>> -- dill pickles. >> dill pickle sold. >> anyway, final trade -- >> -- >> see you back here tomorrow at 5:00 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 you some money my job isn't just to entertain, it's to teach you. so call me or tweet m me @jimcramer. the stock market isn't always a friendly place. it can be volatile, painful, and just down right difficult. there are tons of big-picture problems that can derail any

rally. problems you might not have any idea about until they hit us that's why i'm adamant about trying to make you a better investor i want to teach you the tricks of the trade so that when the market turns negative, when it gets hostile you'll be prepared. you'll know what to do i spent my entire career analyzing the way stocks trade searching for patterns of what's worked for me and what hasn't and i put together a set of rules that are designed to help protect you from the worst mistakes you can make in both good markets and bad as much as i sometimes might seem like an unhinged lunatic, the truth is that i'm all about discipline you're going to make mistakes in this business, it's inevitable but if you stick to the rules that should help you minimize your losses and maximize your gains. so let's talk about discipline

i'm always telling you to buy best of breed companies even if if you have to pay up for their stocks why should you try to identify the stocks for the best run companies with the best prospects in each industry why is owning best of breed even a question when you're shopping for a car, you buy best of breed or the best you can afford. it's not even an issue we pay up for the highest quality brand because we know a good brand signifies reliability. it tells us we can expect a higher level of service, quality of ownership that will make your drive safer and easier for years to come. the idea that you would try to buy a worst of breed car is down right crazy, isn't it? nobody says i'll take the one without the air bags, it's cheaper. why is it so many people seem to think differently about the stock market why are we drawn to the penny stocks that are constantly being talked about on twitter? i think it's because many of us can't resist what we perceive as a bargain -- emphasis on the word perceive.

if you go hunting for cheap stocks and low quality companies in the market, it's more likely to lead to losses than agains. let me be clear, i'm about bargain hunting but a stock is only a bargain if the underlying merchandise is owned you can pick up the stocks in best of breed companies at a discount you know what's not a bargain? buying junk merchandise because it seems cheap that's why when i get asked about a low quality stock you'll hear me say something like hey, if you like blah blah blah you'll love johnson & johnson because that's best of breed sure j & j is probably not going to give you short term pyrotechnics but it's a long term story you can count on. an industry leader with a great balance sheet, long history of dividend boosts and a strong history of new pipelines in the works. what makes a company be the best of breed like the late great supreme court justice potter stewart said about pornography, i know it when i see it

but to help explain this concept to you, i'm talking about well managed quality companies like johnson & johnson. if you can get j & j on sale, great. if you can't, i'd prefer you to pay up for something like j & j. remember, at the end of the day, there are very few genuine bargains out there when it comes to second or third tier players. their stocks may looks cheaper but that's because they deserve to be cheaper. the businesses are worth less. don't worry about paying a higher price for a best-of-breed business, it may seem more expensive but in addition to being the better investment you're buying peace of mind. own best of breed companies, you'll almost never regret it. once you find yourself a best-of-breed company, the company with the story you believe in, i have another story for you. high quality companies represent value and giving up on value is a sin. i've seen people throwing in the towel on companies that have real assets and worth because their stocks aren't working right here, right now. drives me nuts

patience is a virtue if you have reason to believe in a business, don't dump its stock because it's not getting traction for the moment. you don't need your position, even quarter and everyday, you don't have enough money from your portfolio because one position is taking too long to play off that's your advantage over the hedge fund manager you'll be tempted to sell best-of-breed stocks you may correctly identify value but this can make it difficult to stick to your guns with a company you truly believe in when you own a stock going down, you'll feel compelled to give up but in many cases if you've done your home work and you have conviction, that urge to sell will be a mistake. it happens to all of us. in 2016, i did an interview with tim cook, the ceo of apple after his stock plummeted from 136 to 93 in a fairly short period of time remember this?

