tv Mad Money CNBC September 21, 2017 6:00pm-7:00pm EDT
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>> amd we mentioned the other night. >> the world didn't get any safer overnight, raytheon comes out rtn. >> i bet sean. >> how about mark? see you back tomorrow at 5:00. meantime, don't go 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. welcome to cramerica other people want to make friends, i'm just trying to make money. my job not just entertain you but teach and coach you. call me at 1-800-743-cnbc or tweet me @jimcramer.
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this show is based on one herdical idea that it's possible for you if you work at it to make more money investing for yourself than you would be hiding out in bonds or even putting money in index and -- funds. which we favor pundits and commentators say it's too hard, ordinary people shouldn't do it for themselves but i know from running a hedge fund you can do it as long as you're willing to put in the time and effort. i know you're succeeding when you stop me on wall street or on the way to squawk on the street because you tweet me at @jimcramer. thanking me for help along the way. not everybody is up for it, i have no problem with index funds. but to be a good investor, you have to understand how the market works behind the scenes
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tonight i'm devoting this show to educating you, sharing important lessons i've learned in more than four decades in the market before i can start teaching you, lessons i need you to unlearn. myths about the market that need to be demolished one of the most perniciousness is market is always rational and action makes sense on any given day can be nonsensical. stocks go up when they should have been going down entire sectors move up for bogus reasons. never forget the market can be stupid for whole sessions of trading. i see it happen at least once or twice a week it's our job in the media to help you make sense of what's happening but sometimes go too far and create explanations where there are none, finding logic behind the moves that are full of sound and fury,
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signifying nothing market is not always making sense. on day-to-day basis often does crazy anything you have to say those moves are nuts if you cook up connections where none exist, you end up in trouble. sometimes the markets go up or down because of reasons that have nothing to do with the underlyi underlying prospects of companies. it's confusing don't buy into it by chasing stocks or panicking. nobody ever made a dime panicking. when we have a pull-back, lot of stocks go down disconnected from the fundamentals underneath. hence the opportunity. hedge funds in trouble start selling not because they want to but they have to raise money to pay back their unhappy clients who are demanding their money
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before more is lost. that's why we've been know to play bob marley's redemptioning on so remind you pick up a copy of the book if you want to see what happened to me maybe there's a red hot deal out there so huge that mutual funds have to sell to raise cash you don't see that that's not top of mind to you, it is for me because professional trader. mutual funds don't keep the cash on hands to make these investments. money over the transom to participate without selling other stocks they might own to have the cash to buy the new ones regular investors see the selling and start to panic, become too afraid to buy or blown out and dumping stocks themselves everything is down across the board and people in the press
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are cooking up reasons to explain why things that don't go down together normally are done at once. concoct theories and get negative i don't think everybody can understand these moves i've seen them many times in my career and i actually describe what it's like to live through in almost all my books i was embarrassed mightily in "confessions of a street addict" in the great selloff of 1998 and -- more with hedge fund related. that's why mentioned the book. understand the emotionalism of the selling. also huge selloffs in 2008/stwent 2009 eras. never forget oil running up as demand was stable to weaker. should have caused it go lower not spike to highest level ever.
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only after the rally can we found out a couple of hedge funds had been caught short. bet against it had to buy in shorts or end their positions at outrageously high prices as they faced demise when investors pulled out. then fell almost in straight line to $30 a barrel had to capitulate and sell at any price to raise cash. mirror image of what happened when it was higher worst and most common mistake you can make these days is say stock trades at level it deserves to trade there. often an act of fiction. first started trading measured the stocks by the prospects of underlying company 1979 what it might be worth to acquirer, how much products, does it sell well?
