10 fold increase in revenue. earnings take a look at it. >> guy? >> happy holidays, merry christmas to everybody. mid tronnics, getting a bounce here. >> see you in the new year. thank you for watching "fast money." ar rhtowr " with jim crame sttsig n. >> my mission is simple. to make you money. i'm here to level the playing field for all investors. i promise to help you find it. mad money starts right now. hey, i'm kramer. welcome to mad money. i'm just trying to make you some money. my job is not just entertain, but to educate you, to teach you to be better and best. so call me or tweet me at jim cramer.

don't want to share some of my cumulative wisdom. and there is a lot to accumulate in this business. there are so many different things you need to balance in order to be a great investor, they can be hard to keep track of everything. a lot of this stuff is much more important than the day-to- day action of any particular session. the stock went up, the stock went down. without the right discipline, framework, there i say, philosophy you are going to get yourself to trouble. and that is why we are all about discipline when we manage the challenge for the cnbc investing club . it is why we constantly fall back on the rules in our investing guide to guide our decision-making for every kind of market. and tonight, i'm going to share some of them with you. but i know that the big picture financial should be hard to process. a lot of it is downright contradictory. that is a keyword. we tell you to have conviction, to stick with the company you believe in, and we say you need to be ready to change your mind.

you need to be cautious, but you also need to be ready to pounce on opportunities when they present themselves. you need to be skeptical, but you also need to suspend your disbelief. you need to avoid changing stocks too much, but you also shouldn't care too much where stock is coming from if you believe it's headed higher. believe me, i get it. if you take all my rules literally you're going to be running around in circles while tearing your hair out. how do you think i went bold? can't resist. tonight we are going to take a step back, try to put all of this stuff in perspective. now, if you pick your own stocks, which you know i love, in addition to a healthy balance of index funds which you know you need. is to say, what you got to have his good judgment. but obviously good investing judgment is not the kind of thing anyone can teach you in an hour of television. even a year of television. that's what i'm trying to help you good habits. i try to teach you the better ways to think about individual

stocks and the whole market. i try to give you the tools you need to develop your own judgment. and why a focus on guiding you through the whole process more intensively in my investing club. all my best professors in college focused on teaching us how to think. not teaching us what to think. i have always try to take my cue from them. i want to teach you how to be a better investor, not just tell you the stocks that i think are good investments. i would've stopped doing the show years ago. the problem is, it's a heck of a lot to process. what we have to do? we have to try to put it in context. first and foremost, when you're managing some of your own money for any consideration, you need to know yourself. i've said this before and i will keep saying it, because it is so important. you simply can't know which stocks you should buy if you haven't taken the time to really consider what your objectives are. you should build up your wealth to only make a major life- threatening purchase, like your home. are you trying to get a decent return as you save for retirement?

you have enough money to burn while you are taking a risk on more speculative positions? it won't hurt you? so many people do that. they put all of their money and speculative stock hoping they will hit a home run, and then. the truth is there is no one- size-fits-all for investing. anyone who tells you that is either dangerously misinformed or are flat-out lying to you, probably in order to sell you something, but far too often people will invest in the stock market with the simple goal of making money. we all want to make money. i want it, you want it. but how quickly do you want that return? what are you willing to risk in order to get there? how much can you even afford to risk in the first place? these are all the crucial questions you need to ask before you start paying individual stocks. why? because without a goal, you have no way to determine which stocks you should be buying. in other words, your 401(k) or i.r.a. do not exist in a vacuum. if you are trying to save up

for retirement, a stock like tesla might not be the most appropriate place to put your capital. on the other hand, if you already have a decent size nest egg set-aside for retirement and you just want capital appreciation, then high risk stocks start to look a little bit more attractive. in short, before we start making judgments about individual stocks you need to figure out what your own internal is going to look like. that's the foundation of good investing. knowing what you need so you can find stocks that suit there is needs. it is called suitability and it is important, maybe one of the most important parts of investing. let's put it another way in case that doesn't get 30. let's say you want to fly across the pacific ocean. you do it in an airplane, you don't try to fly across the pacific in a ford fiesta. if you want to pick up your kids from school, taxiing down main street in a 747 would be a little impractical. in that case, you are better off with that fiesta. do you need to go to home depot for a metric on of lumber and tiles and pain to get the job