>> backing up and looking at the larger picture, we're in great markets. we have huge opportunities geographically we've got great innovations in the pipeline people love our products they love using our services all of this to me equals great opportunity. now your viewers have to decide what they want to do, obviously, but this is how i feel >> wow people are giving up on tim left and right. i looked at the stock which was selling at an incredibly low price. i looked at the consumer loyalty, 99%, service revenue stream and cash position and i said what the heck is the point of selling this particular stock that makes the greatest products of all time? that may sound like a no brainer but there are tons of apple skeptics constantly arguing the company's best days are behind it presenting these surveys of apple's component suppliers as evidence that the business is in decline. time after time they've been wrong. they don't away with it. i don't want you to fall prey. sure enough, telling you to buy

apple at 93 turned out to be a fabulous call because the insane amount of negativity gave you an opportunity to pick up a stock that was terrific at a major discount the key is that apple is a high quality company, a best-of-breed company, so when its stock came down you know it's getting cheaper. selling apple at 93 would have been an example of giving up on value and you would have missed a huge move which is why giving up on value is a huge mistake. the best-of-breed stocks may have higher price-to-earnings multiples but they're much less likely to blow up in your face the best-of-breed premium is worth it and once you find a company that is best-of-breed, don't let the bear scare you away even if the stock is people prayerly broken. patience is a virtue giving up on value is a sin. let's get to fred in ohio. fred >> caller: jim, i understand that when a company buys back stock it can retire the shares or hold them in inventory. my question is, does it make a

difference to us in evaluating a stock and a buyback which approach the company is taking and how do we find out which the company is doing >> well, i mean, what we do -- a true buyback is what we call a crunch in the stock and when they crunch the stock, you're fine if you're buying the stock and selling it again that would be something i wouldn't want to be in what you need to know is if it's crunched, it's a buy carlos in missouri, carlos. >> caller: big bad booyah from southwest missouri, jim. long time fan. >> i like that what's happening. >> caller: my question today is about fundamental investing. with all the micro trading and the algorithm trading and what not, do you think that is going to go away, investing on the fundamentals >> we have started to see periods of time where best-of-breed stocks is doing much better than a worst-of-breed stock and that didn't happen for a long time.

i think fundamentals matter more than ever. gregory in maryland. gregory? >> jim, thanks for taking my call. >> sure. >> caller: my question is after a stock runup like apple right now, at what increased percentage point should i take profits so i won't be slaughtered like a pig. >> when a stock goes up 25%, take a little bit off and that's what i've been doing for my charitable trust, not a lot but when a stock doubles you take out your cost and let the house money ride listen up, i want you to survive and thrive in any market, i want to be the best you can be and that means not being afraid to pay up for the best-of-breed stocks they're worth it better than all the rest get out your pencils, cramerica. i'm coming back with more rules of engagement. stick with kramer. whoooo.

when it comes to travel, i sweat the details. late checkout... ...down-alternative pillows... ...and of course, price. tripadvisor helps you book a... ...hotel without breaking a sweat. because we now instantly... ...search over 200 booking sites ...to find you the lowest price... ...on the hotel you want. don't sweat your booking. tripadvisor. the latest reviews. the lowest prices.

. how can you keep track of a confusing market let me give you advice that rarely steered me wrong. watch two things -- one, macro, big picture, and one, micro. let's start with the big picture. if you want to mow where the stock market might be headed i say keep your eyes on the bonds. i know the bond market is boring as all get out but it's larger than the stock market and more importantly it's very important to the the overall direction of stocks back in the day when i was running my hedge fund i'd call in from the road the same way. if i had to be away from my desk i'd begin every conversation by asking where are the bonds that's how much it mattered to me but stock market investors forget the bond market all the time they forgot in 2000 even though the bond market told me the economy was softening near the

dotcom peak. they forgot in 2001 when interest rates were too competitive versus stocks and caused a massive selloff they forgot it when the fed raised rates 17 times in lockstep fashion in the leadup to the financial crisis, precipitating the worst downturn since the great depression there were countless taper tantrums where federal officials will strike a hawkish tone and everyone freaks out rates are going higher quickly when the yield on the ten-year treasury started breaking out above 3% in 2018, everybody panicked yet when it pulled back, too many investors were quick to forget about the bond market look, it should never come as a surprise that long-term interest rates are rising or falling. bonds can punch your portfolio in the face if you aren't paying attention. a lot of people don't because as i said bonds are boring. that's why i say don't forget bonds. always keep those bond prices right in front of you. when i was coming up at goldman sachs i was trained to focus on

