tv Mad Money CNBC November 27, 2019 6:00pm-7:01pm EST
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>> yeah. >> what else can you do? >> i mean this is -- we got 20 seconds. >> help you with the final trade. >> the overhundred gobble gobble i'm not happy. cmg for all you folks on friday. >> i'm happy. >> have a great thanksgiving see you friday "mad money" up next. my mission is simple to make you money. i'm here to level the playing field for all investors there is all a bull market somewhere and i promise to help you find it. "mad money" starts now hey, cramer. welcome to "mad money. welcome to cramerica ear people want to make trends i'm trying to make you money my job is not just to entertain but educate you call me at 1-800-743-cnbc or tweet me @jim cranium are. i'm tell you that discipline trumps conviction i say it over and over and over again.
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in other words no matter how much you may hoff a stock, no matter how entrald with the underlying company if the rules say sell it, sell, sell, sell, sell you sell it. one thing i learned in the investing career no matter you might be believe in something you violate the rules of the road at your peril but where the heck do the rules come from? it's not like they were handed down from on high and carved into sfoen tablets they're not the laws the physics. you can't dedues from observing the market the way you can do say gravity. the rules come in from experience in particular my experience. i spent nearly 40 years in this business in that time you better believe i learned powerful lessons in many cases i learn the hard way. and because i don't want to you repeat my mistakes, because i do want you to have the benefit of my whole career, tonight i want to lay out some of my most
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important rules for investing. the stuff i really live by some of the stuff may seem basic. but again you forget the rules at your peril. back at my hedge fund where i labor for a long time i occasionally convinced myself it was okay to have a exception to have a cheat day ignore discipline this this once for some reason. seemed compelling at the time. and whenever i broke my rules, well let's just santa fe i got burned it's like that old joke about the guy who goes to the doctor and says doctor, doctor it hurts when i stretch out and shake my hand around to which the doctor applies then don't do that. what should you be doing or not doing as the case may be let's tick down the most important rules for investing. number one bulls make money. the bears make money and pigs they get slaughtered.
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look i say this all the time because so oft 199my career i have seen moments where stocks went up so much that people were intoxicated with the gains of course they thought they were geniuses however it's this point of intoxication that you need to remind yourself to the to act like a pig i first herd this phrase on the old trading desk of legendary stein hart partnering st i'd be having a big run and the legendary michael stein hart said i had maybe made too much money. perhaps being a pig. i was grateful to catch a major gain of course not that long offer we got the vicious selloff and i gave back everything i made and then some. that's when i enshrine the bulls make money bears make money and pigs get slaughtered thesis. it's so deeply inground i have a barnyard set of the sound effect
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buttons. to be clear, bulls don't have a monopoly of piggishness. the same idea the applies to investors aggressively on the shortside. we have major declines over the years. but other than the.com burst in 2000en a the financial crisis in 2008-2009, systemic risk most stocks bounced back quickly. you maid a killing if you went long at the lows of 2009 but if youstayed short and got greedy betting against the market going down you got slaughtered. of course is begs the question how do you know when you're being a pig? look allegedly there is no such thing as stupid questions only stupid answers but you don't need me to tell you when you're being a pig. if you don't feel greedy hitting the all-time high after in 2000 and no time flat you don't need investment adviser you need a psychiatrist. if you took profits you side
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stepped the huge decline if you let the winners ride. you lost a frrn. the financial crisis is even more stark if you were walking around earning a huge amount of stock in 2008 as the banks started dropping like flies, you were beyond piggish why is this rule so important? it's simple? one of my chief goals is to help you stay in the game the hardest part of investing is holding onto through different periods. taking short-term pain for long-term gains. the people who got wiped out by the.com collapse tend to be the ones who never took anything off the table. where do they live. >> house of pleasure. >> they never felt greedy and the piggishness got them slaut reported same for those who never came back from the financial crisis being cautious and ringing the register near tops ended up keeping youin the game that's why i remind people ever day, have you taken your profit? have you booked any gains at
