looks great. >> you know what looks like it wants to break out, small tech bioteches. >> >> avis budget, bye. >> guy. >> silence is breaking out, sister. >> thanks for watching seyou ckere ba he tomorrow at mh jim cramer starts right now. my mission is simple, to make you oney. 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 is not just to entertain, but to educate and teach you so call me at 1-800-743-cnbc or tweet me at #madtweets the stock market isn't always a friendly place it can be volatile, painful, and just downright difficult there are tonses 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 so adamant about trying to make you a better investor i want to teach you the tricks of the trade so when the market turns negative, when it gets hostile, you'll be prepared. you'll know what the doo i spent my entire career searching for patterns, what worked for me and what hasn't. i put together a set of rules, rules designed to 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 your discipline, if you stick to the rules, that should help minimize your loss and maximize your gains.

♪ hallelujah so let's talk about discipline i'm always telling you to buy best of breed. i use that phrase constantly because it's just that important. why should you try to identify the stocks with the best run companies in each industry let me flip that on its head 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 sig feiss reliability. it tells us we can expect a quality of ownership that will make your drive safer and easier for years to come. the idea that you would purposely try to buy a worst of breed car, it's downright crazy, isn't it nobody says i'll take the one without the air bags, it's cheaper. so why it is so many people seem to think differently about the stock market why are we drawn to the penny stocks constantly talked about on twitter i think it's because many of us simply can't resist what we perceive as a bargain, emphasis

on the word perceive here's the thing if you go hunting for cheap stocks, it's more likely to lead to loss than gains i'm all about bargain hunting, but stock is only a bargain if the underlying merchandise is actually worth owning. a real bargain is when markets get hit with a sudden sell-off, taking down everything and you pick up the stocks and best of breed companies at a discount you know what's not a real bargain? buying junk merchandise just because it seems cheap that's why whenever i get asked about a low quality stock in the "lightning round," you hear me say something like hey, skee-daddy, if you like blah, blah, blah, you'll love johnson & johnson because that's best of breed. sure j&j is not going to give you short-term pyrotechnics, but it's a long-term story you can count on it's a great balance shoot and a strong pipeline of new products in the work. what makes a company be the best of breed well, like the late, great supreme court justice potter stewart once said about pornography, i know when i see

it but to help explain this concept to you, when i say best of breed i'm talking about well managed high quality companies like a johnson & johnson. if you can get j&j on sale, great. if you can't get it on sale, i still prefer for you to pay up for something like j&j than try to pick up penny stock because it seems cheaper at the end of the day there are very few bargains out there when it comes to second or third tier players. their stocks may look cheaper than the top dogs, but that's because they deserve to be cheaper. don't worry about paying a higher to earnings multiple for best of breed business it may seem more expensive, but in addition to being better investment, you're also buying peace of mind. own best of breed companies, you almost never regret it now once you find yourself a best of breed company, the kind of company with the story you believe in, i got another important rule for you high quality companies represent value. and giving up on value is a sin. i see many people throwing in the towel on companies that have real assets and real worth just because their stock's not working right here, right now.

it drives me nuts. look, patience is a virtue if you have reason to believe in a business, don't dump its stock because it's not getting any traction for the momentment you're not a hedge fund manager you. doebd don't need your positions to show a gain every quarter, every month or every day other investors will pull their money from a portfolio because one particular position is taking too long to pay off that means you can afford to wait for these stories to play themselves out. that's your advantage over the hedge fund manager i'll say this because you'll be tempted to sell even best of breed stocks at times. you may correctly identify value, but this market can make it very difficult to stick to your guns, even with a company you truly believe in when you own a stock going down, you're going to feel compelled to give up on it i know that. in many cases if you have done your homework and have conviction in the underlying business, that urge to sale 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 lad 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 we have 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 were giving up on tim left and right i looked at the stock, which was selling at an incredibly low price to earnings. 99%. the service revenue stream and the cash position, 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 there, but are tons of apple skeptics arguing the best days are behind it, evidence that the business is in decline time after time they've been wrong. yet they get 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 a wonderful opportunity to pick up a stock that was terrific at a major discount the key here is apple is a high quality company in best of breed. when the stock came down, you know it's getting cheaper. selling apple at 93 would be a classic example of giving up on value. you would have missed a huge value, which is why giving up on value is a huge mistake so honk often. don't be afraid to pay up for the best of breed stocks they may have higher to earnings multiples, but they're also much less likely to blow up in your face it's worth it. once you find a company that is best of breed with a story you believe in, don't let the bears scare you away, even if the stock is temporarily broken. patience is a virtue giving up on value, well, that's a sin. let's go to fred in ohio fred >> caller: jim, i understand that when a company buys back stock, that it can retire the shares or hold them in