bonds because bonds are the true competition to stocks. competition i most fear. one short-term interest rates, the ones set by the fed, go high sky, you have to expect that dividend stocks, the stocks of companies with high yields like american electric power, they'll sell off when long-term interest rates rise the one to watch is the yield or the ten-year u.s. treasury then you have to be wary all stocks might be worth less than they were trading before it's simple, if the competition gets more attractive, the stock market gets less attractive. this is indeed a zero-sum game you should be especially worried about rising long-term rates caused by a pickup in inflation. that's a toxic brew. inflation eats away at the value of long-dated assets like equities because their future earning streams will have less purchasing power and higher interest rates make it more expensive for banks to lend. and that puts a damper on the economy. for a long time we had an ideal environment for stocks, low inflation and low interest

rates. that's a benign backdrop and i don't want it to lull you into a false sense of security about the dangers of a big spike in rates. that's why you have to watch the bond market. you know what? let me put this another way, if there were basketball i would say if you just watch the man with the ball, call him citigroup, and you don't watch what the other team is doing on defense, the bonds, there's no way to get to the basket the men without the ball, the bond market, can determine the stock action every time. many people who got in this game in the last decade don't know what bonds are that's how benign they've been they're trouble when you say the bonds went up today. they think that means interest rates are going up rather than what it really means which is that interest rates are going down if you don't understand how bonds work you'll be at a severe disadvantage when it comes to investing in stocks so keep your eye on the ball and the bond that's right what else do you need to watch on the micro level, micro meaning the company-specific level, you need to be very cautious when you see

unexplained resignations by key executives to put it bluntly, when the chiefs resign, maybe you should go, too. when you see a ceo step down for no discernible reason you should presume something is wrong and do some selling. shoot first, ask questions later. i've sold stocks because the ceo or the cfo, the chief financial officer, resigned and it turned out to have -- i jumped the gun, oh, there was nothing i don't think, then i'd just buy the stock back but in my whole investing career you know how many times i can recall a ceo left for an undisclosed personal reason and the stock was worth buying off the top of my head, once visa i've racked my brain to come up with other examples, i can't think of any other that's how uncommon they are why? simple, ceos don't quit for personal reasons, not if they want to keep their bonuses cfos don't quit for personal reasons either these are fabulous jobs, you don't become a chief executive officer by being devoted to your family nobody gets one of these jobs without giving up a great deal of what most people enjoy about life, things like family,

friends. competition for these positions is so fierce that when you finally land one you don't up and leave, not for no real reason when executives leave for undisclosed personal reasons, it's almost always because there's something wrong at the company. hence my rule, when high-level people quit a company, something is wrong ah-ha, you say, i know a ceo who quit because he had an epiphany about climbing k-2 or a ceo who left because she wanted to spend more time with her family. fine of course there are exceptions at some point, somewhere, a ceo will step down to spend more time with his kids but when you're investing in the stock market, it's not the exception that matters, it's the rule. there will always be some situations where it's a mistake to sell a stock when senior executives leave i don't care most of the time selling will be the right decision this is the kind of rule that helped keep me in the game at my hedge fund, it's about helping you avoid losses one way to do that is by not taking on necessary risk like betting on companies where the ceo just resigned for undisclosed personal reasons

the bottom line, if you want to get a handle on the stock market and you need to watch what's going on with the bonds, that should be of course at this point but it's something people tend to forget and when you look at individual companies, remember unexplained high-level executive resignations equals sell gorgio in illinois gorgio >> caller: booyah, mr. cramer. thank you for all that you do. i truly appreciate it. >> thank you >> caller: my question is, what percentage of a portfolio should be in index funds and out in cash with the volatility of these future markets >> a lot of that depends on your age. index funds are fabulous because you don't have to do the work on individual stocks and they give you a great diversification. when you're a young age, you want to have 100% in stocks. as you get older you want to take that money out and take the money out i've got in "get rich carefully" and in literally all my books i talk about the different stages but as you get

older, you have to raise cash. let's go to blake in nebraska. blake? >> caller: booyah, jim. >> booyah. >> caller: with the current market volatility, what advice do you have for young investors compared to older investors? >> ride it out young people have their whole lives to make back the money they might lose in the market. older people, well, time gets shorter and you can't make it back, that's why you have to be more conservative. if you want to get ahead on the stock market, bond's the word and when an executive steps down without an explanation, sell, sell, sell and stick with cramer