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all? or are you being a pig. >> because you never know when stocks you own are going to really get crushed you never know when the market could be just enough you can't have certainty if you assume stocks keep going up forever in a straight line i think you're in for a world of hurt surelile thereby there will be times when stocks keep going and going. when i i know the term phang a few years back for facebook, amazon netflix and google i loved them all but i gave up on amazon after the amazing run it continued up. but i felt like a pig after the stock's profitable move. then i felt like a fool when it kept on galloping. bugged me. but that's the price you pay for following the rules. you need to recognize that for every huge pile of cash that gets left on the table with the situation like amazon you sidestep gigantic losses like the kind you would have had if you had stuck with the market in
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2000 and 2008. experiences that turned two generations of investors against stocks maybe forever. so never forget bulls make money. bears make money and pigs get slaughtered. i'll keep on repeating it forever with the sound effects because it is just that important. rule number two. it's okay to pay taxes look, no one has ever liked paying taxes but like death, taxes are inevitable and unavoidable yet the aversion to paying taxes on stock market winnings often borders on the pathological. so many times people have gigantic gains but refuse to take any profits because any don't want to incur taxes to cut into the winnings. wall street is littered with broken hearts of investors who made this kind of mistake. couple of years ago for example i went to a presentation from a prominent hedge fund manager who recommended buying the stock of macy's because of the real estate value the stock had already run a
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great deal and ripe for profit taking but i know people who had owned for years with hefty profits and didn't want to ring the register why? they would have had to write a check to uncle sam s next thing you know the stock of macy's is obliterated, cutting more than half and wasn't the two for one split the mall hit a tipping point courtesy of competition from amazon and the darn thing just got crushed. those who didn't want to share the profits with uncle sam ended up with no profit at all what kind of lesson is that? make the peace with the taxman some gains are unsustainable, need to be taken a profit on paper is not the same thing as a profit in your bank account gains can be ee fem rl errol the last thing you need to worry about is capital gains taxes when it's time to sell, you sell in short stop fearing the taxman start fearing the lossman. you won't regret it. and i'm not saying blow out everything i'm saying take some profits
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bottom line, remember my top two rums bulls make money, bears make money, pigs get -- and don't be agreedy. a variation on the theme okay to pay the taxes. don't be worried about taking a taxable profit because you may end up with no profit at all. chris in ohio, chris >> hi, jim thanks for having me. >> good to have you. >> caller: my question is we have a about $1,000 of disposable income. >> okay. >> >> caller: neither of us have a 401(k) match with our jobs we're basically trying to figure out. we have a mortgage we're trying to figure out what would be the best thing to do with that extra $1,000 of disposable income. >> that's why that index fund is for. you can take 10% of that and use it for "mad money," buy a share
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of something that's okay the first stock trades were one share five shares 7 shares. but you need an index fund to get started until you build welt then you how about jacoamo? illinois. >> recently on the show you talked about for you heirs time investors or younger vfrs should, you know, stay away from riskier asset classes until they have $10,000 lgbted in mutual funds. >> right. >> or exchange traded funds. >> yes. >> caller: my question for you is seeing all the crazies bull market we've got going on seeing the market ramp up, seeing cryptocurrencies going up if i don't have $10,000 invested in mutual funds what should i do? do i let opportunities pass and wait it out. >> i totally understand a young person i want people to be able to save that's my principle goal if you want to put "mad money" aside and do what i think is
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basically doing gambling, with it, i'm not stopping you but the thing that i most care about is getting people to save. if you're saving that way with some risk as long as the understand the risk i'm okay with it. but i can't back away from index funds as the fundamental of how you invest jeff in california, jeff >> caller: hi, jim this is jeff at lake tahoe. thanks to you and your staff for informative and helpful problem. >> that. >> caller: i have a two-part question pertaining to interest rates and yield curves can you explain to us home gamers how -- what a flattening yield curve means and more importantly why did the analyst say when there is inverted yield curves that it por tends recession coming and the last part of the question is, what happens if the 150er t-bill goes to over 3% how will that affect the stock market in 2018 and grab your