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make a lot of money? but then the market and great wisdom and government and everybody lumped stocks together in 1980s developed an instrument that strayed s&p 500 and started to trade in lockstep sometimes whether the prospects were good or bad it's gotten worse. more kmod tiesed every year since then stocks trade as unit turning this into one kmcommodi wasn't limited to this country something happened along the way that changed things drastically. hedge fund managers able to pool vast amounts of money together, so large they dwarfed individual stocks so vast if they tried to buy individual stocks would buy all
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the shares they had that much cash, ran so much money gravitated to the s&p futures markets which are bigger and have more liquidity than single or group of stocks hedge fund managers started to trade in sync with each other because of the same tells, computers with the same programs, alrhythms. group think in 2008, so many hedge funds bought same stocks and futures and sold the exact same kmodities and did it with borrowed money events they didn't see coming, had to sell everything positioned wrong survival at stake. at the time the i called it hedge funds gone wild. told you would create a fabulous artificial buying opportunity. not everything deserved to go down, lot of the companies doing
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fabulous this continues to happen to this day. so many hedge funds buy and sell the same way like stocks are commodities, not pieces of companies that spring of 2014, huge amounts of new stock and insiders selling secondaries, good went down with the bad. next time everything goes down at once in the market seeming to move in lockstep or sectors collapse as companies are doing well, before you cook up excuses why the moves make sense, ask yourself if might simply be seeing the results of hedge funds gone wild. market doesn't always make sense, especially daily basis. everything goes down, instead of dreaming up reasons based on the fundamentals of the underlying business but think about whether it's fundamentals of the wall money management business. and take heart and start
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recognizing that their irrationality could be your opportunity for big profits. andrew in florida. >> caller: hey jim, real quick, another big fan of yours, my mom deserves hallelujah boo-yah for finally being cancer free. >> great news. >> caller: question is investors putting first ten k into index funds, young investor with higher risk tolerance would you -- for long-term investing >> no still index fund, won't break that rule. that's what i did. lot of people think of me as individual stocks do or die, i want that 10,000 saved first then take the shots. we're index fund people here long-term index funds, then mad money for individual stocks. irwin in new york. >> caller: brooklyn, i have a
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question, playing in stock market about 35 years, didn't make money until i started listening to you a few yearsing ago, i have a account with $100,000 say in it and five issues in that portfolio, is there a proper way to balance the portfolio? turns out almost half the money is in one issue, what is proper way to balance out the funds >> great question. first it's high quality problem. probably made a lot in one stock. you have to trim when i was up 25%, take some off. now i changed to 50% take a little off, 100%, take a little off. ultimately be playing with the house's money but could take years to get there continue to let it run and trim as you get 50% and 100%.
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trim only. no one ever hurt taking a profit john in idaho. >> caller: greetings from the intermountain west your guidance has paid off well for me and family. pay ratio as fundamental rhetoric, thesis spoke to the buy side of the model and stated rarely buyed a stock with peg ratio greater than 2.0 do you use on the sell side and if so can you walk me through? >> i'm trying to find situations that seem overvalued in relationship to where the s&p i selling in growth rate two kinds of stocks get overvalued, kinds that get overvalued because earnings in the out years are tremendous, fine with those. then overvalued because fads
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that's the ones that peg ratio says sell. don't listen to naysayers. if you work hard and do research you can do well in the market but if you don't have time or inclination, i'm fine giving it to professionals but we can do it together. coming up, type of stocks to avoid at all cost in selloff and let you in on the companies that could be worth buying when things turn south. send your tweets to me @jimcramer, i'm about to answer them on the show. "mad money" will be right back >> announcer: don't miss a second of "mad money," follow @jimcramer. have a question, tweet cramer, #madtweets send an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc miss something in head to
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it's cheap and gets you all the big games. it starts at sixty bucks a month, but jumps to over 100 after 3 months. cool i think? and jumps again to over 150 after a year. noooo... and ends up costing over 3500 bucks over 2 years. you're cleaning that up. don't get caught off guard by directv. touchdown. get the best with xfinity. when there are huge losses in the market you'll have opportunities to buy good companies with stocks that have
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become bad because the market turned down. catch me saying things like buy broken stocks, not broken companies. saying doesn't do you good on its own. in context almost everything goes down. certainly a lot of stocks that don't deserve to will decline, with those that deserve to be lower. how do you tell the difference between broken company that's not bouncing back and broken stock that could be a golden opportunity? tonight i propose to give you new way to look at stocks in big selloff to lead you from broken companies to broken stocks i want you to own. what is broken company 2007, multiple selloffs related to weak real estate market and shellacking taken by everything mix the ingredients together for a credit crisis.