♪ ♪ legendary jockey víctor espinoza is insatiable when it comes to competing. ♪ ♪ so is his horse. ♪ ♪ when it comes to snacking. ♪ ♪ ♪ ♪ that's why he uses the chase mobile app, to pay practically anyone, at any bank. life, lived victor's way. chase. make more of what's yours. before you can be a good investor, you have to be realistic. there are too many people who n this game who are not realistic. either they allow their emotions

to cloud their judgment or they allow themselves to be surprised by the inevitable. let's start with the inevitable. you'd think people would get comfortable with the idea stocks can go down, right after the dozens of corrections, meaningful pullbacks, we've had over the last 20 years, you'd think we get used to the process. if we were a realistic species you would assume we would say something like, hey, let's prepare for the inevitable correction, it could be around the corner yet aside from the permanent bears who think we're always due for a pullback, most people act like every correction is a total shocker. the type of thing that never happens. so every time the stock market goes down there's a contingent of people who seem totally stunned. just caught by surprise. you know what? that's a bad attitude. to me the corrections are like the rain i know that rain is inevitable, so do you, i expect it to rain, i prepare for it when the rain comes i am ready i got an umbrella or coat or stay indoors that's how you need to approach

from possibility of a pullback sooner or later we'll get one so best to keep some cash on the sidelines in case that time turns out to be now. what's what we do for my charitable trusts. plenty of corrections happen at unexpected times in recent years we've had major declines preceded by terrific up days during which we made lots of money and everything went peachy in january of 2018, the stock market roared higher people acting like an unstoppable rally but in february the averages got obliterated. why do i mention this? because the time to be most worried about the correction is the moment when nobody else is concerned. that's when we get the brutal supposedly unexpected declines, when everyone is euphoric. when i made 2% in a day on the upside i knew i was too exposed. that's the word you used i knew i had too much stock, i knew my portfolio would kill me

if we caught a storm so if my performance was swinging too much to the upside i pulled back, sometimes furiously, selling to prepare for the big down day that had to be around the corner sometimes the correction never came and i had to swallow my pride and buy back the stock i sold but when we got hit, my hedge fund outperformed by so much my clients thought i was a genius i wasn't a genius. it wasn't genius at all. it was discipline. it was preparation because because i'm taken something off the table in order to raise cash, i'd use the money to buy high-quality stocks into the weakness i so often preach to you. we may not be able to predict when a storm is going to strike but we do have barometric readings that can be immensely helpful. if corrections are like rain then where should you get your weather report i pay for something. that's right i like to follow the proprietary standard & poor's oscillator, a terrific indicator that tells us when the market is getting

overbought or oversold whenever the oscillator registered plus five or above, that tells me we've come up too far too fast to the point where it's gotten dangerous so a plus five means you need to pull back aggressively and wait for correction what do i mean by pull back aggressively, if you're nimble you might want to ring the register on about half of your portfolio. yeah that's right not half the stocks but half the shares in each position that way you will have a ton of cash on the sidelines you can use to buy back your stocks at lower level when the storm hits. even if you're not nimble, you should sell something to raise some cash when that oscillator that i buy from the s&p company hits plus 5 and look i understand maybe you want to take a little off but people are aggressive and want to take a lot off because that doesn't happen very often. by the same token, when the oscillator hits minus five, in that situation we come down so far so fast we're due for a short term bounce. it's worked like that for years. that's a good place to put your cash to work if you haven't already by that point.

