tv Mad Money CNBC December 27, 2024 6:00pm-7:00pm EST
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dividend as well. >> courtney? >> goldman sachs we talked about the banks activity picking up. you want to make sure you have a piece of that. >> uber. the stock is where it bounces, uber. >> thank you for watching fast money i will see you in the now year. i am off next week. mad money with jim cramer is up next. my mission is simple. to make you money. i am here to level the playing field for all investors. there is always a bull market somewhere. i promise to help you find it. mad money starts now. hey, i'm cramer. welcome to mad money. just trying to make money. my job is just to teach. i am going to do a lot of teaching tonight. so call me or tweet me. when they come along you need to know how to respond.
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you need a game plan ready so you can figure out what sell off to do. then react appropriately. the early days are never easy to navigate. you need all of help that you can get. to barlow the line, it is fantastic. all are alike. each sell off is unhappy in its own way. >> it is true. bull markets, stocks higher. participating. it eems so easy. same every time. the decline. harder. they can be the start of the bear market. or maybe something worse. they might be viable glitch. that is why tonight we are turning to history to illustrate some of the common qualities of the sell offs. now, really, there are only two hard sell offs for four decades ago. the crash in 1987 and 2007 and 2009. that was the financial crisis.
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horrendous, too. the pull back encouraged bargain hunters they thought they could flip on monday morning into strength. friday, set on monday, the strength never set up. they got badly burned. in fact, we continue to the next day. you know, that is known as trouble tuesday. they broke down entirely. i was there. i was actually able to calculate the bottom. the bottom was dow 1400. that was down from where we closed on black monday at the end of the day. it was all, piece it together, one by wound. stopped the decline in the tracks i still remember the green line when it came over
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the screen. putting in the bottom. taking the dow up 400 points. seemed unbelievable at the time. and it lasted three months when they retested it. took until middle 1989 to trowrn where they were trading. the bear market that began in 2007. it was a different animal. fell 1,198. it did not bottom until march 6th. when it landed at a staggering 6,470. we did not return to 2007 until march of 2013. why did one take six years to unwind? that is the difference of unhappy sell offs. the first one that i can remember the average went mond
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it was like two other crashes. the one of 2010 and one in 2015. the market failed to work. all three of these started with the s&p500 in chicago. chicago overwhelmed wall street in new york. the stocks are traded. it happened when they did not understand the power. no one was ready for it. these days we accept it. but it was not like that back then. there were new instruments created five years before the crash and no one knew the power they had. the power snuck up on us. they were a smaller market than the stocks themselves. they can go in easily and out easily. it became the most powerful drivers. particularly hedge funds. more powerful than the companies the stocks are meant to represent. underlining corporate earnings were much more for the day to day action of the stock. the thing is, even with the
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relatively new impact of futures black monday was highly unusual. we had a big run going into the crash of 87. remarkable multiple-run. i started my own business in then. the rally in the middle '80s had gains a i group of clever sales people offered big funds, they were claiming insurance policies to lock in gains and. so-called portfolio insurance, dynamic hedging. these specialists said they can use futures to insure you would not be part of the risk of down 5% depending on the policy. it was like a stop loss. the idea was these policies would let you sidestep the losses. of course, it is impossible to do that. they had a great sales pitch, people believed them. in reality, though, when the losses all kicked in on once on
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black monday the insurance did not work. if anything the future selling from these insurance companies, declined the stock market. causing massive losses for the poor saps that lost them. many of the clients were wiped out. the people that sold these policies. history remembered them as just idiots not the crooks that i thought they were. i cling to the latter because there is no magic trick that can get you returns for investing without risk. come on. the two go hand in hand. don't believe anyone who tells you different. those are sharltons. we figured where there is smoke there is fire. if the market crashed it has to be something wrong with the economy, right? a recession lurking, right? they could not go down on their own, had to? how could they go down so fast. i say, though, it turned out wrong. the economiy was strong going
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in and coming out of it. just no correlation with black monday at all. it was the inner play between chicago, much more powerful and new york, weaker. and when the treasure department examined what happened it concluded futures set off immense selling and specialists firms on the floor of the exchange and broker houses did not stabilize the tape. the ladder had no duty to do it but the former were supposed to do so. many did not do their jobs. i was fortunate to be in cash on black monday. [ applause ] >> having my portfolio in the previous week. i did not want any part of it. in retrospect it did make my career. i looked like a true genius. the truth is i was frightened of the market and i wanted to regroup. i always say it is better to be lucky than good. discipline can not maximize your luck. and here is the bottom line.
