>> it karen? >> walmart, the other side of the power struggle stocks down 25 bucks, it's interesting. >> netflix, not a trade war stock. >> ♪ some comfort here >> final trade >> tenet health care, you see it on 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 save 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. this show, this show is based on one heretical idea that it is

popping f possible for you if you work at it, to make more money investing for yourself than you would be hiding out in bonds. the pundits and commentators say it is too hard that ordinary investors it is too hard i know you can do it as long as you are willing to put in the time and effort. and i know you are succeeding at individual investing when you stop me and you tell me about your big wins and you know it because you tweet me at. that is why tonight i am

devoting this show to educating you. sharing important lessons i have learned. before i can start teaching you, there are lessons i need you to unlearn. myths about the market that need to be demolished one of the most pernicious is the notion that the market is always rational. on any given day, the action anybody the market can be completely nonsensical stocks can go up when they should go down as i always say, never forget that the market can often be stupid for whole sessions of trading and i see it happen frankly around here at least once a week, maybe even twice. now it is our job in the media to help you make sense of what is happening but sometimes we go too far and creating explanations. full of sound and fury signifying nothing never assume just because

something happens it makes sense. it is important to be able to say, these moves are just nuts and they don't make any sense at all. once you start cooking up connections where none exist, you are in troubline. sometimes stocks or the whole market can go up or down that have nothing to do with the underlying prospects of not buy into it by chasing stocks or panicking out of them. whenever we get hit with a big pullback, there will be a lot stocks that go down for no reason start selling not because they want to, but because they have to raise money to pay back their unhappy clients who are

demanding their money. by the way, you can pick up a copy of "confessions of a street addict". you don't see that, they have to raise the cash to buy the shares it is because i was a professional trader. it makes no sense to those who don't understand the funds of money management without selling the other stocks that they might own so they can have the cash to buy the new ones regular investors, they see the sellers starting to panic and they get too afraid to buy or start dumping stocks themselves. people in the press start cooking up reasons to explain

why things don't normal go down together or go down at once. i don't think unless you have managed money professionally, that you can understand these moves. i have 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 in "confessions of a street addict," with the sell off in 1998 i mention the book, use i need you to understand the emotionalism of the selling. we saw the impact of hedge funds exacerbate moves it can happen in commodities too. oil ran up to $147 a barrel. which should have gone lower only after that insane rally did

we find out that oil skyrocketed because they had bet against it and buy in their shorts or end their positions as they face certain dimensions or even demise after that huge run, oil fell in a straight line at $33 a barrel. when it was rallying it had to capitulate it was the mirror image of what happened when it was higher. the worst mistake is to say that in particular a stock of commodity or trade level deserves to trade there. act of fiction when i first started trading, we measured the stock of the prospects of the company this was 1979 does it make a lot of money off of what it sells then the market in its infinite

wisdom, everybody decided to lump stocks together in a gigantic basket. when we developed the s&p 500 and lumped all the stocks together it is only gotten worse meaning more commoditize every single year zing like they are corn or wheat wasn't limited to just this country other countries it was commoditized and now they trade with etfs. something happened along the way, money managers or hedge pool managers, pulled money together so large that they dwarfed individual stocks. amounts of money so vast, that they would buy all the shares, and many of them, they had so

much cash. the hedge gunnefund gravitated. and they developed a group thing. the hedge fund managers started to trade insync with each other based on all of the same tells they had the computers and spit out the same programs. the height of it occurred in 2008 when so many hedge funds bought the exact kinds of stocks and futures and sold the exact same commodities they had to sell everything because they were positioned wrong. very survival was at stake hedge funds called wild. i told you it would create an artificial buying opportunity. a lot of the companies were doing fabulous and they didn't deserve to go down at all. this kind of thing continues to

do this today. not pieces of paper that actually represent shares of we saw most recently with the internet and cloud stocks. when these groups were hit with huge amounts of huge stocks. s so the good onwent down with the bad. the next time you see certain sectors collapse even though certain are doing well ask yourself if you might be seeing the result of hedge fund gone wild. the bottom line, the market doesn't always make sense. instead of dreaming of reasons of fundmental, think if -- and out of control hedge funds meaning big redemptions. and take heart and start