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skis on come on out and see news thoe. >> you're very kind i love lake tahoe. i used to play cards on the nevada side. the inverted yield curve fed raised rates too high rest of the curve goes out five, 10, 20 years. that is a curve that has shown in many cases to lead to recession. but other cases not. so i'm not -- i'm not hard and fast in that rule. i do think that as rates go up business does slow that's undeniable. but we are such a low rate and business is so strong that we can afford it. mike in california, mike >> caller: good afternoon, mr. cramer. >> mike. >> caller: two things. one first thanks for taking my call number two thanks for leading us nine to fiep fivers down the right path a little extra money. >> all i want to do, thank you. >> caller: i know you're in a
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hurry. >> i'm fine. >> caller: concerning dichds, just want to know do you take the money and put it in your pocket or put it back in the stocks and if you do how do you make that work and how do you set it up. >> you got to do dividend reinvest dividend reinvest it's just a -- a check off basically. but you have to. my trust got to give the dividends away always hurt the performances i tell club members reinvest take the money because there is nothing like the compounding of the great compounding that you get particularly with stocks that have good divides remember my first two rules. bulls make money bears make money and pigs get slaughtered. please don't be greedy be disciplined and don't be afraid to pay the taxman on profits you earn it's a lot better than riding to losses take some off the table. much more "mad money" ahead. putting four decades of experience to work tonight, counting down the most important rules for investing to help you
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navigate the market. stick with cramer. ♪ >> announcer: don't miss a second of "mad money." follow at jim cramer on twitter. have a question, tweet cramer. hashtag mad tweets send jim an email to madmoney@cnbc.com or give us a call at 1-800-743-cnbc miss something head to "mad money".cnbc.com >> announcer: black fridayic kicking off retail biggest weekend. tracking consumer spending coast to coast and what retailers to doing to ring up the edge. all day friday eastern exchange. 5:00 a.m. eastern. - [spokesman] if you've tried college but never finished,
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♪ news flash at the end of the day we're only human. if you remember only one thing about being an investor, that's it nobody is perfect. everyone is fallible opinion and it's inevitable that we're going to make mistakes it's just the nature of the business and the nature of humans that's why if you are going to own individual stocks you need to follow a set of rules rules that are designed to protect you from ourself rules that i learned the hard way. and that brings me no the next commandment. this is a real important one never buy a stock all at once. i can't stress it enough do not under any circumstances ball all at once no broker likes to fool around
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with partial orders like i'm telling to you give. no financial adviser has the time to buy sfoks methodically over time. the game is to get the trade on at one level in a big way. make the statement buy get the position on the sheets or in the portfolio. but from where i stand, that's all wrong. 100% wrong you should never buy all at once and never sell all at once instead what i want to you do is stage your buys. stage yourselves use this -- the term we use on wall street so work your orders. trying to get the best price over time and not necessarily in one day. maybe multiple days. why? okay when i first started out i was a professional money manager i wanted to prove to everyone how clever i was and how right i would be if i felt like buying cater bierlt pirlt buy it now big at one price. because i was sure i was right put me up on 50,000 cat. which means buy 50,000 as if the smartest guy in the universe doing it big
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bhe i think about that young cramer with the full head of hair, by the way i was one arrogant sun of a gun. i was arrogant and wrong what was my mistake? if you want to buy 50,000 of shares of caterpillar you don't pick them up all at once what it goes down immediately if you feel like a dope never buy all at once. instead i have should have bought in 5,000 shares i know it sounds measly if our professional pl buy gradually over time trying the get the best price i could you can buy a small smoegs get a good position. buy lower and lower levels i know we institutionally. and i know the institution guys are saying 50,000 is nothing but you know, i no longer trade in size as we say, but i still invest and i invest for my travel trust and follow along on action plus.com whenever we have a new
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name no buy we tell members eye buy at 500 shares at a time. when you buy all at once you declare the stock won't go lower. don't you think it's crazy when i say it no one has that insight. buying dwradly in changes is recognizing the judgment is fallible why don't investors if they want 500 shares of exxon decide to by it in 100 share increments they want to be big and not waste the broker time. your broker wants the trade done i know my brokers hated incremental orders like i describe but it's just plain hue brings to put a marilyn chunk of the net worth into all the stock at once maybe it goes to free fall that's you need to resist feeling like making a statement when you purchase stock. i bought and sold billions of shares of is to stock. embassy do you know how often i got in at the bottom how often it was lowest off to the races maybe one trade in a hundred and i'm good at this