done? the ford fiesta is probably too small. and there's no way you're taking a 747 to a packed home depot. but a pickup truck, maybe a ward lightning, well, we hope, maybe that can do it. this may sound simple, even downright obvious. but it is the same way with stocks. when you are saving for retirement you want low risk holdings that can give you a slow and steady return. for those of you who don't have time to research individual stocks, you really can't go wrong with a basic low-cost s&p 500 index fund that mimics the performance of the market. i have recommended index funds endlessly and i will keep doing it, because they are phenomenal . at their best, they help democratize the incredible engine that is the u.s. stock market. america is a growth country, that is very business friendly compared to the rest of the developed world. when you buy an s&p 500 index fund you are basically betting on the long run returns of the

u.s. economy. i always say you need to invest your first 10 grand in an index fund. don't bother trying to pick individual stocks until you have at least that much money in an index fund and preferably more. it is the most important bedrock of your portfolio. if you are looking to make slow and steady money over a period of decades, that is retirement investing in a nutshell. you might also see certain kinds of individual stocks, especially consistent steady copies with big dividends. even if the underlying stock goes nowhere, that 4% annual return will double your money in 18 years thanks to the magic of compounding. and of course, you have to reinvest that money, that is vital. you can get the same thing from bonds, but stocks tend to offer the possibility of more capital appreciation than you will get from a bond. not every investor is simply trying to fund their retirement, and even if you are, that may not be the only thing you want to do with your savings.

this is another important point. you can have multiple objectives. you can and should have multiple pools of money. i like to break things off of your retirement portfolio, where you re pretty cautious, and were discretionary portfolio. the extra money you are not going to need in order to support yourself after what the kids call late stage capitalism has grounded down and you are no longer able to work. that discretion portfolio is where you can afford to take more risks in order to generate higher profits. but, and this is a mighty but, for the vast majority of people your discretionary portfolio will be much less important than your retirement portfolio. because it's not just retirement. if you want to pay for a house to send your kids to college, you should take a more conservative approach to managing my money. whatever kind of account you put it in, your strategy for college tuition savings are future how savings should look like your retirement portfolio than your mad money portfolio. please, get to know yourself before you jump down the rabbit hole of getting to know individual companies. something we always try to emphasize in the cnbc investing

club, as you know. bottom line, trust me, i get it. when you get excited on a particular stock you often want to dive right in. first, you need to consider what you are trying to get out of the market. you need to know yourself. the answer to that question is not going to be the same for everyone. but everything else stems from it. you can't make judgments about stocks until you know what characteristics you ctually are seeking and you value. tony and washington. tony? >> k, cramer, thanks for taking my call. >> of course, what's up? >> when i was working and contributing to my 401(k), the only choices i had were mutual funds, you know? i never made any real money until i started buying individual stocks. i don't understand why mutual funds are so popular. >> well, let's give mutual funds there do. there've been some that outperformed the market, and the 401(k) plans tend to have an array of mutual funds that

you can take so you kind of craft your own portfolio. i happen to like individual stocks and i like the s&p 500 because i like a low-cost index fund that can continue to give me good returns and i am a believer in that. i understand, but there are some very good companies that do a great job. let's go to rambo in california. >> this is rambo from san jose. >> how are you doing? >> awesome. i have a question for you. one of the first metrics that i look at when evaluating an investment opportunity is the company's debt and enterprise value. in many cases, i found that although the company looks attractive on a price to earnings perspective, it becomes far less attractive on an enterprise value of earning perspective, especially in the high interest rate compartment. and you give us a sense of how you factor in the company's debt and enterprise value when informing your investment issues? >> i think it's a great question. i will be very simple. i look at how much money the company has to pay an interest. i look at how much money they

make. and i decide if they don't make enough money to cover that interest then it is a cell. every time i violate that principle i go wrong. look, before you start investing you have to find out what you are trying to get out of the market. and then you set your goals at quarterly for you. once you know you need you can get big stocks. but not before that. mad money tonight, from being flexible and having the right attitude, sharing more investing role to help you become a master of this market. you just can't miss the show. i want you to stay with cramer .