recognizing their irrationality could be your opportunity for big prospects. andrew in florida. >> caller: i want to mention another big fan of yours, my mom for deserving hallelujah booyah for finally being cancer free. >> yes that is great news. >> caller: investors putting their first k into investment funds. would you advise me putting my money into safe stocks. >> i am still going index funds. it is what i did and a lot of people think of me as individual stocks do or die i want that 10,000 saved first we are index fund people here. irwin in new york. >> caller: i have been playing

in the stock market for 35 years haven't made any money until i started listening to you my question to you is i have an account with let's say $100,000 in it and i have five issues in that portfolio is there a proper way to balance the portfolio. it turns out now that i have almost half the money in one issue. what is the proper way to balance. >> remember, it is a high quality problem. you probably made a lot of money in one stock you have to trim when it was up a quarter, take some off, but i have changed that, when it is 50%, take a little off when it is 100% take a little off. ultimately you play the house's money. continue to let it run until you get 50% or 100%.

trim only. no one got hurt for taking a profit john in idaho. >> caller: thank you for your investment guidance. you walked us through how to view the pay metric. your thesis spoke mostly to the buy side of the model. do you also use the peg ratio on the decision metro on the sell side can you walk me through how you use it >> i am trying to find situations that seemover valued. but remember, there are two kinds of stock that get over valued it terms out their earnings in the out years are going to be tremendous i'm fine with those. and then those that are over valued because they are fads and those are the ones that say sell, sell, sell and that is the one i don't

doubt. if you work hard and do research, you can make money in the markets. as i have said, if you don't have time or inclination, i am fine giving it to professionals, but we can do it together. comingp, the type of stocks you should avoid at all cost and not all bad news i will let you in on the companies that are worth buying when things go south send your tweets to me@jim cramer >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter have a question? tweet cramer, #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. ♪

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no one is going to have internet like this. no one is going to have internet like this. gig to more homes than anyone. not just the joneses'. over here. xfinity. the largest gig-speed network. when this are huge losses in the market, you will have opportunity to buy good company stocks buy broken stocks not broken companies. serious correction, everything will go down certainly a lot of stocks that don't deserve will decline alongside with those that deserve to lower. how do you tell the difference between a broken company and a

broken stock toward the broken stocks that i want you to own. what is a broken company let's approach it like this. corrections have causes. in 2007 we have multiple sell offs the collapse of companies that own mortgages. specifically bonds backed by the mortgages. what you got is a credit crisis and along with that came your big sell offs in 2011, we had a downgrade. same with the analyst declines related to the battles between democrats and republicans between 2012 and 2013. we had the meltdown of nasdaq in the year 2,000 where many stocks folded up and disappeared.

in each of these sell offs we had sectors of companies that were immune to the actual selloffs like the drugs and foods. in march of 2000, and what an opportunity that was unless you were mesmerized by the dot bonds of the era look at the companies that caused it. they are probably broken in 2007 that meant everything touching houses or mortgages or any kind of lending. if you are looking for a company that is part of a reason for the correction, you are looking at a broken company those companies are directly in the blast zone and they might be certain to be obliterated. then there is another group of companies that is not bad as the first group. these are companies that might not be directly related to the sell offs. their earnings will be hurt. while banks were in the blast zone in 2008, 2009, almost all

banks became victims they couldn't be owned through the crisis a company does not break just because its stock goes lower thou though in 2007, many of the great infrastructure stock that would get marked down because. sell off or oil, or agriculture, none of these companies were going to be directly affected. that means the companies weren't necessarily broken very little to do with the worries of the potential default with the u.s. government or in 2012 how can a mexican company like chipotle get hit because of italian bonds. how about the fact that the defense stocks didn't go down because well, you know, frankly their budgets were pretty good often wasn't a connection to the causes of the sell off and yet these stocks get hit

i came up with something that i think will help you. i call it the bristol-myers syndrome what does that sell off caught by a cyprus bank seller, or a greek crisis have to do with the price to earnings ratio of bristol-myers. what does that have to do with -- you want to look for stocks that are independent in what is ailing the market. if you think you are proapproacn the bottom, that is rarely a se safe bet once a company breaks, it is difficult for itself to mend only true for sectors which control half of the stock movement in the selloffs there will be clear reasons that are going

lower. the first is broken companies. avoid them the second group are made up of broken stocks and that is exactly where you want to be still on "mad money" ahead, the opportunities created during a market wide selloff, how to zero in on the stocks worth buying. and why you should be worried watching some stocks rally, yeah i will give you a heads up "mad money" will be right back >> caller: cramer, you are super, you are awesome. >> i am a first time investor. thank you for inspiring me to get into the game >> you have transformed me thank you, cramer. once there was an organism so small