worst-case scenario, there's no storm, stocks go higher and you underperform the averages because you have such a large cash position. i'll admit, that's a real risk but using this methodology at my hedge fund i gained my investors a compound 24% return. that was more than twice what the s&p 500 would have given them over the same period. that's strong evidence that avoiding losses makes up for the possibility of gaining on big up days let's talk about the other component of realistic investing. you need to accept meaningful selloffs are inevitable, like bad weather. but you need to stop yourself from making investment decisions on misleading emotions and the worst is hope. hope wherever i hear the word hope as in i hope that doom stock du jour will come back, i hate that hope is not part of the

equation don't hope for anything. hope is emotion and this is not a game of emotion or at least not your emotions. every stock you own because you hope it goes higher is another position in your portfolio that's not being filled by a stock you believe will go higher yet i hear hope constantly that is fine if we're talking about religion or sports some of these come from behind ncaa men's basketball teams keep their players motivated through hope but in the stock business hope is a mistake. why? because it supplants reason. especially when yes we're talking about stocks in the single digits. you talk about i bought the stock for $5, now it's $4. how hard can it be to go from $5 to $4, right wrong. no company sets out to have a single digit stock most companies fight tooth and nail to keep their stocks from going into single digit territory. so when you find something that sells for a few bucks, the market has already rendered a harsh judgment when you let hope become part of

the equation you can end up holding these low-quality pieces of paper waiting for something that will likely never happen. forget hoping and forget waiting for higher prices. i say the thing to do is to cut your losses and move on to a stock you can actually see going higher in other words, a stock that you have done the work and believe will go higher it's not because of hope but because of reason. the bottom line, it pays to be realistic so prepare yourself for corrections, big pullbacks are like rain, they're inevitable and whatever you do, don't make stock-picking decisions based on hope. you need to invest in the real world, not a fantasy land created by your own hopes and dreams let's go to dick in virginia dick >> caller: hi, jim i love your show i've listened, learned and profited from your advice. >> thank you. >> caller: i have a general question about retirees and the

stock market i'm now 72 years old, retired and wondered even though i am well diversified in most of your favorite stocks i cannot risk a large market correction. i might not have enough time to recover. the stock market is the best vehicle for wealth-building. should i consider derisking my portfolio by adding bonds or bonds equivalents and even though we're in a rising interest rate environment or get rich carefully by being well diversified with stocks? >> i think at 73 i think you have many years but i think you should raise some cash i would say even i'm not sure about your work status but someone 73, to have 25%, 30% in cash -- reasmember, i believe we'll live longer lives than most people think -- 25%, 35% would be fine in short-term cash because rates are going higher let's go to pat in colorado. pat? >> caller: hi, jim this is pat from beautiful,

beautiful, colorado. my question is this, i owe $189,000 on my mortgage. i'm concerned about a severe market correction. some time back you said they usually happen about once every ten years. i have enough money in my mutual funds and accounts to pay it off now but should i face the tax ramifications of adding $189,000 to my income next january? thanks >> tax things i usually say you have to speak to your tax accountant to be able to be sure i do think that you're -- look that's -- let's put it this way, i think to each his own on that particular kind of thing but i will say that we've had corrections more frequently than ten years and that's really the issue. i do expect them more frequently these days because they've got a much more volatile market that's been up a lot over multiple years time let's be real. it pays to be real realistic, that is "mad money" is back after the break.

because, when you really, really want to be there, but you can't. at cognizant, we're helping today's leading media companies create more immersive ways to experience entertainment with new digital systems and technologies. get ready, because we're helping leading companies see it- and see it through-with digital. it's pretty amazing out there. the world is full of more possibilities than ever before. and american express has your back every step of the way- whether it's the comfort of knowing help is just a call away with global assist. or getting financing to fund your business.

no one has your back like american express. so where ever you go. we're right there with you. the powerful backing of american express. don't do business without it. don't live life without it. anyone can get you ready, holiday inn express gets you the readiest. because ready gives a pep talk. showtime! but the readiest gives a pep rally. i cleared my inbox! holiday inn express, be the readiest. holiday inn express, especially when inside another amazing machine. your an amazing machine. the lexus es. with standard technology like lexus safety system plus. the lexus es, and es hybrid. experience amazing at your lexus dealer.