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regular viewers know that i have a lot of rules. the result of more than four decades in the money madness, first as a broker, that as a hedge fund manager, then as a journalist. i have rules from investing, to sell off. for making winners and avoiding losers. all to be stressed properly as we show you how to invest in the portfolio. it will be a lot of taken, but as i mentioned before, the point of all these rules is to help you learn from my mistakes and develop your own judgment. i just explained why you need to have a clear understanding of your own objectives before you start buying stocks, something more focused than really trying to make some money.

let's pretend you've already done some self reflection and you know you're trying to college. now you start buying individual stocks, enough to fill out a diverse portfolio of 5 to 10 names. that's what i want. hold up. before you buy anything i need you to do one more thing. first you have to do the homework. now, i've covered this before. if you're going to invest enough money in a company bridgette matter to your portfolio, you need to know what that company does. you need to know how it makes its money. you need to know how much money it makes. the internet has made this whole process much easier. you can go online and read the files which contain a wealth of information. you can listen to or read he transcript of the conference call, which i regard, by the way, is the best way to get familiar with the business in the key metrics that will drive the stock. reread some journalism on top of that. just google it. listen to some opinions. anything to familiarize yourself with the company itself, the way stocks trades. it is the kind of homework we do for you on our favorite names in the cnbc investing club. it is a must join. join, please after tonight's show. sign up so we can show you the

hard work that we do. lately i've been starting with the website. i like the company's website because they have all gotten so much better. the actual research is just part of doing the homework. after you learn when you can develop the thesis, a theory about why you think the stock is headed far. you need to be able to explain that story to another human being. ideally an adult, to make sure that the level of sense. if you're walking down wall street, you see me, you buy into a stock, i'm going to say what is it? you better know the answer. for those of you who are tuning me out because you can't stand to hear another word about homework, the craft, as i call it, i'm done. that's all i will say about the process of repairing to buy a stock year. because tonight i'm trying to focus on the big picture. let's escort a little. once you've done homework you can build a diverse portfolio to go with your index funds. if you are so inclined to pick your favorites from the club, you will note that we

thoroughly research, that is what we do. any more han 10 and you likely one of time to keep up with them. the idea is that you should be able to do this in your spare time. not that you will turn money management into a second or even third job. let's assume you own shares in a bunch of companies you genuinely believe in. you now the thesis for each one. you've got to have one. there's no sector overlap, meaning you have five minutes 10 companies and distinct industries that don't tend to trade together, diversification. if you know what a company does you can find out whether it is too much like another company. and what you have, in theory, is an ideal portfolio. what is the most important thing for you to keep in mind? above and beyond everything else you need to know your perfect portfolio won't stay perfect for long. those 5-10 stocks, and less you are lucky, not all of them will stay winners. some will lose, some will do nothing. and some of the companies that you like best will inevitably disappoint you. what can i say? the game is full of heartbreak. which brings me to my next

rule, always try to stay flexible. you have to stay flexible because business, by its very nature, is dynamic and not static. things change, markets change, and new players will enter the industry to undercut existing players to cut the price, take market share. previously well-run companies start executing poorly. customers cancel orders. unprecedented events happened that hurt businesses or make some category of stocks seem less attractive to big institutional money managers who dominate the market. remember, you don't, they do. when something like this occurs, when the story of the company that you own shares in changes, you need to be willing to acknowledge that things are changing, that they are different. if your thesis is no longer intact, if the reason you gave for buying a stock in the first place is no longer valid, don't we have to do? sell. you have to. this is why you need to explain your pics to another person, so you can recognize when your original ideas stopping workable.