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welcome back to the special edition of "mad money. where i teach you how to navigate so-called market corrections. ordinarily leave the best of us in tears if not heading straight for the dirty linoleum floor without a big lay over at the liquor store that is not the way we do it at "mad money." we have been over the big picture stuff. how sell offs have to be anticipated even relied on you know you have to circle the wagon on the stocks you really like the difference between damaged stocks and damaged goods you need to go hunting

a correction is just a mega sale on stocks. no different than what you might find on all kinds of things that you might find at sam's club or costco tell you about a couple of types of stocks that i particularly like to hunt the more brutal the selloff, the more attractive these stocks look to me the new high list is always a great place to go hunting if you are looking for good investments. stocks that are hitting new highs are thought of as being expensive. this is what big declines are made of. look for stocks that maybe get knocked off, and get pushed down a couple you are likely to find good

merchandise. then there are other stocks that can only be dislodged from that list because market conditions got to horrible that everything went down at once. when you find a stock that needs a correction to take it down, you probably got something wonderful there. not all the time, you have to use your discretion for each individual stocks. the stocks that recover hardest and fastest from the carnage unless they are part of the reason for the carnage that is not a place you want to go anywhere near that is the first group of stocks i want you to look at you should certainly have at least one stock that is pulled back from its highs on your selloff shopping list. you want a list of stock that

you should buy if the market took a nose dive tomorrow. even if you ordinarily would take a pass on them because they are so high. there is a second kind of stock to keep your eye on and these are stocks that sell with huge dividends. just like you should be watching the 52-week high list. you should also be keeping your eye on stocks that you should buy if your dividend yields were higher it will send your stock lower. i am trying to reach everybody, including second graders and three-year-olds who like the algorithms the dividend yield is just the size of the annual dividend say

$1 $one dividend divided by $20 share. that is a stock with a 25% yield. sometimes you have a selloff that is so severe, you get what i called hhy accidental high yield. or even a trampoline for a quick bounce back. i know dividend investing isn't sexy at all. you got to trust me. especially when you are looking at a big decline you want stocks that are practically guaranteed to put money in your pocket and that is what a dividend does no guarantee that any stock bounces back don't buy a damage company just because its dividend s

skyrocketed. a good rule of thumb when you are trying to tell if a dividend is truly reliable is by looking at the company's earnings or profit it is a good rule of thumb, not perfect. some companies have giant cash flows but this will do it for you. a sell off is an opportunity to buy. these are the best places to bargain hunt in a decline of any magnitude and i will be right there alongside you trying to spot them. let's go to janet rose in new york. >> caller: long time listener, i want to know how interest rates will affect my dividend stocks. >> people will stock higher yielding stock when rates go higher because bonds can offer

more attractive yield with more safety this is the way people think i personally like growth and yield and therefore i would not be a seller of these stocks. it has happened since '79, and get ready and act accordingly and don't be shy jason in new york. >> caller: how are you i have a lot of friends doing real estate investing, how can i do that with stocks, monthly income with stock market investing. >> there are stocks that offer monthly income the ones that i know i am not that fond of but the ones that are doing it unfortunately turned out to be some of the most dangerous ones.

let me revise my thinking. to get in on stocks that you should be in with prices that you like when it comes to shopping for stocks do you dare go up against the all power index funds. i will tell you how to get on top. sometimes the warning signs aren't obvious i have the details on when a rally could be a red flag. plus you tweeted now i am answering. taking some of your questions. "mad money" will be right back >> follow "mad money" on facebook, twitter and instagram to go one-on-one with cramer. >> what are the questions we have i tell people you have to start with an index funds. >> gelt more with guests and go behind the scenes with the most interactive show on television.