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

time it's happening now i think fundamentals matter more than every let's go to gregory in maryland, gregory. >> hey, jim, thanks for taking my call. >> sure. >> my question is after a stock run-up like apple right now, at what increased percentage point do you have to take profits? >> some of my books i've been saying 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 the main thing is when a stock doubles, you take out your costs and then you let the house money ride listen up! i want you to survive and thrive in any market. i want you to be the best investor you can be. and that means not being afraid to pay up for best of breed stocks they're worth it, better than all the rest get out your pencils, cramerica. i'm coming right back with more rules of engagement. stick with cramer. 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. cramer you are super. you are awesome. >> i'm a first-time investor. >> thank you for inspiring me to get in the game. >> your show is the best i am so glad you're on tv. >> i want you to know that you have transformed me. have transformed me. thank you, cramer. intelligence, at&t providese covering virtually every part of your manufacturing business. & so this won't happen. because you've made sure this sensor and this machine are integrated.

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brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops. oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. ♪ how can you keep track of a confusing market let me give you some advice that rarely ever steered me wrong there are two things i want you to watch one, a macro, the big picture, and one micro, company specific. let's start with the big picture. if you want to know where the stock market might be headed, i say keep your eyes on the bonds. look, i know the bond market is borg as all getout, but it's much larger than the stock market and it's very important to the

overall direction of stocks. back in the day when i was running my old hedge fund, i'd always call in from the road in the same way if i had to be away from the desk, i'd be asking where are the bonds? that's how much it mattered to me on a day-to-day basis yet invests forget it all the time they forget 2000 even though the bond market us the market was softening. they forgot in 2001 when interest rates on cash were far too competitive and would cause a massive sell-off they forgot it when the fed raised 17 times in lockstep fashion precipitating the worst downturn over the past decade, there were countless tantrums where some official will strike a hawkish tone and everyone freaks out rates are headed much higher too quickly. when the yield on the ten-year treasury started breaking out above 3% in 2018, everybody panicked yet when it pulled back, far too many investors are quick to forget about the bond market

should it never come as a surprise that long-term markets are rising or falling. bonds can punch the portfolio in the face if you aren't paying attention. a lot of people don't pay attention, because as i said, bonds are boring that's why i say don't forget bonds. always keep those bond prices and interest rates 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. the competition i most feared. when short-term interest rates, the ones set by the fed go sky-high, you have to expect that dividend stocks, the stocks with companies like high yields like american electric power, southern, they'll sell-off when long-term interest rates rise, the one to watch is the yield on the ten-year u.s. treasury then you have to start being wary that all stocks might suddenly be worth less than they were trading before. it's simple. the bond market 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 that are caused by a pickup in

inflation. [ booing ] >> that's a toxic broou brew inflation eats away at value because future streams will have less purchasing power. and higher interest rates don't just make bonds more attractive, they also 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 an incredibly benign backdrop 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 to watch the bond market let me put this another way. if this were basketball, i'd be saying if you just watched the man with the ball, let's call him citigroup and you don't want what the other team is doing on defense, the bonds, there is no way you're going 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 still don't even know what bonds are that's how befine they've been they're troubled when you say the bonds went up today. they think that means interest

rates are going up, rather than what it really means is that interest rates are going down. if you don't understand how bonds work, you're going to 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 2 micro lervelgs 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 too. when you see a ceo step down for no discernible reason, you should do some selling shoot first, ask questions later. i have sold because the chief financial officer resigned if it turns out i jumped the gun, if there was nothing wrong, i'd simply buy the stock back. but in my whole career, you know how many times can i remember a ceo left for an a personal undisclosed reason once, visa i racked my brain to come up with other examples.