we get so many calls where people say they like the stock, they bought it for x, and x is no longer even the case. i don't like that, you need to be better than that. you can't afford to say i like it because of x and that's not there anymore. this may sound straightforward, but for decades so-called experts have told you that when you buy a stock you need to be able to hold onto it until the heat death of the universe. how many times have you heard somebody say buy-and-hold? that is nonsense. don't get me wrong, i would love to buy a stock and hold it from here to eternity, because the whole thing pans out and the thing just keeps getting higher. but if the thing doesn't pan out, you have to be willing to sell. there are only two stocks i've ever given my highest blessing, and they are apple and nvidia, a pair of revolutionary companies with outstanding management. even then, you'd need to do the homework, or watch as do the homework, in case something drastically changes with those two companies. now, i'm picking this up because people hate admitting when they've made a mistake.

once they make up their minds that things are great for, say, coca-cola. we like coca-cola, so shut up. but you know what? you can't afford to fall in love with any stock. it's a piece of paper. when you buy shares of a publicly traded company you are not joining that stocking holy matrimony. you don't swear to stick with it for sickness and health, for richer or poorer. you don't go to a judge and get a divorce. it's just a piece of paper. anyway, acknowledge when something changed. if you buy a stock because he believed the underlying company is going to take a ton of market share and it fails to do so, don't move the goalpost. don't search for new reasons to hang on. just get out of dodge. you must be willing to recognize the companies can take a turn for the worst. managers can make mistakes. ceos make errors every day. here's one the you probably know, that bath and beyond. did you know that they literally spent $11.8 billion buying back their own stock

from 2000 42,022? in an ill-fated attempt to boost their stock price. it didn't really work. the company kept losing market share to online competitors like amazon, and the buyback could not prevent them from going bankrupt. think about it. they spend more than 11 million on stock buybacks and the things still went to zero. you know it was their mistake? the guys running bed bath and beyond were not flexible. they kept buying back their own stock and mistakenly believing it would help, instead of putting money in a technology that would help to manage inventory. customers, customer retention. by the time they brought a new management feel like it was far too late. don't make the same error. when something goes wrong with the company you own, be ready to stop helping and start selling. listen, be willing to recognize the turn for the worse, as bad as it might be. it always seems to lead to much larger losses than you have

already accrued. a wise person once said to me your first loss is your best loss. that's what we are talking about. the bottom line, before you buy a stock, please do some homework and come up with a thesis, a reason why you think that stock is headed higher. once you own it, stay flexible. if your thesis doesn't pay out the way you expected it to, sell the stock, as we try to do in the club. don't keep bashing your head against the wall, just recognize that things don't always go your way and then move on. mad money is back in a few.

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homework, if you don't want to watch the underlying companies and give up on their stocks when something goes wrong, nobody is forcing you. there's no gun to your head. it's okay if stockpicking is not for you, and that is why vanguard invented index funds. it is why the dutch invented bonds. you have plenty of other investment options. it's why we created the cnbc investing club, to help you understand the whole process. so if you're going to play the stock market, you should put in the effort to do it right. i think stocks are the greatest engine of wealth creation and history, and you can harness that engine and make it work for you, but only if you know what you're doing. a lot of this comes down to discipline, the stuff i've been talking about all night. but there is another ultra important component here called the emotional side of the equation. you need the right attitude toward the market, because without the right attitude, stocks will break you. i mean it, they will break you. this is a brutal game, and you need to make sure you are in the right headspace if you're going to play it. i cannot stress this enough. for many of you, managing your

emotions will be the hardest part of investing. harder than picking winners, harder than identifying new trends, harder than knowing when to cut your losses. why? because the market is a harsh mistress. at times, owning stock can feel like being in an abusive relationship. but we keep coming back, because long-term it is a great way to try to make money. the thing is, in less you can perfectly predict the future you are going to make lots and lots of mistakes. and when you make mistakes, and you lose money, it can be very hard to handle. it really is. you need the patient's of the dalai lama to not get upset when you buy a stock and it falls off a cliff. imagine what it would like for me and my hedge fund, i was the opposite of the dalai lama. when i got something wrong i would flip out. you did not want to be around me on a down day, or at least back then. i can tell you from experience, this is not a productive attitude. i know better than anyone that you need to try to remain calm. constantly getting mad at yourself is not sustainable.