>> if you can't explain in three bullets why you are buying a certain stock don't buy. >> announcer: follow "mad money" today. the digital divide is splitting this country. we have parents who are trying to get their kids off of too much social media and computers, and then we have parents who would only hope their children have access. middle school is a really key transition point, right. the stakes start changing. students begin to really start thinking about their futures. what i like about verizon's approach is that it's not limited to just giving kids new tools, it's really about empowering educators to teach in different ways, and exposing kids to more active forms of learning.

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devoted to telling you that you will never beat the market you cannot win it is simply better to put your money in the index fund than to invest on your own the index fund works fine for me and you know i believe your first $10,000 should be saved in an index fund. you can beat the averages only if you know what you are doing this is particularly important to keep in mind after a selloff period that is why i do "mad money" and spend time trying to educate you. i want you to be a better investment or better client.

if you want stocks but can't do the work, hire a professional preferably somebody good by word of mouth and these are the lesson that help identify opportunities and avoid some of the worst mistakes right now i have got a rule that i want to bring back from "getting back to even,". avoids helping from getting burned don't invest in buybacks they are anot created equally. many disappear when times get tough. as we saw in the oil companies i used to believe with large buybacks, in order to take them

out of the equation, something that reduces the number of shares are outstanding bad buybacks were the exceptions they are a way for companies reward shareholders. buybacks over the years have become increasingly popular. companies that spend a trillion dollars buying stocks over the last few years money being better paid to you buybacks haven't given us the value we thought would in many cases. when you see a company with large buyback and puny dividends let's be skeptical in the wake of the 2008 crash, it is not hard to find companies that squander their company. some companies have been a whole lot worse than others.

for example, here is a group that i like now but they spend a lot of money doing the wrong thing. the health maintenance companies. a lot better if they have given you the great yield that they could have market. we have seen the same thing with some tech stocks absurd prices. that did plague cisco for a while until it decided to boost its dividend it led to the stable higher run. intel bought endless amount of shares and then causing the stock to bottom maybe the worst offender out there is exxon that is why it is my least favorite in the group. i don't tell people to sell the darn thing, it has a great

balance sheet. however i like higher dividends and buybacks together. why do executives seem to like buybacks more than dividends, since it is net income of shares the buyback creates a perception of growth. but it is just earning growth. the buyback magnifies would otherwise be anemic growth and no growth and yet low teens earnings growth from many st stagnant businesses. you know, i got an idea, give it to shareholders in dividends we want the income ensuring there is always a buyer

ready to purchase stock. short sellers or ordinary sellers in a panic can overpower any company's buyback. especially if there are restrictions again, a dividend does a better job by creating meaningful yield support. short sellers have to borrow stock and they pay the dividend themselves they borrow the stock first and who ever borrows the stock must pay the dividend to the real holder no group is more aggressive than the bavrnks leading up to the crash in 2008. they didn't hold the stocks up when faced against rapid fire that hammered every bank in sight. banks stocks down over and over again, without waiting for a lift, the buyback as support game was over.

even worst for the banks they bought back all of that stock and then they had the issues tons more the power to destroy stock was granted by the short sellers up tick rule which i remember fondly to wait for above market prices prices before they could offer stock. you couldn't stop these guys especially when the fundmentals were deteriorating announces major buybacks saying we are putting it to work right there, these attempts and babe ruth called shot almost almost fail as it turns out the executives they should watch the show or maybe they don't understand the way their own stock works. at least as well as you expect

four fortunes. they got a buy back with the brain. yes, that is about the best buyback i have ever seen and it is a company that is terrific to boot of course it also has the best product manufacturer of the world. disney too is extremely opportunistic. during the ebola scare in the fall of 2015 hey, the ceo wasn't worried. he was a buyer and auto zone is a tremendous buyer of its own stock and it also has worked if you take a look at the long-term chart. the bottom line, buybacks by themselves are no reason to own a stock. you never want to own a stock that is wasting money --

fruitless as repurchasing its stock to call bottom and you shouldn't rely on even the largest buyback to help prop up a stock the way i see it, these are false signs of health and too often just a darn waste of shareholders money "mad money" is back after e break. let's begin. yes or no? do you want the same tools and seamless experience across web and tablet? do you want $4.95 commissions for stocks, $0.50 options contracts? $1.50 futures contracts? what about a dedicated service team of trading specialists? did you say yes? good, then it's time for power e*trade. the platform, price and service that gives you the edge you need. looks like we have a couple seconds left.