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sometimes crashes have nothing to do with the economy. caused by the mechanics of the market. stay tuned for more examples of this decline and no more serious animal, the bear market of 2007, 2009 to figure out what to do when they really go down. irma in new york. irma. >> yes. good evening mr. cramer. i am planning to open nondeductible ira's for my grandchildren who are all in their 20s. am i better off with the growth fund or index fund >> i want you to the be in growth, growth, growth, they are young, switch to index in their 30s. let's go for risk. they have their whole life ahead of them and i want you to hit it big for them right now. i am alone in that but i don't care. i really want risk taking when they are younger. tony in florida, tony. >> jim, i want to let you know i am a member from day one.
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>> thank you. >> lifetime member. i love you. what i want to ask you, when we like a stock or love a stock and the earnings are good but then for some reason the market buys it down. should we buy it day one or do we use that rule like everybody says wait three gains before you buy a stock that goes down? >> no, no, you buy it at your prices. you buy a little bit at the beginning and then like we teach at the club, you buy it on the way down. we may have a real battle on our hands. now, you know we battle the club and we have been successful in most of our battles. some tougher. that is the way that you do it so your battle is not that hard. buy it all at once we don't want that. tough days don't last forever. when they come along you need to know how to respond. tonight i am giving you a crash course in crashes. so you are prepared to get the
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when it revealed itself. oh, when it did. and the first incidence of s&p500 exercising the power over individual stocks, sadly, the first of many. it brings me to the flash crash of 2010. one of those moments that drove away the stocks they did not know the value could be destroyed quickly. who wants to keep their life- savings there when you can blink and gone. i do not blame anyone for not wanting to be part of that. the future overwhelmed the stock market. had to be something behind the destruction, right? could not just be them breaking it down for goodness sakes. could it? it happened on may 6th of 2010. it lasted 36 minutes. it fell almost 1,000 points from the 10,000 level. memorable for me because i was on air at the time. immediately money managers tried to play pin the tail on
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the sell off. rising and maybe at the time they were focused in southern europe. focused on the debt crisis. and the u.s. economy. for the record there was not any. benefiting the trading. i recognize it for what it was. another situation, they were breaking as the futures overwhelmed the stocks. now, it caused fear. spread like wildfire. they did not wait to find out what was causing the landslide. had to be something big, right? wanted to get out fast as possible. it made for a tremendous buying opportunity. >> it is too bad, the system broke down. >> we are trying to get the specialist to talk about what happened. >> the machines failed.
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>> it broke down. >> obviously broke down. >> the market did not work. it broke down. the machines broke down. that is what happened. >> that is exactly what happened. nothing to do with the fundamentals, just more of the nonsense. some listened and bought stocks off what i said. many did not believe that equities could not be that way and left. it was shocking. in all of the years i have been doing this show i hope i taut you they are not hard assets. subject to wins to reduce the value in a heartbeat. just, they are just not perfect enough. and people think they are. any way, the market quickly regained. not before a round that many left and never came back. okay, how about august 2015. the dow fell 1,000 points at the opening. raise interest rates right there. one more story about the china market collapsing.
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they have been collapsing for ages, right? kind of, always out there. the whole economic part of the prc could collapse at any given time. all of the right times. and, that fighting was there despite the chinese sell off. impressive statement that demonstrated a cavalier attitude towards the markets ugly but fragile mood. when we came in on monday august 24th we insured there were large sell orders in place for major stocks. we were not ready for the gap downs that we saw. large stocks shedding hundreds of billions in value. many down 20% as the market opened and had no ability to tell why. like the crash of '87 it was tough to see the prices. the confusion that was horrific. the fog of war, the fog of trading. some stocks down 40, 50%!