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game resist the arrogance buy slowly even over a couple of days as i tell member of the action owners plus.com club. humility beats hue brings every time next rule buy damaged stocks not damaged companies. let's say the mall is having a sale and you pick up the merchandise. you find out it's broken maybe a hole in it, maybe it's a shirt in the real world you can return it and get money back. guarantees and warranties galore on main street wall street is different if you buy a stock from a defective companies. you eat the losses caveat emptier that why you need to be careful to distinguish from broken stocks make macrocosts and broken company which absolutely deserve to see the stocks trade lower without you. sometimes damaged companies can be easy to discern when valiant started to plumb fret the
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150i .balance sheet fears and chicanery with pharmacies, it wasn't a dwootd sale to rush toward valiant tumbled from 262 down to the single digits for a bottom a lot of people thought valiant was worth at 150, like an auction going down but the ongoing problems at the company meant the stock was toxic. sometimes the stock sells off for reasons nothing to do with the underlying company could be caused by etfs or problems overseas. washington worries, greece just because the stock is down that doesn't mean there is anything wrong withes business how do we distinguish between the broken company and stock complicated question i like to develop a list of stocks i like. i ball it the bull pen in the action club. when wall street holds a sale with the market coming down i use that as opportunity to pick up the stocks on the list that was designed in a cooler moment with a cooler head but the bottom line is that you never really know. and that's why this rule works in a tandem with the last one.
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you never buy a position all at once what you think is merely damaged might turn out to be damaged company. if you take your time you're less likely to end up with a large quantity of broken merchandise. stick with crame it is nice. his haircut is "nice." this is the most-awarded minivan three years in a row. the van just talked. sales guy, give 'em the employee price, then gimme your foot. hands-free sliding doors, stow 'n go seats. can your car do this?
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♪ if you want to build a portfolio of individual stocks, the big if, since there is nothing wrong with getting auto all the equity exposure yur from a cheap index fund that mirrors s&p 500 you have to be rigorous about it the next rule, do the homework growing up my kids hated homework thought it was punishment. when i looked added what they were studying, i have to admit i found it easy to sympathize. what's the relevance of most
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they teach in high school, how will it help you later in life why even bother? of course that's a terrible distribute i just really should take at a back as a patient i always encouraged my kids to study because you never know what you turn out to be interested in later in life i bring it up because many have the same attitude so to the homework for stocks. you suspect it might be as irrelevant as school work seemed to be to my kids when i tell people they need to listen to the starbucks conference call which is really good or they know what the analyst from netflix about subscriber growth. if they own the stocks they don't want to hear it they think they just want to own them not do anything. when he i remind them them listening to the conference call and doing research reports the look at me like a old fashioned teach he were a school marm asking for way too much in the busy 21st century world. that's wrong owning stocks without the proper
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research, i regard it as just plain lunacy you never want to do that. >> they know nothing. >> but people do it and for different reasons. on the one hand the buy and hold school of thought, the idea you don't need to track what's happening at the company because you're in it for the long haul as if that makes it okay on the other hand you have people who don't have the time to be that diligent. for those without the time i got the get someone else to manage the money or do the smart thing and invest in the low cost s&p 500 index fund if you can't get a few hours a week to the portfolio you shouldn't mess with stocks. but i want the buy and hold premises that's more per initials back during the 90s buy and hold became the be all and end all of investing. i'm just going to hold onto that cmgi, you got to look it up, goolg are google it but has to go back to 100 where i bought it man i could substitute a hundred
