxy for the level of activity coming in and out of china when it comes down, you have to believe that the chinese economy is slower. many of the metrics i just mentioned have been given too much power, but because of how important the health of china is to so many companies, there's nothing you can do you've got to keep an eye on it. so if you want to make sense of the day-to-day declines you might be seeing in your stocks,
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recognize the key metrics that seemingly control the whole market, like oil, the dollar, interest rates, and even the baltic freight index would be playing havoc with your stocks, whether it makes sense or not. remember, ours not the reason why, just to accept that these metrics matter, even as the ones that are important can literally change on a dime "mad money" is back after the break.
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♪ any time your stocks go lower, you're always going to be trying to scramble to figure out what the heck is causing the decline. i've told you about a bunch of external factors that can push stocks down. but when all else fails, remember there have been a number of established that allow you to own or short the sector your stocks are caught up in i know people love etfs. so often i hear how you can eliminate single stock risk by participating in one of these.
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i just don't recall the first time i heard about this single stock risk it was about enron, a company that went bankrupt because of corrupt accounting what did enron really do it defrauded investors because it was a corrupt company run by corrupt people i don't have a solution for that kind of an individual stock. but the concept took route, and more investors have wanted to have sector exposure because they thought the sector was going higher and they didn't want to take the risk that they were playing wit the wrong stock. i find this reason to be circular if you want to be in a stock that's the best name in a sector that's growing, not in a group of mediocre stocks what's really going on here? i think this etf is all part of a move by the financial industry to find something that people will invest in and trade in at a time when individual stocks have
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lost their appeal. so there are all sorts of etfs set up to take advantage of every trend, from wind power to cyber security, biotech, broad line retailers again, i rebel against these if you can pick the best of these stocks, i would suggest that you might not know enough about the sector to begin with so if you can't pick the best, you're going to be outsmarted by the etf. it's a terrible thing, it really is worst though, you may have a company that's doing well, but the stock gets pulled down by the weaker performance of a bigger company in the etf. we saw this happen several times to the stronger companies in hack, the cyber security etf, and with the housing, banks and biotech etfs all you want is a company that has the best prospects there's a place for these exchange traded funds. owning fiscal gold bullion is too expensive and the gold
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miners often leave you out in the gold but the price of gold is tracked as closely as possible but i'm against etfs because they create enormous distortions that can obliterate the best of stocks you can find yourself caught in a stock that's pushed up or pushed down by one of these leverage entities that should have never been approved by the government you have to accept more risk if you own a stock that's hostage to a given etf my final words to the wise, accept the fact that at any given time the rules can change. when the fed raises interest rates, people pay less for stocks all stocks it's been ages since bonds have offered much competition to stocks if it's corporates, they may yield more, but you can be taking on more risks think about all the billions
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lost in municipal bonds. watch the debates in states that pit pensioners against municipal bond holders and while it may not be worth it for you, others will make the switch when the fed raises interest rates repeatedly. as rates go up over time, this will become the biggest theme out there, and the bottom line is that you must be ready for it because while the fed might hold off for the -- up for this or that event overseas, sooner or later it's coming. rates have been down long enough and the great recession is far enough behind us that a series of rate hikes might become the natural course of things in the not too distant future stick with cramer.
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a used car, the energy conscious whopeople among usle? say small actions can add up to something... humongous. a little thing here. a little thing there. starts to feel like a badge maybe millions can wear. who are all these caretakers, advocates too? turns out, it's californians it's me and it's you. don't stop now, it's easy to add to the routine. join energy upgrade california and do your thing.
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time to take some questions from the smartest viewers in television if you've got one for me, send it @ jimcramer here's one, who asked in the '60s we had u.s. savings stamps for kids in grade school what would you suggest for grade school kids today? gary, this is important. i suggest you buy an individual share of stock why? because i want kids to be involved pick a stock of a company that they use in their life so that they will be able to stay current and probably want to be interested in the stock market use it as a teaching
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opportunity. and maybe it will work out, too. now we have a tweet from brad, who wrote, my 1-year-old loves you for some boo-yah reason. and he sent a little video along with it. >> you like cramer >> that kid's got horse sense. next up, question, for small scale traders, how do you determine the number of stocks to purchase to be profitable this depends on how much research you can do. no one is capable of owning more than ten stocks at one time and do all the quality research that is necessary to trade. many disagree with you i don't care that's what i've learned from personal experience. up next, a tweet here asking how to identify opportunities to buy
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quality where the stocks, not the companies, are broken. i detail all the metrics you need, if the companies are beating the metrics, even though the stocks are hammered, that's where your opportunity comes in. here we have a tweet, he's asking what per tent of your savings should be in s&p 500 index fund and what percent should be in individual stocks the first $10,000 all index fund i can't have you pick a stock and lose a lot of money. once you've done that, then you can begin to pick individual stocks in addition to continuing to put money in an index fund. why do i recommend individual mutual funds because the managers change and you don't know what they own first $10,000, index fund. and then the rest do index fund and individual stock, buying stocks you like, buying companies you like and buy them
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on the way down. that's where opportunity comes in the next tweet asking, don't you think it's changing to more data driven decisions that could be the case i don't care how it's changing i'm telling you what i've experienced that works lots of homework knowing the companies. buying the stocks of good companies at prices that are reduced because of trends that happen in the stock market and that happens all the time. remember brexit? next, i'm looking at a tweet here that asks how much assets should you keep liquid ready to invest after a downturn? we often debate this, but i hike to keep a good cash position i've had it be as low as 3, 4, as high as 20. what is your world view? that is what you have to adjust to the short term.
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we make a decision about how risky it seems and take more money out. i think you have to assess your risk and reward. here we have a tweet asking, what is your opinion on dividends? get them in cash or reinvest them i've been reinvesting. that's perfect i want everyone to reinvest their dividends. put them back in that's how you make the really big money. stick with cramer. >> the earnings are relentless, but cramer is ready to run the gauntlet all week, cramer sits down with some of the market's influential players. join "mad money" for must-see interviews you can't afford to miss
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i like to say there's always a bull market somewhere, and i promise to find it for you right here on "mad money." i'm jim cramer, and i will see next time. art schlichter was once a gridiron great. wagner: guys wanted to be him. girls wanted to be with him. he was captivating. he was charming. narrator: but off the field, schlichter's been living a secret life. he was a manipulator, and he could persuade people in doing whatever art wanted. narrator: schlichter's also a compulsive gambler who lies and steals hundreds of thousands of dollars to keep the bets rolling. schlichter: i've conjured up every way possible to pay gambling debts off. it makes you very creative.
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