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it was indeed crazy town. as the market rolled open the dow ended with a decline of 1,000. we were stymie at the time. his reaction, it was priceless. >> i, i don't -- this is -- i -- i . >> i got to make phone calls. >> yes. >> you have to find out . >> these are enormous moves. >> i got to make some phone calls >> i remember when he said it. that is it. i got to make phone calls. that is how confused we were. you can not just say it is wrong. we figured it had to be very bad in the economy. somebody knew something we didn't. something mysterious, unworldly? maybe china collapsed maybe a war occurred or something in europe that we did not know about. good reason for that decline. i was conspiracy, the hardest
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hit were the recession safe ones. that made no sense. that the is exactly what people buy when the economy softens up. they are safe havens. i suggested it was the machines, the futures overwhelmed the stocks and the computers went haywire. midmorning we learned that is the case and it went up into a furious rally jumping 500 points from the bottom. strong stomach buyers took advantage of the economy. the economy was gaining strength and not ready to lose it. it was excellent time to buy stocks >> buy, buy, buy! >> why was there fury and confusion in 2010 and 2015? why were they so frightening? i think investors were not ready. the government put in what were known as circuit breakers. cooling the declines by stopping it. but that created a false sense
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of security that oddly still exists today. it did little to stop the destruction of your nest egg. please, when you hear talk of circuit breakers protecting you, no, do not believe it. fear can not be legislated out of the market. there will always be people who react horribly at an event even if it is mechanical and not subtive in nature. there have been declines worse than 2010 and 2015. i can think of three days during the covid crash when we were down 7.8% to 13% in a single session. but covid was straightforward. we knew where the problem was. the government shutdown the economy to fight a deadly plague. if you thought my commentary was useful in 2010 and 2015. that is more of a reason to join the cnbc investing club. we take everything in couldn't. these moves were never going to
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go away. anticipate the next one after getting through one. if you can figure out if a sell off is mechanics break down you might have a buying opportunity. you have to determine if it is related to the economy or not. if it is, stay tuned. if it isn't, stay tuned any way. but recognize you have first class panic and no one made a dime panicking but did they coin money taking the other side of the trade. "mad money" is back after the break
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. not all days are winners in the market. knowing low to handle the down days are key. we have to cover good and bad days. lessons in the bad days that can help. let's set the stage. back in october of 2007, the dow peeked at 14,000. they raised over and over and over, 17 times, the economy, if you move a little bit you fall off of a cliff and take the stock market with it. you could of seen it coming if you paid attention. specifically if you paid attention to me back on august 3rd, 2007, when i said the feds raised it too much. >> i am talking to the heads of every one of the firms in the past 72 hours and he has no idea what it is like out there.
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none and bill poole has no idea what it is like out there. my people have been in this game for 25 years and they are losing their jobs and these firms are going to go out of business. they are nuts, they know nothing! >> all right, what did i mean by that? before i came out and set that moment with my old friend erinbernette. following the mortgage market, there were a lot of unsound practices going. i was told by this executive he could not believe how many people are beginning to default on their mortgages. he talked about how many mortgages of the 2005 vintage. were not money good. something that only happen once in our country's history. that was the great depression. obviously chaos. you know what? i had a lot of friends at a lot of firms i made a lot of calls,
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i wanted to see if they were everywhere. the problem was spreading. i called mortgage bankers, firm runners my people. everybody said the same thing, we are in big trouble. and that is why i went off so strongly on my rant. sadly, the fed did not listen. especially bill poole who at the time was an important fed official. he was sane about things hi to single him out in the rant. years later i found out my rant was put up but only as a joke. soon after my rant, we had defaults of large banks, savings and loans, some thought to be too big to fail and failed any way. the largest savings and loan and two large brokerage firms. i urged people to take the money out of the stock market before it was all lost.