you don't need me to tell you the internet has been a double-edged sword

that's true in every area of life, including investing. sure the web makes everything convenient, you have everything available at the push of a button, something that was unimaginable when i got started. it was harder to do the home work in the old days it took real effort. these days everything is searchable but for all of the ways in which the internet makes the process easier, it creates new problems and when we have new problems we need knew rules to help contain them for example, you have to be able to explain your stock picks to another human being. if you can't, you have no business buying the stock. here's the thing, in the old day this rarely came up but the rise in the internet took away one of the most important warning systems which is talking to another person about what you want to buy. it used to be you had to talk to a broker now with a stroke of a key you can buy a stock of the work day or square without having to tell another person why you're doing so why is that an issue

it can be anybody. preferably an adult but you can explain to your kids if you have to buying stocks is a solitary event -- too solitary. but we're prone to making mistakes, sometimes big ones to err is human. you should be able to articulate why you like the stock do you know how they make their money? do you know how their earnings are supposed to look you're setting yourself up for trouble so many people own buio tech stocks. think of explaining your stocks as a test to make sure you've done the home work so if the stock gets slammed you'll know whether to cut and run or buy more if you don't know what you own,

believe me, you're going to get slaughtered on the next decline and there's always a next decline. when i was at my hedge fund, i made employees sell me the stock like a salesperson before i would buy it if you're in a person where you're i can pi you're picking stocks yourself, articulate your reasoning. that's what's important. i ask people what is going to make this dog go up. what's the catalyst? or have we missed the move in this overvalued stock up 100% this year? i get a lot of those questions, too. and what's your edge these are important questions. if you can't answer them, you shouldn't be buying. and the ability to make has the i decisions isn't the only thing you need to be carry of. there's something else you need to be aware of the internet has vastly increased the power of the wall street promotion machine i've long believed home gamers and professionals alike don't have enough respect for this promotion machine. i recognize when wall street falls in love with a stock it will go much further than anyone

expected in its efforts to hype that stock to high heaven. consider the case of valiant which is changing its name it was one of the most heavily promoted stocks in the last decade its shares soared to $200 and then some on acquisition after acquisition as analysts raised numbers. why? management would slash costs and raise prices when the political environment changes, analysts turned on valeant and it fell apart. plus, the company had embraced a bunch of shady practices within a few months the darn thing plunged from the mid-200s to the mid-20s it took valeant two years to bottom and before then it fell to the single digits and on the way back it became bausch health the thing is, valeant should never have been trading above $200 in the first place.

the only reason the stock reached those levels to begin with considering the endless pyramiding was because the analyst promotion machine was so powerful and the web amplifies the reach so any time you see nearly unanimously bullishness from the analyst community on potential lly dube white housioe you should be aware. in the words of public enemy, don't believe the hype one last thing and this is true of all media online and offline. whether you're watching tv or a web cast, it pays to be a critic it may sound crazy for the host of a cable tv show to make this argument but you can't believe everything you hear. lots of times executives say whatever they want on air knowing they can get away with it lots of times fund managers come on air and tout their holdings and sure they have to disclose when they own something but they rarely tell you whether they're in it for the long term or short term and that makes a big difference you need to accept this as a given. my general approach is when you hear on tv is probably right but

no more than that. same goes for the web. except you have to be more careful because there's a ton of junk information and uninformed commentary online. that's the world we live in. so repeat after me -- just because someone says it on tv doesn't mean it's true i hate to say it, but you're being naive if you believe everything you hear. that's one reason why we only bring high-level executives on to "mad money. they can mislead you but if the see the owe of a public company outright lies about how their business is doing, their legal bills will start that up but generally speaking you see money managers coming on television for a variety of legitimate reasons, they aren't always well vetted and often managers can't help themselves when it comes to being promotional. so here's a good rule of thumb if a money manager is on tv and he's moving his lips, he's probably talking his book. when someone comes on and says a plunging stock is a buy, do you think that sounds like an opportunity? no, instead you wonder he must be really stuck. bo bottom line, explain your stock picks to another human

being and never take anything on faith, not from the analyst community and not -- well, let's just say from the money managers who love to come on tv and talk their book jimmy in delaware, jimmy >> caller: hey, jim, how are you doing? >> doing well, how about you, sir? >> caller: i'm doing great my name is also jimmy. so i had a question regard iing whether it's better for somebody to get in stocks whether they should go in with general knowledge or take the time and learn more because i'm currently 19 and i have a lot of money in cryptocurrencies and i've been making money there and i want to diversify my investment but i don't know much about stocks so would you suggest that me buying general companies i know about is a good thing or bad thing or should i take the time to learn a lot more. >> i like to have first investments be index funds particularly if you don't have time to do the home work which