i just can't think of any other because that's how uncommon they are. why? ceos don't quit for personal reasons. cfos don't quit for personal reasons either these are fabulous jobs. 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 c suite executives for undisclosed personal reasons, it's almost because there is something wrong at the company hence my rule, when high level people quit a company, something is wrong ah-ha, i know a ceo quit because he has an epiphany about climbing k 2 or a ceo left because she wanted to spend more time with her family fine of course there are exceptions at some point, somewhere, a ceo really will step down just to spend more time with his kids. but here is the thing. 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 because most of the time sell willing be the right decision this is the kind of rule that helped keep me in the game at my old hedge fund it's helped you avoid losses one way you do that is by not taking on unsays 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, you need to watch what is going on with the bonds that should be obvious at this point. but it's something people tend to forget. and when you're looking at individual companies, remember that unexplained high level executive resignations equal sale giorgio in illinois, giorgio >> caller: boo-yah, mr. cramer thank you for all that you do. i truly appreciate it. >> oh, thank you >> caller: my question is what percentage of a portfolio should be in index funds and held in cash with the volatility of these future markets >> okay, a lot of that depends on your age. by the way, 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 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 it in "get rich carefully. as you get older, you got to raise some cash. blake in nebraska, please. blake? >> caller: boo-yah, jim. >> boo-yah >> with the current market volatility, what advice do you have for the young investors throughout compared to other investors? >> ride it out young people have their whole lives to make back the money that they might lose in the market older people, while time gets shorter and you can't make it back that's why you got to be a little more conservative okay if you want to get ahead on the stock market, bond's the word. and please, when executive steps down without an explanation, sell, sell, sell and stick with cramer. take control of your

financial future with the new madmoney.cnbc.com. cramer's exclusive interviews, full episodes, analysis, even your own soundboard. ♪ hallelujah plus special access to mad money 101 with rules and techniques to break down the market for all investors. >> the red flag that makes me drop a stock immediately is -- >> it's everything you need right when you need it the new madmoney.cnbc.com. nice.

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an energy company helping cars emit less. making cars lighter, it's a good place to start, advanced oils for those hard-working parts. fuels that go further so drivers pump less. improving efficiency is what we do best. energy lives here. before you can be a good investor, you need to be a realistic investor there are far too many people in 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 think people would get comfortable with the idea that stocks can go down, right? after the dozens of corrections,

meaningful pullbacks we've had over the last 20 years, you think we'd get used to the process. if people were reasonable, if we were a realistic species, you would assume we'd say something like hey, let's prepare for the annual correction because it could be right around the corner yet aside from the permanent bears, 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, is a huge contingent of people who seem totally stunned. just caught by surprise. you know what? that's a bad attitude. to me, the corrections, well, you know what they're like they're like the rain. i know that rain's inevitable. so do you. i expect it to rain. i prepare for it when the rain comes, i am ready, skee-daddy i got an umbrella or a coat or stay indoors that's how you need to approach the possibility of a pullback. sooner or later we're going get one. so best to keep some cash ready on the sidelines, just in case

that time turns out to be now. that's what we do for action alerts on my charitable trust. in recent years we've had a lot of major declines that were preceded by terrific up days during which we made lots of money and everything looked peachy in january of 2018, the stock market roared higher people were acting like it was an unstoppable rally but in february, the averages, they got obliterated why do i mention this? because the time to be most worried about a correction is the moment everybody else is concerned. that's when we get the brutal supposedly unexpected declines, when everyone is euphoric. i used to have a rule in my old hedge fund when i made 2% in a day on the upside, 2%, i knew i was too exposed. that's the word you use. i knew i was too long. i had too much stock i knew my portfolio would kill me if we caught a storm. so as the market lifted or if my performance was swinging too much to the upside, i pulled back, sometimes furiously

selling. >> sell, sell, sell, sell, sell, sell, sell, sell, sell >> to prefair for big down day that had to be right around the corner sometimes the correction never came and i had to sexual assault low my pride days later and buy back the stock we sold but when we did get it, my hedge fund outperformed by so much that my clients thought i was genius i wasn't a genius. it wasn't genius at all. it was discipline. it was preparation plus, because i had taken something off the table in order to raise cash, i would be able to use that money to buy all sorts of high quality stocks into the weakness i so often preach to you. look, we may not be able to predict when a storm is going to strike, but we do have barometric readings that be helpful, immensely helpful where. should you get your weather port i paid for something that's right i like to followthe proprietar standard & poor oscillators, a terrific indicate they're tells us when the market is getting overbought or oversold whenever it registers plus 5 or above, that tells me we've come up too far too fast to the point where it's gotten dangerous.