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companies i could put in the sentence if the experts say if you hold the long-term isn't everything supposed to work out for the best this philosophy took a blow during the financial crisis when so many people praying buy and hold got wiped out that's why i've been an evangelist for buying and homeworking what's the homework listen to the conference calls you have to. that's the minimum to the company website read the research read the news stories google the darn thing everything is available on the web. everything you have so much more available now so much knowledge there is no excuse. you aren't up there begging at goldman sachs library for microfeesh statements. but if you fall back on the buy and hold strategy for groups of stocks and don't pay attention i can assure you you will be soundly beaten by professional managers with good track records actively searching for high quality sfoks stocks all the time more to the point i'm certain
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any index fund can beat someone with no homework it's not a strategy it's just being lazy the next rule is another essential i harp on constantly diversify, diversefy and diversify more to control risk. if you control the downside, the upside takes care of itself and the controlling the downside means managing risk. what's the biggest richk out there? sector risk. stocks in the same sector tend to trade together. especially at extreme moments. do you know that about 50% of the action in a given stock comes down to the sector in some areas because of etfs it's higher. i don't care how great a tech stock was in 2000 if you had all the eggs in the group you got scrambled. same thing with financials in 2008, oils 2014 to 2006. and this is there is only one thing to keep you from getting nailed by the sector risk that is diverse fix i've been playing since 2002
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i like to say diverse fix is the only free lunch in the business. people make fun of me in thes office because i satisfy it oech if you mix up enough different sectors in the portfolio five, you won't be wiped out something happening far more often than you think. but if diversification is so obvious how is it anyone can be undiversified? it comes back to the homework issue. a lot of people simply don't know what they own they couldn't tell you if you bumped into them they end up stocks frightening slr. without knowing it i field calls from people generally think people owning phang is a diversified strategy. facebook, amazon netflix and google alphabet you own social, mobile cloud. i call it faux diversification no heart you like the oil stocks
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it's usually wrong you can't have a portfolio of exxon i say know equal j & j ealey little bristol myers and united health this they leave you exposed to health care risk overwhelming the graup at once having of undiversified portfolio is not just amateur mistake. many professionals like don't it box because of the way money management if you concentrate the bets in the secretary are and it takes off you'll beat everybody who is diversified out there. that's the nature of the beast a hedge fund manager who does that and gets lucky can market himself as a huge success. get profiled by every magazine raise capital from unsuspecting investors who don't realize the risk they're taking on here is the bottom line. whether you're amateur or professional you always need to do homework and keep the portfolio diversified may not be exciting and sexy but this is routine maintenance that
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protects you from monster losses down the line. mike in south carolina, mike >> caller: hey yb jim mike from south carolina zbleen thank you for calling. >> caller: i was wondering i'm a new investor say i'm vechg about $100,000 how many stocks should be in the portfolio. i have about 30 i don't know if that's a lot or. >> after ten you're a mutual fund now look if you are a stock junky like me you can have a lot plor and if you have the action alert club but ten is the about the most you can do. you won't be able to do the homework roberto in texas roberto, please. >> caller: hi, jim buya. >> i just had a question i'm a new investor, 29 i have a small amount about $1500 i wonder how i should invest in the index fence. >> 1,500 first 10,000 index fund
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no matter what then some "mad money. don't forget, index funds keep you diversified. and we like to diversify, diversify, diversify sure homework isn't fun but you know, losing money is worse. you want to avoid monster losses homework and diversification are key. stick with cramer. cramer, you were super awesome. >> caller: i'm a first time investor. >> thank you for inspiring me to get in the game. >> your show is the best so glad you're on tv. >> i want you to know you have transformed me thank you, cramer. i'm a regular in my neighborhood. i'm a regular at my local coffee shop and my local barber shop.
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when you shop small you help support your community - from after school programs to the arts! so become a regular, more regularly. because for every dollar you spend at a small business, an average of 67 cents stays in the community. join me and american express on small business saturday, november 30th, and see how shopping small adds up. it's how we care for our cancer patients- like job. when he was diagnosed with cancer, his team at ctca created a personalized care plan to treat his cancer and side effects. so job could continue to work and stay strong for his family. this is how we inspire hope. this is how we heal. we love you, daddy. good night. i love you guys. cancer treatment centers of america. appointments available now.