you'll end up running out of patience and giving up on the whole thing. i'm not telling you you have to be the dalai lama. you don't need to be a buddhist monk to be a good investor. it is okay to get mad or sad when the market punishes you with this behavior. but you can afford to punish yourself. the market is brutal enough on its own. your head matters in this game. you need to have it on right every day if you're going to spot opportunities. so many of us approach the market with an inferior attitude, and inferior state of mind. had the clutter with negative thoughts, and throwing a soft target and making us do the wrong thing. let me be your stockmarket therapist for a moment. there are a lot of harmful thoughts you can have that will mess with your judgment, but the worst of the worst, when you think to yourself if only, as in if only i had acted sooner or pull the trigger sooner, or state short i could've made a fortune. don't get hung up. this is a

wasted, damaging emotion. it is destructive to the positive psychology you need when you are making investment decisions. for a long time i took it to the extreme. i would sit and assess about a couple of big losses, going over and over the bigness. it just was the wrong thing to do. not anymore. it's a long time, but eventually i was able to see just how destructive playing the game could be. and this is a key role he always stressed the members of the cnbc investing club, where we highlight exactly what the messy part of money managing is, not just in the emails, we also do it in the morning meetings and in the home stretch. if you are an emotional guy like me, you may need to trick yourself into a more productive pattern of thought. i had to build all sorts of methods of tricking my minded and not playing this game, chiefly removing the stock symbol for my desktop and my mobile stock list when i get it wrong. just clear it out. remove the ticker on your

social media. if you like it so much after you sold it, they go back and buy it for heaven sake. but don't tell me what you could have done or should have done differently. you didn't. when you walk into a big loss or miss out on a big name, it is irrelevant. stop beating yourself up about it. the bottom line, the stock market can be punishing enough. you don't need to make things harder by punishing yourself. don't play that if only game. if you need help curbing this kind of destructive thinking, go to that extreme. take the stocks off your monitor or your portfolio watch. you will be surprised how much better your decision-making becomes when you stop the obsession. it will not help you make money. let's go to joe in new jersey. joe? mr. cramer, thank you for taking my call! i want to say that i have learned from you and i have earned from listening to you over the years, thank you so much for that.

>> i like that. learned and earned, it is going to be adopted and used in tomorrow's show. what's going on? >> my portfolio has grown significantly thanks to you, and that there are a lot of qualified dividend paying stocks in there. if dividends that are being paid are being invested to my earned income salary. i'm 58 years old and trying to live the next year to 59 with a modest pension. do you think this would be a good move? >> absolutely i think it would be a good move, and you got the wherewithal to do it. that's what really matters. never bet against yourself. long life, and you have to stay invested. i'm one of the few people in the world that thinks by the time your 75 you should have 50% in equity. i don't want people to bet against their long-term existence.

all right, the stock market can be punishing enough. you don't need to make things harder by punishing yourself. you will be surprised how much better your decision-making comes when you stop the what have could have should have. coming up, some top tips on what i wish i had when i started investing. plus my colleague from the club and i are going to be answering your questions about the stock market. so stay with cramer.

let me give you a piece of advice that would've saved me a lot of cash and even more heart ache back when i was running money professional. this is some genuine sage investing wisdom from the late, great my angelo.

quote, when someone shows you who they are, believe them the first time. i know she wasn't talking about publicly traded companies, but if the shoe fits, i say wear it. all night i have been trying to hammer home important bedrock principles of investing, principles we show you how to follow in the cnbc investing club all the time. this is an essential one. when a company shows you who they are, believe them the first time. or to put it as baldly as possible, when a ceo tells you the business is bad, take their word for it. don't try to make excuses for them, just get the heck out. at least until the smoke clears and you get a better assessment of the damage. let me read you the rest of that my angelo quote, because there is another valuable insight here for investors. she continues, people who know themselves much better than you do. that is why it is important to stop expecting them to be something other than who they are." . the same thing holds true in