to me a plus 5 means you need to pull back aggressively and wait for a correction what do i mean if you're nimble, admittedly a big if, 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'll have a ton of cash on the sidelines that you can use to buy back your favorite stocks at lower levels. you should be selling something to raise some cash when that oscillator, again, that i buy from the s&p company, hits plus 5. and look, i understand maybe you just want to take a little off but people who are aggressive want the take a lot off because that doesn't happen very often by the same token, when it hits minus five, it means the market is oversold. 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 the sell-off worst case scenario, there is 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 look at this way i gave my invest areas compound 24% return after all fees that was more than twice what the s&p 500 would have given them over the same period. as i see it, that's pretty strong evidence that avoiding losses on big down days more than makes up for the possibility of missing partial gains on big updays. yes you need to accept sell-offs are inevitable like bad weather. but you also need to stop yourself from make investment decision based on misleading emotions and the worst of those emotions is hope. whenever i hear the word "hope" as in i hope that doom stock du jour will come back to where i bought it so i can sell it without taking a loss, i get furious. hope is not part of the equation repeat 56 me hope is not part of the equation don't hope for anything. hope is emotion, pure and simple and that is not a game of 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's fine if we're talking about religion or sports you know the coaches of some of these come-from-behind ncaa basketball teams keep their players motived through hope but this the stock business, hope is a mistake. why? because it's a play is reason. especially when we're talking about stocks that trade in the single digits. you tell yourself hey, i bought this at $5 i hope it goes back to $5. no company sets out the have a single digit stock most companies will fight tooth and nail to keep their stocks from going into single digit territory. when you find something that sells a few bucks, the market has already rendered a harsh judgment when you let hope become part of the equation you could end up holding these low quality pieces of paper, waiting for something that will likely never happen.

forget hoping, and forget waiting for higherprices i say the thing to do is to cut your loss and move on to a stock you can actually see, can see going higher in other words, a stock that you had done the work and believed will go higher and it's not because of hope, but because of reason. the bottom line, it pays to be realistic in this business so prepare yourself for corrections. they're like rain, inevitable. don't make stock picking decision based on hope you need to invest in the real world, not in the fantasy land created by your own hopes and dreams let's go to dick in virginia, dick >> hi, jim i love your show. >> thank you. >> i listen and learn and profit 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'm well diversified in most of your favorite stocks, i can not 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 interest, or get rich carefully by being well diversified with stocks >> i think at 73, you don't have many, many years, but you should raise some cash. i would say even i'm not sure about your work status, but someone is 73, to have 25, 30% cash, remember, i believe you're going to lead much longer lives than most people think 25, 30% would be fine in short-term cash. because rates are going higher and then we'll deal with it. let's go to pat in colorado, please pat? >> caller: hi, jim this is pat from beautiful, beautiful colorado my question is this. i owe $19,000 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 got to speak to your tax accountant to be able to be sure i do think that -- look, let's put hit the way. i think that each -- 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 a lot 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. s. >> jim cramer, you're one of my here roy, i look for toward your

show every week night. >> thank you so much for helping beginning investors like me. >> when you talk about the mark market, i believe you're spot on. >> oh, i love it thank you so much. every night we watched you i have learned and earned. the nature of a virus is to change. move. mutate.

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you don't need me to tell you the internet has been a double edged sword you have all sorts of information available at the push of a button something that was unimaginable when i got started it was much harder to do the homework in the old days it took real effort. these days everything is searchable for all the ways the net makes it easier. it also creates new problems when we have new problems, we need new 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 do that you have no business buying the stock in question here is the thing. in the old days, this rarely came up. but the rise of the internet took away one of the most important brakes on the process, one of the most important

warning systems which is talking to another person about what you want to buy. it used to be that you had to talk to a broker now with the stroke of a key, you can buy let's say a stock of workday or square without ever having to tell another person why you're doing so. why is that an issue why do you need to explain this stuff to someone else, anyone else it doesn't have to be professional, by the way it could be anybody. preferably an adult. but you can fall back on explaining to your kids if you to buying stocks is a solitary event, too solitary. but we're all prone to making mistakes to err is human. if you want to cut down, force yourself to articulate to someone else, not just yourself why you like a stock do you know how they make their money? do you knowhow their earnings are supposed to look if you don't, then you are setting yourself up for trouble. i see this in biotech, including questions, the lightning round people talk about. so many people own biotechs