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♪ look, i don't want to go all zen in the art of portfolio maintenance on you but when it comes to managing your money you are often your own worst enemy don't take it personally i'm my own worst enemy too what do i mean. >> you need to fight off your worst impulses we're not robots we've emotions and they can throw you off the game
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that's why the theme of tonight's show is that discipline trumps conviction obey the rules to do the smart thing even when the emotions tell you the opposite. the text rule for investing, nobody ever made a dime panicking. yeah, panic -- you should repeat after me frank mri it's not a strategy panic is not a strategy. you see it over and over as if it is. a stock gets hammered. then investors sell after the hammering. the market gets crushed on the huge day people bail at the end of the day. in short something gets annihilated and people can't take the pain. so they bolt sell, sell, sell panic is the operating instinct in all cases there is something base and instinct about the desire to flee if you are a stone age hunter gatherer who stumbles into a family of grizzly bears panic can be helpful but, it tells you to run away. but it's not a useful emotion when it comes to analyzing the
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stock market where you run when maybe you should run toward. the truth is that almost there is a better time to sell than in and panic. a better time to leave the table than whatever moment inspired you to panic in the first place don't i know it. back in 2010 i was on the air for the flash crash when the market fell 900 points i watched the monitor for the tick are the crawl under the picture i couldn't believe what was happening. people dumped stocks simply because everyone else was. they didn't know why they were dumping. and that's what a panic looks like that's textbook. i urge view tors pick a stock they love and buy it using limit orders so you wouldn't have to accept the price you didn't like. the result to this day people still come up and thank me for the advice during the flash crash. but i simply put the rule into practice realizing nobody made a dime panicking and try to help you profit i did the same thing in 2016 when when had 1,000 point selloff two days i told people
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buying down limited orders you can join the action alerts.com club process we got outstanding buys because we took advantage of everyone else's panic. the next time there is a the marketwide sell off and feel like fleeing and never touching another stock i want you to do something for me take the opposite side of your emotions, the opposite side of the trade. when you see one of the high-speed routes of a sector even individual stock, why not buy a little get a feel for it see what i mean the rewarding trades are those where the decks are kerd by terrified folks using market orders >> sell, sell, sell. >> who dough they don't get the exit doors aren't that big mind you i'm not saying you just buy every stock every panic sell off. they're in the all worth buying. often when people freak out about the individual company it could be with good reason. but i'm saying it's a rare moment you won't get some sort
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of bounce after a big decline. the next time you want to dump everything take a deep breath and wait for the rebound before you sell rather than rushing to join the fleeing masses. you could get trampled speaking of hideous down days i have more another rule to help you handle big declines ready? when the stock market gets unrelenting negative he mo defends everything defends nothing. it's true when when frederick great said it 250 years ago. it's just as true now. he talked about battle plans and wear wraer we're talking about portfolios but the point stands. he who defends everything dechds nothing. what does it mo mean it's how you evaluate holdings when the market is flying you don't need to worry about most of the positions more exposure to the bull the better, right? but when things get difficult when you're on the defensive, you need to recognize many of the stocks you bought in better times might not fit the new environment. when the economy is slowing and the market slammed you can't hang onto everything
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if you try to defend all positions in a market that turns against you, that's a recipe for you to begin blown out of the stock market and when i say defend i mean you can't treat a declining market like a baying opportunity every stock in the portfolio and you just keep chipping away. if you do that you'll quickly run out of capital anyone would leaving you unprepared to buy more if we go lower. maybe appreciatively lower yes, when the market is negative uvlt get selective, focus efforts. that's why i rank all stocks at all times for my action alerts plus.com club members ones stocks buy right now two stocks i buy threes are stocks i sell maybe in the spring that way i'll know which stocks to defend when things get tough. i make the plan not in the heat of battle. i know which to cut or use the source resists of capital to buy the ones let's say tech is getting hammered but you think there's a rebound. you don't try to hang onto the whole complex. pick the best that you want to