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>> for investors what is your advice. whatever money you need for the next five years take the money out of the stock market. i do not want to say these things on tv. >> well, sure nough, the market fell another 40% before it bottomed. it was a good call. if you bought time when the stock market peaked in 14,000 or cut more than in half by march 9th you lost a fortune. never came back in stocks and probably gave up. how do you avoid buying this dip? and the lead up to the financial crisis that sell off like black monday in 1987? first you have to ask yourself about the state of the economy. is business really getting crushed. is employment falling off hard? is fed raising rates like size of cracks, companies unable to pay their bills? runs of multiple financial institutions around the country not in just one area. if the answer is yes, you have
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a problem. one that is true systemic risk. that is the term. meaning the entire country could collapse. that is how it was during the financial crisis. thereat is why i got so angry. people are like this is going to be as bad as 2007, 2009. there is nothing like that occurring. like i said, twice in 80 years has it occurred. even covid recession not as bad. the moment we got a vaccine everything went back to normal. systemic risk when regional banks went under. a few months we were over it. the odds are you are worrying too much. second, if you want to know there is anything in place to save the economy or turn it ar was a statement by then chai banks go left and right. the fed was sitting on his hands the moment he decided
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something needed to be done. the stock market bottomed. ways to spot the bottom? i have a couple signs to help. there is an osolating market that i watch. minus 5 it is most likely too much selling. when you get a minus 10 you have to do some buying, even if everything seems horrible. we were getting signals worse than that near the bottom in 2009. another look at it, i got one, i like to see who is pez mystic or concerned about stocks but reluctant to say anything positive and then changes his tune. the best example of that kind, that big switch came from the late great mark haines who this to say back then >> i will step out on a limb here. >> this is the big, hold on. >> i think we are at a bottom. i do. i think we will have a rally. >> there you go, man unafraid to make a call. >> i don't know if it will be a
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monster rally. in other words i think today, this is for real. >> what a call. look at that. march 10th of 2000 nine. the day after bernake was on "60 minutes" a call from someone not willing to make it. best call i ever seen. it made a ton of sense to sell when i said sell in 2008. before you say to yourself, what if no one warns you again? well, i have good news for you. sobering but it is good news. if you waited long enough, 60 years to be exact. you did get back to where you were for the bear market. 60 years. you eventually got back to edan and made a killing. a lot of people struggle to get back in. they got burned out of the whole thing. they did worse than the ones that simply sat tight. here is the bottom line. the financial crisis dpaif us a once-in-a-lifetime bear market with true systemic risk.
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that is the exception. not the rule. let's take questions. let's go to stackwell in washington. >> having a cup of water right now, what is going on with you? >> you know, i am having cup of water, we have bad weather out here. i can definitely say, a big shout out to you big northwest. >> done, done, thank you, i will take that shout out! >> now, because you get a lot of advise from all around the world, might as go to a qualified banker. what i want to say to you man, curious, your feelings on using high yield dividend stocks as a form of investment, the reason that i am asking, too risky or lose market value are you going to be hit and if you do agree, can we take a balance in our portfolio. >> i love it, i love it, i love it. >> i don't want to reach. i don't want dividends so high yielding something is fishy.
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what i want are solid companies with good balance sheets that bay dividends. that is nirvana. that is the way i would invest if i could own individual stocks. the bear market, risk, that is the exception, not the rule. much more "mad money" a survival grid after the crashes of 2010 and 2015. and market pull backs and asking all of your questions with my colleague. so, stay with cramer! to go further, you need to be ready for what's down the road. as energy demand continues to rise, we're harnessing breakthrough innovations to increase production in the u.s. gulf of mexico. our latest deepwater development, anchor, produces
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how to deal with brutal sell offs. specifically how to defend against them, take advantage of them even. i like to be opt opportunistic. that is easy to spot. like the world is falling apart like in 2008. you don't need me for that. now, i want you to figure out the less dangerous crash. the mechanical kind, caused by a broken market in a healthy economy. recognize there is a bottoming process one that you can spot. what should you do? i have a solution that worked even in the toughest of times. i like to look at something that i call the accidental high yielders. i call them ahys on this show. those are companies that are doing fine, good balance sheets, that is important, by the way. but share prices fallen that their dividends are giving you a turn, a good yield.