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now, after a selloff, in order for stocks to reverse and move higher, they need to have fuel the fuel necessary for a rally and what that fuel, what is it it is cash sometimes it comes from retail investors taking it off the sidelines and putting it back in i like that. hedge funds desperate to own stocks rather than shorting them, then you are in the land of the thousand bull dances. you don't need me for certain.

that is when everybody seems so smart. as long as more and more dough is flowing in the stock market, easy to find groups that can higher you have got to buy the dips each time they occur i will talk about it to want, don't worry. but it can take a long time for regular people to becoming accustomed for regular people putting their money in serious stocks you can still have powerful moves in the stocks and sectors that are trying to assert their leadership anybody the turmoil but the fuel to make those moves happen, can't come out of thin air, it is money and it has to come from somewhere. if people are still reluctant to invest, then the money can be pulled out the least interesting stocks and swap out of there, and swap into the ones with power with sexier names. this kind of churning move is called a rotation and we have

seen quite a few since the market bottoms without new money flowing in, the advance often becomes zero sum. and ultimately can and will run out of fuel. as soon as the selling comes to an end, the leaders also run out of steam not enough left on the sidelines and when investors on the sidelines, you can still invest on what happens. you can get a rally on the wrong stocks the stocks that signal slow downs or even recessions namely the food and drug names that have been named as fuel all the cash that investors pulled out of them can be poured back in. the big money thinks another downturn can be ahead. or the food and drug stocks will still be going lower not matter that it might be because these nondurables are getting so cheap a rotation can be at hes and i want you to be ready for

them you never want to see the consumer staples rally in a sustained advanced it means the economy is going to get worse or stay in awful shape for a long time to come. one the most horrifying things you can see in the stock market is a powerful rally in the wrong stocks altria, coca-cola, general mills. that is trouble. without any understanding of the damage it is leaving in its wake for the rest of the market unless there are vast sums of money coming in to the sidelines. you need to more cautious. when you see the defensive -- in order to time when to expect more of a sustained rally.

in the meantime, look for opportunities to buy high quality names where the stocks and not companies are broken and beware of management, only to see the stocks go right down. remember, the coast isn't clear until the vast pro preponderance of stock groups go higher. maybe it is something worth waiting for. "mad money" is back after the break.

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fie my fingers are hurt from battling all the trolls. let's give my poor hands a break and give you the answers that you deserve. let's start here when i sniffle i miss something. well, you know, may i suggest that you get some "mad money" kleenex. that way you will be in sync with what you are saying next, @willingblam is wondering.

you know, sometimes it is good when insurance doesn't pay off here is one from @tiffany dunn your invaebl knowledge is and energy is inspiring. here is an idea. that would be funny to watch and he where going to do that. we are going to do that regularly. there is a guy that does it on tv and it is funny it looks like @q1us has a

dilemma. at actualownersplus.com we say you have to wait in 2014, i violated basis and it was not a good year. make the next purchase meaningful here is an idea from @emflavin #energizerbunny. i want one of those self-charging tables, you know from integrated devices. that is what i really need here is @dmg43 my financial adviser warns me watching the market every day. don't be obsessed about t you are trying to buy good companies

with stocks that are good at prices you like. okay, just to watch it all the time doesn't make that happen. much better to do homework i just use goiogle but there are better techniques. i have written whole books on how to make money. the most recent one is "get rich" stick with cramer. once there was an organism so small

no one thought much of it at all. people said it just made a mess until exxonmobil scientists put it to the test. they thought someday it could become fuel and power our cars wouldn't that be cool? and that's why exxonmobil scientists think it's

not small at all. energy lives here. i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money. i'm jim cramer, and i will see

you next time! narrator: in this episode of "american greed"... vitaly borker rules an $18 million eyewear empire hawking fake luxury designs online. there is no crime that i've ever come across where you can make this much money and face such little risk. everybody wants something designer, something name brand for cheap. he had ray-ban, prada, gucci, chanel. narrator: customers think they're scoring high-end bargains. instead, they're getting hustled with bogus brands and violent threats when they dare to question vitaly borker. he just went nuts -- started yelling at me, started cursing at me.