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buy in weaknesses it toss out to rest the raise cash. use the cash reserves to buy the higher quality tech companies at lower prices that's right the non-essentials, the one was no catalyst and only own because you wanted exposure to the bull market they get the heave ho immediately when things turn bar he shall karen criminaler worked with me for years at the hedge fund used to call it circles the wagons the first time you do it you'll curse yourself because you might slaughter stocks you owned for sometime process pu but eventually after experiencing rough markets you'll realize how valuable the process is. because over time you end up with great cost bases on the costs you like bottom line great investors know how to ignore emotions when they get in the way of mowing money the next time the market gets slammed don't panic. never ever made a dime panicking but don't double down with your eyes closed and the portfolio in
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weakness vicious negative markets you need to focus on capital and favorites ranger rather than chases bargain in lower quality merchandise when it turns out they weren't bargains. rich, in new york, rich! >> hi, mr. cramer. it's a pleasure. >> how are you. >> caller: i'm good. thank you. could you please explain the technique of buying calls and if it could be or should be used by us home gamers to boost or pad our portfolios. >> look it's a great question. and najarian brothers i don't know if you have seen them they have done fabulous works work on options and "options action" friday afternoon it's a low risk way to limit exposure if you get the book getting back to even i have 100-page exposition how to use calls to limit your downside and get maximum upside exposure. getting back to even david in california, david
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>> caller: buya jim cramer thanks for having me. >> glad you called >> caller: thanks. all right all right so quick question for millennials somewhat knowledgeable about the market where should they invest money other than phang >> well, you know, there is a lot of fang i like aerospace a long-term bull market maybe something in that group. i like a little bit of foreign exposure and i think that that's not such a bad idea maybe etf that has europe. because europe is way behind where we are and will be that way for multiple years and then i think that you know if you are really young, why for the look at some riskier biotech stocks got your whole life to make that money back remember emotion haves no place in investing they get in the way of making money. so the next time the market gets slammed, please don't panic. nobody made a dime by panicking selloffs give you huge
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opportunities but do your homework don't chase and don't buy damaged merchandise just damaged stocks "mad money" is back after the break. >> announcer: listen to cnbc live on your daily commute on your alexa device, google assistant, sirius xm 112, tune in and the cnbc mobile app wherever you go, cnbc. (vo) the moth without hope, struggles in the spider's web. with every attempt to free itself, it only becomes more entangled. unaware that an exhilarating escape is just within reach. defy the laws of human nature.
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♪ ♪ welcome back to tonight's check yourself before you wreck yourself edition of mchld. i'm a big believer in the idea once you get money saved up you are in control of your financial destiny. but that also means you need to very careful because you're the one with the most power to derail the financial future look, mistakes always will be part of the investing game you can't rule them out. you can't outlaw them. i just want to be sure you don't make the same mistakes twice or three times or endlessly for that matter. that's why i have rules. rules for investing to protect you from the ms. judgments that i used to make when i was young and inexperienced. rules like for example don't own too many stocks. >> back at my old hedge fund i would spend three hours a day analyzing the mistakes of the day before
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you wonder why i retired made myself sick to my stomach every day. that's my major task one you complete every morning before anyones else came to the offs. do it generally between 4:00 a.m. and 7:00 a.m some people are in and out ouls i'm early morning. i would analyze the trade. i'd try to figure out how i could have made more money or more importantly lost less i was for lack of a better word man yack alabout it. i had an ee fifpy epiphanymy realized fewer positions could be linked to making more money it was just axiomatic. that's why ever since, i won't buy a stock without first taking a different one off the table. ry try to do that with the travel trust, the only way you can do it these days you don't just buy shares in more and more companies. you need to limit holdings that's a great discipline and
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one you should adopt pronateo. all the bad money managers i know of have hundreds of positions they can't keep track. i don't know how the heck you are supposed to stay on top of more than 30 the good money managers have a few names they know inside out meaning they can buy confidently op the way down when the market goes awrie that's why i say don't own too many stocks. now i know it could be constrange you end up selling stocks for that are good for those that aren't. hindsight is 20 tp take it from me as someone owning stocks for 40 years it's likely to sell marginal companies in order to get bigger and better that's how to make the portfolio work that's portfolio management. you don't want to be a mutual fund manager might as well give it to the index fund the time i lost the most money as hedge fund manager the positions were thick as a brick. when i made the most my wroo one sheet of paper are double space