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how do you spot these? you look at the historic level of the yields you have got friend certain stocks. and look at the 10 year treasure. yield 2% and paying double that because of the market decline. you are looking at a accidentally high yield. focus on cutches that re not sensitive to swings in the economy that have good balance sheets. second, if they are not giving you opportunities i use a mechanical sell off to pitch stocks that you like. you can buy them using what is known as wide scales. that is what i recommended during the 2010, i told people to use wide scales. pick the stock and buy them limit orders only. don't use market orders because you might end up getting terrible prices. frankly never use market orders t is stupid during a crash. i like this method, the market comes back as it did after the two flash crashes, you pick up
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terrific merchandise at amazing prices. flip the stocks for big profits and hold on to them for the long hall. take a look. i demonstrated how it works. during an appearance on tv when the flash crash happened in 20 10. >> it is down 25%. >> p&g. >> if that is true buy it. that is not a real price. i am not interested. it is at 47, that is a different security entirely. you have to use limit orders, procktor jumped. >> it was down 9 points now down 6.88. >> i buy it and flip it. 59, i just paid $500gs. >> that is the crazeness. i a lot of people did that trade. i have been thanked by a dozen times people thanked me. the limit order rings true. we talk about meltdowns and
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risk and gut-turning moves that are not tethered to the economy. what about the pull backs we experience all of the time? first, you have the sell offs by the federal reserve. that is the frequent reason. businesses constantly talk about the fed. when the economy is weakening it is the reverse's job to restore it. they did it when covid shutdown in 2020. every decline say viable one. a fact of life. been like that since i got in the business. the fed it is a different band- aid. stamping it out. declaring in 2021, the market started rolling over. now, no one wants high inflation, those that missed '70s and '80s know from post- covid, but you don't want the fed to break it like they did going into the great recession. it caused the great recession,
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now, plenty of times they tightened. the stock market did not get crushed. that is how we got the bull market in the first half of 2023. however, wherever the fed tightens, some will come out of the woodwork saying the market will crash or take a big header. that is inevitable. do not panic. they do not lead to crashes. plenty that do next to nothing. but, racial reasons why the stock market deserves to go down. i am not ignoring them. first, stocks are only one of the assets available. i like it as a safe haven and everyone should hold some gold. real estate? it could be good. most do not have the money to invest in that real estate that the big institutions can buy. we have real estate trusts but they are not as reliable as real estate as a whole. finally, we have bonds as an investment, they are the source
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of a problem when the fed tightens. short term treasures a lot of people carbout of the stock market. -- cash out of the stock market. bonds, pieces of paper are more competitive with stocks, the fed jacks up the rates stocks will be among the worst performers. they have serious competition from fixed income. so, be careful of these dividend stocks when you are dealing with a sell off by the fed. they are different than accidental high yielders. the second reason why stocks can go down when the fed raises rates the fed is not perfect. they raised rates when they should of stayed or cut rates fast because the economy was slowing rapidly. although in recent years powell has been responsible not pushing us off of a cliff than
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recent chiefs. they can be gamed as long as there is no systemic risk. the fed raising rates those are trickier. they can lead to opportunities. as long as you stay away from the high yielders that are less attractive when the fed tightens and stick with the accidentally high yielders. "mad money" will be back after the break
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. tonight, we are talking sell offs. specifically in this block. garden variety pull backs. many of the times it is not the fed as i mentioned before the break. sometimes there are other issues, driving the crunch. for starters, the issue of margin as a former hedge fund guy i am aware people borrow more cash than they should. they meet the market's demands. these reportedly happen. including february 2018. funds borrowed money to bet against stock market volatility had their heads handed to them. stupid, and same time they bought the s&p500 using borrowed money. real stupid. when it fell they were forked to dump -- forced to dump their position. there were so many people doing
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it at once their selling caused severe market wide loss. these margin break downs occur after the market is down for several days in a row. that is why i tell you to be aggressive in the first few days of decline. there will be people against these managers who buy stock with borrowed money. does not happen immediately. they have to keep chopping. how do you spot it? you know what? i use the clock. they want to get out. so, they demand the cloud be put up. raise cash, sell you out without your say so. i consider it the butcher. the butcher occurs between 1:00 and 2:00. if the selling runs its course by 2:45 p.m., yes. i find it is that specific, i think you have a chance to buy safety stocks. the kind that tend not to need the economy to be strong to
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advance like health care. might want what works in every department. i talk about them all of the time. especially members of the investing club. we like to own the best ones for the travel trust. what else can create opportunities? sell off for overseas. they scare us because of greece or mexico, all kinds of places. do any of these woes truly impact the stocks of the american companies in our portfolio? do they make you want to pay dramatically less for individual u.s. stock? usually the answer is no. you can not just buy them hand overs in. you should always assume there are people who do not understand how unimportant the worries are, the vast scheme of things. those people will panic and sell. >> sell, sell, sell. >> after you would of thought they would have known better.