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came the selloffs. wild summer of 2011, debt ceiling concerns in the u.s. with s&p downgrade and liquidity concerns that led to selloff and volatility same as battles between democrats and republicans in 2012 and 2013, including the government shutdown and nasty squefr sequester. and the meltdown in 2000 in n nasdaq, stocks disappeared there were stocks that were immune like foods and that fell off. what an opportunity that was unless mesmerized by the dot bombs of the era 2007, everything touching housing, mortgages or any lending. if you're looking at company
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that's part of the reason for correction, that's a broken company. those companies are directly in the blast zone they might be certain to be obliterated. then there's another group of companies not as bad as first group but still radio active not directly related to the cause of the selloff but whatever caused that should cause them to make less money going forward. earnings hurt. banks in the blast stone but almost all the financials afflicted. couldn't be owned through the crisis company doesn't break just because stock goes lower great example would be infrastructure stocks marked down with everything else in the selloff or oil companies or agriculture, none of them directly affected by credit crisis that caused the correction so not necessarily broken
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saw in 2011, buying opportunities in companies with little to worry about potential default of the u.s. government or 2012 with domestic companies brought down by european turmoil. companies that did no business with the government but banged down by the sequester, or defense stocks didn't go down because frankly their budgets are pretty good. often wasn't a connection to the selloff but get hit. need to think about it i came up with something that will help you. bristol meyers syndrome. what does that have to do with the price to earnings ratio of bristol meyers most likely nothing. probably time to buy that quality blue chip drug company it's worked every time since
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1983 another way, don't want to buy stocks leading to decline when selloff, you want to look at independent. even if you think approaching bottom and worst performers about to become the best as market reverses itself, rarely a safe bet don't do that. only more true for sectors which control half of the stocks bottom line, in selloff will be stocks that have clear reasons for going lower and ones that get sold along with everything else first are broken companies, avoid them at all costs. second group made of broken stocks where you want to be ahead, opportunities created on market wide selloff, zero in on the stocks worth buying and common practice in corporate america that could be cause for concern and why you should be worried watching some bad stocks
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if not heading straight for the dirty linoleum floor with a brief layover at liquor store to pick up cheap scotch to wash our troubles away. that's one way to handle it but not on "mad money," especially not if underage. been over the big stuff. selloffs are part of the process and have to be anticipated and relied on. you have to circle wagons on what you really like and leave stocks you're not enthusiastic about in the dust. and difference between damaged stocks and damaged goods when hunting bargains in selloff. which is what you need to do, hunting. correction sam's club or costco any day of the week but get more specific with methods to my madness. couple of types of stocks that i specifically like to hunt on days that are really down. more brutal the selloff, more
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attractive these look to me. first like to find stocks pulled back from highs during the selloff. new high list is always a great place to go hunting if you're looking for good investments generally not on the new high list for no reason but also tend to be expensive or thought of as expensive. you might lot of company and think it's great buy but not -- this is what big declines were made for look for stocks knocked off new high list, a couple of percentage points down because of the market-wide correction and likely to find a lot of good merchandise. not all good some going lower for good reasons that have to do with the company. maybe damaged goods. but other stocks can only be dislodged from that list because market conditions got to
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horrible, everything went down at once. when you find a stock that needs a correction to take it down, huge decline of the averages, you've probably got something wonderful there. not all the time you have to use your discretion for each individual stock but using ones that knocked from highs in recession recover hardest and fastest for the carnage unless they're part of the reason many a damaged company is under that stock and not a place to go near first group to look at at least one stock pulled back from highs on selloff shopping list at all times. which is what i'm teaching you to make. list of stocks you could buy if the market took a nose dive tomorrow, even if you ordinarily take a pass on them because expensive. that way the decline comes you take advantage of it rather than being a hapless victim