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when pro or amateur it's almost always possible you have too many positions rule of thumb. if you are just investing to for yourself and you own more than 10 positions, that's right if you own more than 10 stocks maybe you ought to pair back it's hard to have too much cash. cash is for winners. the at times cash is such a perfect investment it drives me crazy how few people recommend it he hate the market so they're only 95% long. instead of 100%. but they think the market stinks to decide to short high fliers against the long positions they own, no, no, and no. that's the wrong way to approach things as an investor. you don't like the market any sectors sell stock raise cash. don't buy put options op the stocks you own or find other stocks to short against the pursuant positions
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the odds do not favor you winning on both stocks, short and long it's a strategy whose goal is mediocrity but if raise the cash and put it work at lower levels that's the best way to protect yourself a little story i was one of the biggest option traders on wall street a time. he he when i bought put options to hedge positions i lost money. when did i make money? when i bought put options to profit from low quality companies that were going to have i thought short falls sore stocks that seemed hopelessly overvalued versus the fundamentals if you dislike the market you you don't need to bend yourself into pretzels, just do short-term treasury the people talk about now little cash earns it's more than it did a while ago. or they say cash is for loosers. no cash is for winners especially with a major disaster ahead or the market is having a pro longed sell i don't have
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i grew up in a different time always shorted a edge. i can't short become back when i could i didn't short them as for the sake of having shorts. i don't care about not having enough exposure. i care about not losing money. if you don't like the market nothing compelling to buy into weakness, i suggest you sell stock and raise cash go sit on the sidelines nothing wrong with that. wait for the situation to improve. believe me it's never the wrong call when you don't like the tape or can't find anything making sense for you the bottom line always be careful not to own too many stocks and not to have too little cash. stick with cramer. ♪ dbackinnovate... to introducing products faster... to managing website inventory...
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and network bandwidth. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence. non-gmo, made with naturally sundown vitamins are all sourced colors and flavors and are gluten & dairy free. they're all clean. all the time. even if sometimes we're not. sundown vitamins. all clean. all the time. the amount of student loan debt i have, i'm embarrassed to even say. we just decided we didn't want debt any longer. ♪ i didn't realize how easy investing could be. i'm picking companies that i believe in. ♪ i think sofi money is amazing.
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♪ the tweets with piling up. holy cow starting with quinton who asked @jim cramer at what age should i put funds in the retirement canment account i don't want bonds until very, very late. i like to actually extend it a little here and say not until you are in your late 50s do i want to start seeing a lot of bonds. why? because people live longer than they used to and bonds don't generate enough return how about higher yielding dividend stocks that's what i go, process moving on.
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could at germano franzoni pmt i would like to see a show entitled tip typical errors of emotional investing that's a great idea i'm doing it i do know emotional vechg produces major mistakes that lead to big losses you got to check them at the door and i will do that for you. another tweet this one from steve daniels who says @jim cramer buya what other index funds do you recommend besides mirrors the s&p 500. >> van guard is terrific and they have a thing called the total return fund. of all stocks. that one is one of my absolute favorites. stick with cramer. so ...how are you feeling?
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on a scale of one to five? one to five? it's more like five million. there's everything from happy to extremely happy. there's also angry. i'm really angry clive! actually, really angry. thank you. but what if your business could understand what your customers are feeling... and then do something about it. turn problems into opportunities. thanks drone. customers into fanatics change the whole experience. alright who wants to go again? i do! i do! i have a really good feeling about this.
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most people think of verizon as a reliable phone company. (woman) but to businesses, we're a reliable partner. we keep companies ready for what's next. (man) we weave security into their business. virtualize their operations. (woman) and build ai customer experiences. we also keep them ready for the next big opportunity. like 5g. almost all the fortune 500 partner with us. (woman) when it comes to digital transformation... verizon keeps business ready. ♪ i like to say there is always a bull market somewhere and i promise to find you for you right here on "mad money."
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i'm jim cramer and see you next time. narrator: it's been 10 years since "shark tank" ignited america's entrepreneurial spirit, and we're still blazing a trail for those who take their fate into their own hands. tonight, sara blakely, the founder of spanx and one of the wealthiest self-made women in the world, returns to the tank. i also like to invest in female entrepreneurs. oh, my gosh. look, we wish you the best, but i think we're done here. do not shut it down. what's going on in all those heads over there? -it's like christmas. -[ laughs ] you will get your money back. this is coo-coo. i believe that my company can easily be a hundred-million-dollar company. ouch. you just love money. [ winces ] you deserve an "ay, chihuahua! caramba!" ♪
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