the corporate world. executives will always know their own business better than you do, and less they are genuinely negligent. that is why it is so important to listen with the ceos and cfos are halved inside. whether they are on the quarterly conference call or come to visit on our show, even someone else's show. high-level executives are your best resources. don't get me wrong, you can't just take everything that comes out of a ceos mouth as gospel. there are plenty of executives who are excessively promotional, who talk like they have rose-colored glasses welded directly to their face. i try to ask more skeptical questions whenever my alarm goes off during these interviews, because i don't want to hurt you. that is what i did with most of the ipos in 2020 and 2021, when it felt like the whole market ran on height and nothing else. ceos can be misleading, almost none of them flat out lie, because lying about material information is what we call a

crime. sometimes you need to take what they say with a grain of salt, if not a full carton of norton's iodized. but the more cynical among you might be surprised at how many straight shooters you will find the highest levels of corporate america. some of them are just plain honest. others don't want to go to prison. good call. either way, they tell the truth. again, when we have someone on the show with a track record of being extremely candid or extremely reliable, i try to point that out to you. it matters. when honest executives tell you that something is going fairly well, i think you should believe them. this can be a profitable strategy if you get it right. to give you the best example ever, when the division or a ceo came on the show in september of 2022, the stock is been eviscerated for the better part of a year. everybody was giving up in the federal reserve relentless rate hike. stock beaten down to the 120s. but he told an incredible story about nvidia ability to reinvent itself, including what

artificial intelligence can really do if it is powered by the right engine. less than a month later, the stock bottomed. four months later we witnessed the birth of the artificial intelligence boom. one that nvidia had been planning for ages. they had the best chips by far and build them out in advance. in 2023, nvidia is making new all-time highs. we told you to stick with this one for the travel trust, because nvidia was always able to reinvent itself in the past, so we told you to hang on. even when things were the most ugly in the great bear market of 2022. something very similar happened with the bank ceo of salesforce in the recession, another important travel trust name from the get go. he explained his cloud software company would be fine and he said it was going to be the future of the industry. he said there have been no real slowdowns at all in his business, even though it was flowing everywhere else.

he was right, and if you listen to him, you made a killing. more important, if management tells you something is wrong that you have to take the person extra-seriously. whenever a company announces a shortfall. you need to wait at least 30 days before you even think about buying a stock, especially if they give you a preannouncement. a lot of people are tempted by these negative preannouncement names, they figure that news must be out already. wrong. in practice, i found it other than some rare exceptions, the opposite is the case. when business is so ugly that a company is forced to come out early and got numbers that typically means there is more bad days ahead. especially because pronouncements are few and far between. companies are more likely to slash their forecast. if they get a very bad/things are going to be terrible for a while. why? it comes back again to my angelo. when someone shows you ho they are, believe them the first time. that negative preannouncement is the first time.

when management pronounces a bad quota, they are not just looking at the past, they are looking at their own order for the future. believe me, if there were any hope the business would get better, the company would have to cut numbers between its regularly scheduled quarterly reports. if they thought that something could get better, not worse, in the next 30 days, they just keep their mouth shut. preannouncement or severe guidance cuts signal ongoing weakness that you can't be tempted by. that is why i recommend waiting 30 days to see if anything is improved before you think about buying this kind of stock. that's another rule we try to follow religiously for the cnbc investing club. sure, you may miss some great opportunities every now and then when a stock bottoms out ahead of time. that can happen. the most of the time when i studied this extensively, after 30 days you will have sidestepped yet another brutal leg down. i know 30 days sounds arbitrary, but i've done of homework on the question and i found that it usually takes at least a month for the bad news to finally get baked into the stock price and it is okay to start buying. the bottom line, sometimes it

can seem like we live in a post- truth world where it is impossible to know who to believe on any particular issue. but even the most skeptical among you should believe executives when they pronounce earnings shortfalls or cut their forecast well below what they are looking for during the regularly scheduled quarterly report. trust me, these people don't like flashing their own numbers. they do it because they don't see much hope of things improving by the time company scheduled reporting next quarter. in the wake of a shortfall, you have to present the stock will be bouncing back anytime soon. for the next 30 days you should treat the thing as a falling knife. in short, even if you are not a huge fan of my angelo's poetry, you should trust her investment advice. mad money is back after the break.