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second, stocks that sell with huge dividends dividends that become more atrackive to the share price as it goes lower. just like you should be watching 52 high list, also keep eyes on stocks you would buy if the dividend yields were higher. market correction gives you higher yields. will send the stock lower. pardon me if you know this already, trying to reach everybody, including second grards and three-year-olds who like the animal noises one dollar dividend by $20 share is 5% yield. price goes lower, yield goes higher selloff so severe you get ahys, accidental high yielders didn't seem to be dividend plays
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but fallen so hard and fast that that yield becomes meaningful for a trampoline for a bounce back when times get better as they tend to do. dividend investing isn't sexy at all but nobody ever woke up unhappy next morning after bringing home a stock with a big dividend, got to trust me. especially look at big decline want to get more conservative, stocks practically grandparented to put money in your pocket. but remember there's no guarantees any stock bounces back don't buy a damaged company because dividend is skyrocketing if damaged and -- company might cut its dividend and that defeats the purpose. good rule of thumb to tell if dividend is reliable, look at earnings or profit at least twice, should be reasonably secure. good rule of thumb but not
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perfect. telco companies have giant cash flows. selloff is opportunity to buy. especially just pulled off highs or gone larger thanks to decline in the overall market. best place to hunt in the decline of magnitude i'll be there trying to spot them jane rose in new york. >> caller: i wanted to know how interest rates will affect my dividend stocks. >> people immediately sell higher yielding stocks when rates go higher. bonds can offer more attractive yield with more safety swap out alleged safety of some stocks and go for true safety of bonds. this is how people think i personally like growth and yield and wouldn't be a seller of these stocks but it's what happened in marketplace, always
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has, since '79 act accordingly and don't be shy. jason in new york. >> caller: how you doing i'm doing great. my question is, lot of friends do real estate investing for monthly income how can you do with stocks, monthly income with stock market investing? >> i have to do a segment on this ones i know i'm not fond of, i have to find new ones. ones that were doing it tend unfortunately to be more dangerous ones revise my thinks this market presents gifts to you you all the time huge selloff, spot bargains, get in on stocks you should be in at prices you like. coming up on "mad money," shopping for stocks do you go up against the all pf powerful index funds?
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plus if you're getting ready to goat back into the game, warning signs are not that obvious details on when rally is red flag plus you tweeted, i'm answering. i'll take your toughest questions. "mad money" will be right back >> announcer: what's better than "mad money"? more "mad money," follow on facebook, twitter and instagram go one-on-one with cramer. >> what are the questions that we have? i always tell people you got to start with index fund because i need you to be diversified >> announcer: get more with guests, and go behind the scenes with most interactive show on television. >> if you can't explain in three boards why you're buying a certain stock, don't buy it. >> announcer: follow "mad money" today. for your heart...
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invest in your own i get that if you don't have the time or too overwhelming, pundits are right. and index fund works for you and i believe first 10,000 should be saved in index fund. nevertheless i also believe you can beat the averages, only if you know what you're doing, using the precepts we teach every night here particularly important to keep in mind after selloff period why i spend the time trying to educate you how the stocks and stock market works but be a better investor or better client. can't get advice, do with fund and if you can't get -- want stocks but can't do the work, hire a professional, with good word of mouth from acquaintances, do the vetting for you. devoting tonight's show to some of the most important lessons i've learned in three decades of investing and trading to help you identify the opportunities
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and avoid the worst mistakes especially when times are tough. right now got a rule i want to bring back "getting back to even" i wrote after the great recession to help you keep getting burned don't put a lot of faith in buybooks sound great but not created equal. and not the place to run to in selloff. think it's trampoline underneath and safety net but many disappear when times get tough and can't rely on. oil plunge, a lot of oil companies walked away from buy backs. i used to believe that large buy backs companies shares this the open market, almost always worthwhile and bad buy backs the exception. they're a way for companies to reward shareholders with cash, return to you of the money but i like dividends more
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because of the -- and preferred taxation status. but buy backs been popular companies spent about a trillion dollars doing that i felt would be better paid right to you in dividend but not given us value we thought they would in many cases and many cases, huge waste of money. when you see large buy back and puny dividend, be skeptical. the track record is better from the rally in 2009 but still not hard to find companies that squandered their money leaving shareholders with nothing to show for billions spent buying back stock but some companies worst than others health maintenance companies i like now huge performers since the affordable care act. but offer to buy back stock.