i've described as listening to conference calls, reading documents, seeing analyst research, then i think you should be in an index fund it's no surrender. and if you build up that stake and you're interested in buying stocks and wanting to do home work then i think it's okay but to not have a lot of knowledge and buy a stock i think that's a recipe for defeat. can i go to denice in minnesota? denice >> caller: jim, booyah and thanks for all of your hard work for us. >> thank you. >> jim, can you explain dutch auctions and why a company has them and what a shareholder should do about them >> that's a company showing you they this i the stock is worth more than it is and they're buying up high you won't be able to get all of your stock done, you'll get the rest back but it's a nice way to make money and i think companies that do it are showing they have tremendous belief in themselves. and the last one i love was the

o old martin franklin who did a touch trade. always explain your stock picks to another human being and never take anything on faith in this business more of my rules of engagement and your tweets after the break so stick with cramer

♪ i'm a loser, sooner or later you know i'll be dead ♪ no matter how smart you are, no matter how well informed, no matter how lucky, sooner or later you'll make suboptimal stock picks. it happens to the best of us, every portfolio has a few duds on it. the true difference between a good investor and bad is how you handle your losers people seem to have a natural version to selling losers. professionals and amateurs alike hate doing it. they keep operating under the

assumption that a sinking stock is wrong in its direction they ration allize the lack of interest they see will be fleeting and people will recognize the value of their stock that's in question that's all well and good until you need money maybe you want to raise cash because your portfolio has gotten too stock heavy maybe you have real life expenses that require you to put together money in a hurry. maybe you're a money manager where investors want their money back that's always tough. every read "confessions of a street addict? how do you decide what to sell this is where the tendency to hold on to losers show its sinister side. a lot of investors would prefer to sell their best performing holders rather than their worst. they will sell their winners to subsidize the losers you then get a self-fulfilling spiral, the bad stocks stay bad. they keep going down and with few er winners, the performance will get worse

this particularly dangerous hedge fund manager because bad performance triggers more redemptions from your clients and if you keep selling winners to give the money back it creates a vicious cycle. individuals do the same thing. you have a finite amount of capital to invest, right rather than take your medicine the -- take a loss, far too many people prefer to hang on to their worst performers thus my rule never subsidize losers with winners. my advice to anyone who is stuck in the position is quite simple, sell the losers and wait a day if you want them back, go buy them back the next day but once they're out of your portfolio, i doubt you'll be tempted to buy back that stock. you can't hang on to a low quality stock because you're hoping for a takeover. oh, that's a real good idea. i get it, nothing is more exciting than a takeover people go to great lengths to try to capture these moves, that

includes buying bad companies and hoping that they catch a bid. funny thing about bad companies, they do get bids in reality what get ace choired are great companies with cheep stocks not company stocks that seem cheap. people buy this merchandise because they think a takeover will save them which brings me to my next rule. never speculate on takeovers of companies with bad fundamentals. the odds are you'll vote for something you can go down than you ever thought even as it has limited upside. even if a bad company gets a takeover it might end up coming at a much lower price than what you initially paid for the stock. that's the thing about bad companies, the stocks tend to go lower, deservedly. you can do much better buying a well-run company that's in good shape and can still get a takeover bid than you can from buying a company that's doing poorly and thus unlikely to get a bid. it makes sense not many bad companies get

acquired because not many managers can turn bad companies into good ones don't wait around with a company with lousy fundamentals, you could wait a long time if you just moved on, you could have bought the stock of a high quality company that's likely to give you much better performance. in a well-run company you can get away with speculating on a takeover because you have other ways to win and when the stock of a good company goes down you can buy more that's not something you can do with a company going from bad to worse while you were waiting irrationally for lightning to strike the bottom line -- never sell your winners to subsidize your losers if you need to raise money for whatever reason, just take the darn loss and sell something that's underperforming and absolutely don't speculate on takeovers in companies thies thv deteriorating fundamentals if a possible takeover is the only reason you have for like ago stock, that's not something you should own stick with cramer. (baby crying) (slow jazz music)