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i spent a lot of time here tonight talking about the many ways in which you can make mistakes. and you need to guard against them by knowing when to admit you are wrong. let me be crystal clear, the market can be just as wrong as an individual investor, just as wrong as you. maybe you are started in the market. contrary to what so many of the graybeards claim, the market makes mistake every single day. this is my next big picture lesson for you. don't just assume that the action makes sense, like so many do. a lot of times stocks go up and down for the wrong reason, no reason. it is something we try to walk through with you in the travel trust of the cnbc investing club. sometimes the market, people try to come up with the seas

that don't exist. when a company's stock is down it is a national impulse to be disappointed. must've been a bad quarter, while the stock going down? often that will be true, but not always true. sometimes there are other forces at work. stocks will go down in the initial earnings release than bounce right back when management explains things. how many times that happened or vice versa? which is why am always telling you not to jump to conclusions until after you listen to the call. especially in the middle of earnings season with hundreds of companies reporting every day. the market makes a ton of mistakes. but it's not just about errors in judgment. the truth is, the stock prices do not always reflect the underlying fundamentals. the actual facts and figures about how the business is doing. the funnels are a big part. over the long-term, the most important part. which is why spend the most time focusing on them. they are not the big picture. the stock market is first and foremost a market. any other market, is prone to all sorts of distortions.

when adam smith wrote about the invisible hand of free-market capitalism, he forgot to mention it is the hand of someone with bad reflexes, while the coordination, and possibly even some kind of neurological disorder. the poor guy needs to see a doctor. in short, stock prices do not somehow reflect reality, as if by magic. they are as much a product of perception on wall street, and the mechanics of the money management business as they are a product of the funnels. i tell you all the time about short squeezes, this is the mechanics of the market. they can't handle the short- sellers. this is why it is possible for you to conform to the average by investing in individual stocks. if the market worked perfectly you would never be able to exploit any opportunities, because the whole point of the game is that you can spot stocks that are mispriced, because there are stocks that are mispriced every day. why do i bring this up? because when the action is as irrational as i find it often, it can be frustrating. i want you to be able to take advantage of these moments were stock prices are simply wrong, or at the very least, i don't want you to throw up your hands

and discussed and give up on the whole enterprise because nothing seems to make sense here. let me go over some of the larger distortions i've seen in my time that are in play right now. for instance, i spent a lot of time talking about what i called the etf of stocks. this is become a major issue for me. for most of my investing career you could bank on the fact that about half of a stocks performance came from its sector, meaning how the sector was doing and about how wall street felt about it. the other came from the actual company itself. in other words, your average company was in control of half of its own destiny. this is a good situation for stock pickers as long as you make sure to avoid sectors that are out of favor with wall street. you can do pretty well researching companies, trying to pick which ones would be better than its competitors in the sectors that are in favor. but the rise of etf has change the equation, especially sector etf's. the dozen or so that exclusively own fang, my own acronym for facebook now meta platforms. these are incredibly well-run

companies they can get dragged down by an etf driven rep side. fang is the most ridiculous example, because when netflix catches a cold, even if the streaming video business of netflix has nothing to do whatsoever with the business of meta , strange. a lot of times you will get situations where sellers throw the baby out with the bathwater. if the worst company in an industry reports bad numbers, the whole group tends to go down. even if everyone else is doing well. these are opportunities. we saw them in the cybersecurity stocks in april 2023. one of the worst offers and artistry reported bad numbers. whole foods sold off. turns out to be a great buying opportunity, one of the great buying opportunities to buy this stock up. they were higher over the next months. sometimes the market is up, you see companies report good quarter after good quarter to