without having the vaguest understanding of what the companies do i urge you to be able to articulate a thesis for every stock in your portfolio to cnn think of it as a test that you've actually done your homework that way 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 get slaughtered on the next decline. and there is always a next decline. when i was at my hedge fund, i always made my employees sell me the stock. literally sell to it me like a salesperson before i would buy it if you're picking stocks yourself, get someone to listen to you and let you articulate your reasoning that's what's so important i also like to ask people, what's going to make this dog go up what's the catalyst? or have we missed the move in this overvalued stock that is up 100% already this year i get a lot of those questions too. and of course, what's your edge? these are all important questions. if you can't answer them, you shouldn't be buying. and look, the ability to make

hasty decisions is not the only thing you need to be wary of on the web. there is 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 wall streeters alike don't have enough respect for this promotion machine. when wall street falls in love with a stock, it will go much further than anyone expected in its efforts to hype the stock to high heaven. consider the name of valiant, the big pharmaceutical rollup that was one of the most heavily promoted stocks of the last decade its shares soared to the $200 and then some on acquisition after acquisition as analysts routinely raised numbers why? because management would slash costs and raise price. when the political environment changed, the analysts turned on valiant and the numbers fell apart. plus, to make matters worse, it turned out the company had embraced shady practices to bolster results. within a few months, the darn

thing had plunged from the mid 200s to the mid-20s. it took valeant almost two years to bottom, and before then, it fell all the way to the single digits and on the way back, it became bausch health. whatever the thing, valeant should never have expanded above $200 in the first place. the only reason the stock had reached those levels to begin with, considering the endless pyramiding of new companies on old was because the analyst promotion machine was so darn powerful, and the web amplifies the reach. so any time you see nearly unanimous bullishness on potentially dubious merchandise, i think you ought to be wear you should beware. in the words of public enemy, please, don't believe the hype one last thing and this is really true of all media. both online and offline. whether you're watching tv or webcast, it pays to be a critic. it may sound crazy for the host of a tv show to make this argument, but you can't believe everything you hear on

television lots of times executives say whatever they want on air, knowing they can get away with it they come on air and tap 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 the short-term. does that ever make a 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 a lot more careful because there is a ton of junk information, uninformed commentary online. that's just the world we live in repeat after me. just because someone says it on tv doesn't mean it's true. i hate to say is it, but you're being naive if you simply believe everything you hear. that's one reason why yes only bring high level executives on to "mad money. they can still mislead you but if the ceo of a public outright lies about how their business is doing, let's just say their legal bills will start to add up. but generally speaking you see a lot of moby managers coming on television for a variety of

legitimate reasons here is a good rule of thumb if a money manager is on tv and he moving his lips, see probably talking his book when someone comes on and says some plunging book is a buy, do you think hmm, is that an opportunity? instead you wonder he must be really stuck in that pit bottom line, always be able to explain your stock picks to another human being and never take anything on faith in this business 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? >> i'm doing well. how about you, sir >> caller: i'm doing great. >> name is also jimmy. i had a question regarding whether it's better for somebody whose getting into stocks, whether they should go in with general knowledge or they should take the time and learn more because i'm currently 19, and i have a lot of money in crypto currencies, 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 that i know about is a good thing or bad thing? >> i think it's a great question, jimmy. it depends on whether -- i like to have the first investments be index funds. and particularly if you don't have time to do the homework, which i've described a lot as i listen to a conference call, reading through the documents, seeing some analyst research then i really think you should be in an index fund. it's no surrender, okay? after you build up that stake and you're still interested in buying stocks and wants to do a little homework, 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 denise in minnesota, please denise >> caller: hey, jim. boo-yah and thanks for all of your hard work for us. >> oh, thank you. >> caller: say, jim, you explain dutch auctions and why a company has them and what a shareholder should do about them >> well, that's a company trying to show you basically that they

think the stock is worth more than it, and they're buying the stock up high. basically you're not going to be able to get all of your stock done you'll get the rest of the stock back but it's a nice way the make a little money and i think companies that do it are showing that they have tremendous belief in themselves. and the last one that i really loved was the old jardin it was really good for everybody. always be able to explain your stock face-to-face 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