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that's the best combination in the market in low interest rates and uncertain growth seeing with. tech stock buy backs at absurd prices plagued cisco for a while. directly led to the stable higher run it had. intel did the same thing buying huge amounts of shares. not doing much but dividend policy and terrific rise worst offender is exxon, buys most back but least growth of the companies. i don't tell people to sell that but i like higher dividends and buy backs together why do they like the buy backs net income divided by total number of shares, buy back creates perception of dprouj but
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it's just earnings growth. old fapharmaceuticals, magnify what would be anemic growth. see low single digit revenue not a lot of growth at all for sales and almost no growth and yet low teens earnings growth for some of these stagnant businesses shares not doing anything but buy back, shares go up decide it's worth it to buy back the stock instead. give it to shareholders in dividends please, we want the income but ensuring there's always a buyer ready to perfect stock evidence shows even if it's trying to prop up stock, especially as there are restrictions on how much stock a company can buy on a given day
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dividend does a better job creating meaningful yield support. dividends repel short sellers. they have to borrow stock and pay the dividend borrow first and whoever does that must pay the dividend to real hollered. futility in buy backs no group more irresponsible than the banks leading up to crash of 2007, buy backs didn't do ounce of good. rapid onslaught of short sellers that ham ared down every bank in sight. as soon as not wait are fog lift, buy back as support gain was over little to know downside protection even worse with the banks. bought back all that stock and had to issue tons more to meet the regulators' demands. power to destroy stocks by securities and exchange commission when repealed uptick
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rule which i remember fondly previouslyforced short sellers to wait for above market prices before offering stock. couldn't stop with biggest buy backs in the world, especially when fundamentals were deteriorating for best bonds out there. also trying to call bottom in their own stocks attempts at babe ruth style called shots almost always fail, turn out to be a big waste of your money executives trying to call this turn out to not understand how the stock market works should watch the show. or don't understand their own stocks pour fortunes into trying to create the appearance of bottom while business still in decline. rare exception, apple led by tim cook, buys back tremendous amount of stock opt tuneistically. buy back a brain about the best i've ever seen
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and accompanied by terrific dividend to boot that's combo i want. also the best products in the world. disney 2, opportunistic, bought stock back in ebola scare in when the crushed because people worried. ceo wasn't worried, buyer. auto zone, always a buyer in weakness buys its own stock and shrinks the float and also has worked if you look at long-term chart. buy backs by themselves no reason to own stock, sometimes reason to sell it. never own stock of company wasting money. or spending money it doesn't have to try to call a bottom and don't rely on the largest buy back to prop up a stock if the situation is dire. these are false signs of health
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for stocks to reverse and move higher, they need to have fuel the fuel necessary for a rally, and what is it cash so says the fuel comes from retail investors taking the money off the sidelines and putting it back to work in the stock market but endless waves and hedge funds sfret to own stocks rather than shorting them, in the land of the thousand bull dances. don't worry where the rally comes from, don't need me, everybody seems so smart more and more dough flowing in, you've got to buy the dips each time they occur. can take a long time for regular people to become accustomed to putting money in stocks again after a serious selloff. it's scary with no money flowing to the
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market or even outflows, can still have powerful moves in stocks and sectors trying to assert leadership in the turmoil. but fuel can't come out of thin air. it's money and has to come from somewhere. if people are reluctant to invest, money pulled out of the least interesting groups of stocks as investors shop out of them and into the ones with power, sexier, more lift food and drug stocks happily sell them to raise cash. it's called rotation, this churning one problem with rotations, without new money flowing in advance often becomes zero-sum and ultimately run out of fuel as soon as the selling of defensive staples comes to end, leaders run out of steam not enough left on the sidelines to drive them higher and investors on the sidelines