no real effect. and suddenly critical mass saying hold a just a second. things are really going well there. so the next time the business reports a strong number in the stock source. in those cases you just needed to be patient, because the market didn't get it right. notice i keep saying the market gets it wrong all the time. ancient people come on tv and tell you that's not true, they are not true. the caveat here is sometimes when the market makes a mistake it's not worth trying to fight it. because while the markets are often irrational, they can remain irrational for longer than you can remain solid. to borrow a phrase from the late john maynard keynes, who by the way, was a very good money manager. your goal here is not necessarily to be right, it's to make money. sometimes that means being a little cynical about other people's expectations. i often hear people say i was right, that guy made money, but i was right. no, you're wrong, that i was right. don't just assume that stocks go down. don't presume they deserve it. in the immortal words of clint eastwood in unforgiven, eastwood

made a point. you know what he said? he said deserve has othing to do with it. the market is going to make mistakes. your job is to recognize when it is doing something wrong, then try to take advantage. stay with grammar.

>> i always say my favorite part of the show is answering questions directly from you. so i will bring in my portfolio analyst and partner to help me answer some of your most burning questions. were you able to take a look at some of your mad tweets? for those of you who are part of the investing club, you'll need no introduction. for those of you who are not members, which is really shady if you're not, i hope you will join and i will say that jeff's insights help me do a great job for all mad money viewers. you see a lot of the stuff that i talk about in the show. now you are going to be getting to see it in real time.

we do this sort of thing during our monthly meetings, where we give you an in-depth look at our portfolio decisions for the club. and to answer your burning questions then, too. if you like this, then join the club for heaven sake. we are going to do first is we are going to go right to the questions. john arizona asks when profit is taken or there is a sizable cash on the sidelines, how would you pick a stock to add more portfolio? i want to start out by talking about the odds here. if there is a lot of cash on the sidelines, i'm not that interested in putting money to work. if we are overbought. >> absolutely. if you are looking for new ideas, a couple ways you can go, one, sell stock in one area. look in the same industry, but a better run company. you can buy that, we call that high grading your portfolio. or if you are looking for something completely new, baby it is something, and industry on the rise or a good dislocation of value. at the end of the day we are looking for high quality companies. >> right. people may like medtronic, but

we like healthcare better. we go back-and-forth and compare, it could be netflix versus tesla. we do everything. but the main thing i want to point out is that if the market is really flawed it's okay to have the cash. cash does not hurt you. next we're taking a question from mike and marilyn who asked how can an investor choose which is more likely when the narrative flip-flops back-and- forth between recession and strengthening economy so often? so, here we are not traitors. we do not, we have a lot of special situations that are not dependent upon a recession, dependent upon the strength of the economy. we like to look at our sector and figure out whether that sector, for instance, let's say we are picking just something. we are buying an air conditioner company. air conditioner company is typical on-site, you should sell it. but if there is a secular case for an air conditioner company, thinking about carrier because i like you very much, then it really doesn't matter because

there is such a huge amount of money coming in. i'm saying is that those words, expansion and contraction, usually do not play that much of a role in our stock. >> i think that such a great point that you made, and that something you taught me, that if you're willing to get your hands dirty and study a company you can create your own narrative of what is happening in the market. >> and that's what i really want to emphasize, that we in the club do a lot of special situations. we are not hostage to the winds and slings and arrows of the economy. now we are heading to twitter to take a look at some of your tweets. let's look at ivan on twitter who says i'm starting to think that jim cramer is a time traveler from the depression era. that's photoshop, there's no way. this is the new york line. immediately i know that this isn't right. and by the way, just you know, j.p. morgan had his pictures. he was the first ever to be photoshopped because he had

what was known as a cauliflower nose, it was really hideous. he had no pictures other than one spontaneous one that was happen to be taken right about here. all i can tell you is if he was photoshopped, i'm photoshopped. see you next time. right now on last call, a tesla uber bull turning more bullish. the stocks had a monster year, a top tech watcher says you may not believe how high two of them will go next year. it has been a busy week for insider stock buys, we have new names for you. calling their shot, the dodgers spending $1 billion on a could of players, will it buy a world series? we will break down the odds. plus, beat the books picks for a huge nfl weekend ahead