♪ fly me to the moon ♪ and let me play (bell ring) welcome to holiday inn! thank you! ♪ ♪ wait, i have something for you! every stay is a special stay at holiday inn. save up to 15% when you book early at hollidayinn.com

this is the most interactive show on television i like to brag about having the smartest audience there is that's you, cramerica. let's get to some of your tweets first up, a tweet fro from @bullflags, watching iron man with son, forgot jim cramer lives in the marvel universe yeah, that was just fun. i broke that cup, it was one take, it was kind of crazy and i

am forever indebted to the fabulous people, including john favreau, that do those movies. and here's a tweet from big dude making big mo. i'm a new investor, less than three months in, i've always been a great saver, how do i develop discipline as an investor here's what you want to do as an investor, just buy small, this is what we do for actionsalertsplus.com. then if the stock comes in you have more room i want you to do it so that the discipline is going to make it so you won't be able to necessarily make as much money as you'd like but we're trying to cut off our losses. now a tweet from @dari 77426739. what is that like your pin number or something? jim cramer, do you ever sleep? i see you on tv early in the morning and late at night. the answer is i rarely do sleep and i have pulled a huge number of all nighters within the last

three years. i wish that weren't the case but it is true and now a tweet from from @infinitenulity, is there such a thing as market inertia is this like steering the "titanic" versus a jetski. no it's not and i tell you why, we don't have that much money coming in. literally the money has been going out so the fact the market is going is up a test that there's a core group of people not leaving, they're being just like warren buffett, they're putting a huge amount of money in index funds and that's okay that's not inertia, that's believing in progress. now a tweet from @mikemonroenw thank you for being the voice of reason and keeping our sanity amongst this market craziness. don't know what we'd do without you. well, thank you, my goal is to make it so people don't freak

out. there were times when i would tell you listen, you have to go and those have happened when there's systemic risk, meaning risks where you can't assess whether the system will hold but most of the risks we see are just market risks that are not in sync with how the strength of the country and the companies so i will warn you if i think things are coming unglued but otherwise my job is to put in the perspective. thank you so much. that's a very nice tweet they're all nice next we have a tweet from @commonstock. omg, jim cramer is part of a jeopardy question, i would have got that answer right. my youngest daughter loved that, too. she's like dad's made it and now she knows i have a show. thanks, cramerica. we really do have fun. stick with cramer.

♪ (daniel jacob) for every hour that you're idling in your car, you're sending about half a gallon of gasoline up in the air. that amounts to about 10 pounds of carbon dioxide every week (malo hutson) growth is good, but when it starts impacting our quality of air and quality of life, that's a problem. so forward-thinking cities like sacramento are investing in streets that are smarter and greener. the solution was right under our feet. asphalt. to be more precise, intelligent asphalt. by embedding sensors into the pavement, as well as installing cameras on traffic lights, we will be able to analyze the flow of traffic. then that data runs across our network, and we use it to optimize the timing of lights, so that travel times are shorter. who knew asphalt could help save the environment? ♪

at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade, you'll only pay $4.95. fidelity. open an account today. ♪ you'll only pay $4.95. how do you know you made the right call... ...you just do. the light beer you've been waiting for has arrived.

lower carbs. lower calories. higher expectations. corona premier. i like to say there's always a bull market somewhere. i promise to find it just for you right here on "mad money." i'm jim cramer and i will see you next time. >> announcer: what's better than "mad money"? how about more "mad money. followon facebook, instagram and twitter. >> i always tell people start with the index fund because i need you to be diversified. >> announcer: get more with guests >> how do you stay sharp >> announcer: and go behind the scenes with the most interactive show on television. >> if you can't explain in three bullets why you're buying a certain stock, don't buy it. >> announcer: follow "mad money" today.

>> welcome to the shark tank, where entrepreneurs seeking an investment will face these sharks. if they hear a great idea, they'll invest their own money or fight each other for a deal. this is "shark tank." ♪ i'm an active-duty officer in the united states army. currently, i'm a captain with the army corps of engineers. in 2007, we were deployed to iraq. i did 15 months overseas. it was a very rewarding experience being at the tip of the spear, actually accomplishing missions. and i really believe that we made a difference. man: let's go! for me, physical fitness is very important