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reluctant to invest, you can get a rally in the wrong stocks. stocks that signal slowdowns or recessions, food and drug names used as fuel in previous advance. can become the new leaders and all the cash that investors pulled out can be poured back in big money thinks another downturn is ahead or food and drug stocks would be going lower. not just because nondurables are representing great value i want you to be ready for it. don't want consumer staples roaring higher in sustained advance where they're the only ones means people think economy will get worse or stay in awful shape for a long time to come. one of the most horrifying things you can see in stock market is powerful rally in wrong stocks altria, coca-cola, general
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mills. if that's all that's going higher, that's trouble nothing more disconcerning watching a food or drug stock plowing higher without understanding the damage in its wake for rest of the market. until there's more money from the sidelines, be more cautious. when you see the defensive food and drug names do the job as generals and leaders watch the sector leadership to give you a read on macro sentiment to time the sustained rally. in the meantime look for opportunities to buy high quality names where the stocks and not companies are broken and be aware of buybacks remember the coast isn't clear until the vast preponderance of the stock groups actually goes higher that's when it's really safe to go back to the water after the huge run with the
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averages we've had, maybe it's something worth waiting for. "mad money" will be back directv has been rated #1 in customer satisfaction over cable for 17 years running. but some people still like cable. just like some people like banging their head on a low ceiling. drinking spoiled milk. camping in poison ivy. getting a papercut. and having their arm trapped in a vending machine. but for everyone else, there's directv. for #1 rated customer satisfaction over cable
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switch to directv. call 1-800-directv. every year we take a girl's trip. remember nashville? kimchi bbq. kimchi bbq. amazing honky tonk?? i can't believe you got us tickets. i did. i didn't pay for anything. you never do. send me what i owe. i've got it. i mean, you did find money to buy those boots. are you serious? is that why you don't like them? those boots could make a unicorn cry. yeah, tears of joy. the bank of america mobile banking app. the fast, secure and simple way to send money.
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my fingers are hurt from battling all the trolls. trash the troll campaign if only an easier way to answer all the nice tweets. wait a second, tv show give my hands a break and give you the answers you deserve. i let my nose run when listening to @jimcramer because when i sniffle, i miss something. may i suggest you get some "mad money" kleenex, that way you'll be in sync with what i'm saying. next, wondering kri@jimcramer,
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benefits to silver over gold not really silver is less worthwhile, can be found and gold is getting hard to find and gld or bulion is good insurance. you have jump started my addiction for investing early on in life, value and knowledge is inspiring, thank you tweet that every single day for the rest of your life. makes up for the trashy trolls thank you. you should have a video made reading angry tweets against you. would be interesting and fun to watch. going to do it do it regularly. guy that does it on tv it's funny dilemma, enough stocks but too much cash.
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can't add to positions without violating bases, help. at my travel trust i say you know what, you have to wait. i know it's painful but don't violate bases. in 2014 i did it and not a good year principally atribute that to not allowing the stocks to come down enough to make the next purchase meaningful space them out maybe you could develop tech to charge your apple watch from personal energy level. #energizerbunny. i want a self-charging table from integrated. that's what i really need. my financial adviser warned me about watching the market every day. it's more frustrating than ever. i like to check in on the market on vacation. don't be obsessive about it.
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that is not what you're trying to do. trying to buy good companies with stocks that are good at prices you like. okay just watch it all the time doesn't make that happen better to do homework to find the next idea. next, asking for information on how to do homework better. i use google but many better techniques #madtweets i've written whole books about how to do homework best is still "real money" but "get rich carefully" longest chapter is about how to analyze stocks can really help. and stick with cramer. at fidelity, trades are now just $4.95.
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