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that is why the declines last for three days, the best way to figure out if they are done is to watch the clock. sellers need to be margined out against their will if there will be a bottom. another sell off. ipo decline. end of the day, markets are first and foremost. markets have supply and demand. if the bankers start rolling out new ipos and the company sell more shares, you can end up in a situation where it is just much too much supply and not enough demand. by the way, we saw it in 2021. after we were drowned under the weight of 600 odd ipos and deals. oh, man! >> the house of pain. >> don't buy, don't buy. >> avoid the blasts on the air when most are concentrated and focus on the stocks that are down due to collateral damage. sometimes we get them triggered by multiple earnings short falls. if you want to buy stocks after
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an earnings fall, avoid them like the plague. no reason to stick your neck out here. instead, buy unrelated stocks hit by the brooder selling via the s&p500 futures. then, tricky risk. political risk. strike between parties or more risk. i am not a political guy. i hate talking about it on air and off air. with every stock that you own you need to ask, does this company have direct earnings risk when it comes to washington. if not, you got nothing to worry about. the trade dispute and government shutdown. it can turn into a house of pain. i know it is enticing. there are so many.
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look for companies that have nothing to do with the fray. stocks brought down by what we see every time there is a debt ceiling standoff. i can not tell you how many times. it is a reason to sell stocks. >> there may be a reason to sell some stocks. not enough to sell everything. here is the bottom line. all sorts of sell offs. unless they involve systemic risk, increasingly rare. 2007, 2009. they will buy it long-term. and driving the decline. note the sign that it might be subsiding. then, take action to buy not sell and never to panic. stick with cramer at least, not the way it could work. your people are buried in busy work. and you might be thinking... can ai make it all work? it can. on the servicenow platform, ai transforms your entire business. because when your people work better,
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everything works better. so, let's get to work. idris elba works here? mm-hmm. ya, he's super nice. it all started with a small business idea. it's a pillow with a speaker in it! that's right craig. pulling in the perfect team to get the job done. i'm just here for the internets. at&t, it's super-fast! you locked us out?! and when thrown a curveball... arrggghh! ahhhh! [crashing sounds] we had everything we needed.
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crime to help answer the questions. part of the investing club which i want you to be, need no introductions, those that are not members i hope you will be soon. jeff's insight and the back and forth help me do a great job for all mad money viewers and members of the club. if you like it, join the club. first up, we are taking questions from peter who asked as a younger investor, able to add funds to the market bye- weekly and trust having a set amount of funds, how do you recommend putting money in your work? it does not matter. we are good. remember when my late father would look at the list. i will not buy all of these. i am going to pick six of my favorites. my suggestion is, each time, every two weeks, stick with the 6 if you want to. invest, invest, invest. if it is down invest, don't misit. that is the way that -- miss it. that is the way i do it.
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next question, how do you know when to break your cost basis? we do it sometimes for magnificent 7 stock is what we call them. what happened is those that don't want toy do it because they come down a lot. when they come down a lot. you want to buy. we had stocks that come down and go up and when the stock market oversold we do it rarely. >> yeah, i would say general rule of thumb, stock is down, call it 10% or from a level, but it has gotten better and stock is down due to market forces that would be a good time to violate it. >> goes up and down less you want to be in there. it is troy. that is something that you can do. we don't do it very often. now, we are going over to one of your mad mentions. there is one from that says jim are you sure you are not a fellow italian? best sauce not sauce start with tomatoes. i got irish but no italian. i don't know what i to say.
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i will point out the saucing came from the fact that tomato yield was so great so i sauced. next up, taking a question from jeff in florida who asked if the stock has been in the red for a couple years and average down three at a time -- [lost audio] it gets out of the mud, people get thinking no. stocks are out of the bud. no. you want to hold on. >> yeah, something that i learned from you is that we don't care where stocks came from where care about where they are going. if the outlook is strong you
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want to hold on. absolutely. >> yeah. bull market somewhere, i have to end the questions, i can only do that on a break form and say, thank you for good tip margin. thank you for being on the show. and i promise to find new ideas that are good for you right here on "mad money" i'm jim cramer, see you next time we handle the tech so that our couples can handle the love. [ laughs ] this is not a business. you will not run this as a business. -ouch. -ohh. we are in position to blow this company up. what i'm offering you, it's like gold. [ whooping ] i sleep naked, and so -- -now we're really concerned. -wait. wait. -no. -no! i don't have this problem. you came here on "shark tank" to sell the sharks. now you've got these two selling you. both: let's get it. -- captions by vitac -- ♪♪ narrator: first in the tank is a modern way to celebrate your union.
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