♪ no matter how smart you are, no matter how well informed, no matter how lucky, sooner or later you're going to make some suboptimal stock picks it happens to the best of us every portfolio has a few duds in it. the true difference between a good investor and a bad investor is how you handle your losers. people seem to have a natural aversion to selling losers professionals and amateurs alike hate doing it. they keep hoping, operating

under the assumption that a sinking stock is wrong in its direction. they rationalize that it will be fleeting and people will soon recognize the value of their stock, the one that's in question that's all well and good until you need money maybe you want to raise some cash because your portfolio's going a little too stock heavy maybe you have some real life expenses that require you to put together a lot of money in a hurry. maybe you're a money manager and some investors want their money back that's always tough, though you ever read confessions of a street addict? holy cow i have a whole chapter about that one then how do you decide what to sell this is where the tendency to hold on to the losers shows the sinister side. a lot of invest worries prefer to sell their best performing rather than the worst. yep, they will sell their winners to subsidize the losers. [ buzzer ] you then get a self-fulfilling spiral as the bad stocks stay bad. they usually keep going down and with fewer winners, your 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 down individuals do the same thing. you only have a finite amount of capital to invest. rather than take your medicine, 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 stuck in the position is quite simple sell the losers and wait a day if you really want them back, go buy them back the next day once you're adding portfolio, i got to tell you, i doubt you'll be even tempted to buy back the stock. by the same token, you can't keep hanging 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 nothing is as lucrative. you can put a lifetime's worth of gains in a day in a takeover. people go to great lengths to

try to scalp cher the moves. the funny thing about bad companies. they really do get bids. in reality, typically what gets acquire ready great companies with cheap stocks not crummy companies with stocks that seem cheap but are really expensive so many people buy this junk merchandise because they think a takeover will save them. my next rule never speculate on takeovers of companies with bad fundamentals. the odds are that you'll end up owning something that you could go down much more -- much more than you ever thought. even as it has very 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 it in the stock. that's the thing about bad companies. the stocks tend to go lower, deservedly you do much better buying a well run company that is in good shape and can still get a takeover bid than you can from buying a company that is doing poorly and thus unlikely to get a bid. it makes sense

not many bad companies get acqui acquired don't wait around for a company with lousy fundamentals to be taken over you could be waiting a long time if you just moved on you could have bought the stock of a high quality company that is likely to give you much better performance. in a well run company you can get away with speculating on a takeover because there are other ways to win. when the stock goes down, you can confidently buy more on the weakness that's not something you can do with a company that's going from bad to worse while you were weight irrationally for lightning to strike. the bottom line, never sell your winners to subsidize your losers [ buzzer ] if you need to raise money, for whatever reason, just take the darn loss and sell something that's underperforming and absolutely do not speculate on takeovers in companies that are deteriorating fundamentals if a possible takeover is the only reason you have for liking the stock, that's not something you should own stick with cramer!

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 from @bull flags. watching ironman with son. forgot @jimcramer lives in the marvel universe. oh, yeah, that was just fun. i broke that cup it was one tape. it was really kind of crazy.

and i am forever indebted into the fabulous people, including jon favreau that do those movies and here is a tweet from big dude making big mo says i'm a new investor, less than three months in. i've always been a great saver, but how do i develop discipline as an investor all right. here what's you want to do as an investor, why don't you just buy small, okay this is what we do for the club. if the stock comes in, you've got more room. i want you to do it so the discipline is going to make it so that you're not going to be able to necessarily make as much money as you would like, but we're trying to cut off our losses, and that's why we start small. 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 very late at night and the answer is i rarely do sleep, and have i 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 very much looking for perspective tonight. is there such a thing as market inertia? with the amount of money moving in the market, is this like steering the titanic versus a jet ski? bill from gfx. no, it's not and i'll tell you why. we don't have that much money coming in. literally the money has been going out. the fact that the market is going up is really a test top of the the fact that there is this core group of people who are not leaving. they're being just like warren buffett. they're putting a huge amount of money into index funds, and that's okay. that's not inertia that's believing in america and believing in progress. i have no problem with it. now from mike monroe thank you for being the voice of reason and keeping our sanity amongst all this market craziness. don't know what we'd do without you. #mad tweets, had tag mad money thank you.

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

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>> 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." ♪ with a money-saving idea to help parents entertain their kids. ♪ i'm nikki pope. i live in los angeles, california, and my company is toygaroo. (singsongy) look what i have. yay! i have 13 nieces and nephews, and they absolutely love playing with toys.