>> alphabet google. >> courtney. >> we talked a lot about europe, not about china. i think just abroad is still looking really attractive. the mci is a way to play the chinese markets here. >> stephen i looked for something green today. i found it in cigna. so cigna is going to be the final track. >> all right. thanks for watching fast money. see you back here tomorrow at five for more fast mad money with jim cramer starts right now. >> my mission is simple to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. mad money starts now. hey i'm cramer. welcome to mad money. welcome to cramerica. i don't make friends. i'm just trying to make you a little money. my job is not just to entertain, but to teach. and i'm telling you, i'll do a lot of teaching tonight. so call me at one 800 743 cnbc or tweet me jimcramer. tough days do not last forever. but when they come along you need to know how to respond. you need a game plan ready. so you can figure out

what kind of sell off we're dealing with and then react appropriately. because the early days of decline are never easy to navigate. you need all the help you can get. to borrow a line from tolstoy's fantastic anna karenina, all happy families are alike. each selloff is unhappy in its own way. it's true. bull markets send stocks higher and everyone thinks they're genius participating because it seems so darn easy. same every time. but big declines are much harder. they could be the start of a bear market rally. or maybe something worse. or they might actually be just a bible glitch. that's why tonight we're turning to history to illustrate some of the common qualities of selloffs. so you know what to do the next time the market has an inevitable moment of weakness. now, really, there are only been two truly horrifying selloffs since i started investing over four decades ago. the one day crash of 1987 and the rolling crash of 2007 to 2009. that was the financial crisis. do you know what even the covid crash, when the s&p lost sb 500, lost 35% of

its value in just over a month. that wasn't nearly as bad as these two, especially when you remember that the market started rebounding almost immediately. so let's deal with the two big ones head on because they make for great examples. 1987 and the financial crisis are actually polar opposites. although the percentage declines are really pretty similar. on october 19th, 1987, also known as black monday, the dow jones industrial average fell 508 points, or more than 22%, in a single session. i was trading that day, and even the previous week had been one of the worst weeks in market history. black monday hit fast and hit hit hard. it felt there were no buyers to be found from dow 2246, where the crash started to dow 1738, where at last it ended that day. it kept tumbling right into the close. i remember thinking saved by the bell. except it felt like there wasn't that much money left to be saved. but most people don't remember that the week before was horrendous too. the dow had already plunged from 2482 to

2246. that's only a 10% decline. that harsh pullback encouraged bargain hunters, intrepid souls who thought they could flip into monday morning into some strength. you bought friday. flip it on monday. except the strength never showed up and they got badly burned. in fact, we just continued to the next day. you know, that day became known as terrible tuesday, where the dow kind of just broke down entirely. the market simply stopped functioning. but you know what? i was there, and i was actually able to calculate that bottom. the bottom turned out to be about dow 1400. that was down another 122 points, or about 7% from where we closed on black monday. at the end of the day. it was all just i pieced them together one by one. people didn't think it ever went down below dow 1600, but they were wrong. then fed chairman alan greenspan stopped the decline in his tracks when he said he'd provide all the liquidity necessary to stabilize the market. now, i still remember that green line when it came over your screen. he enlisted multiple firms around wall street to help put in the bottom, and the market staged a remarkable two day rally that

took the dow up more than 400 points from its lows. that seemed pretty unbelievable at the time. the effects of the crash lasted for just three months when we had a retest that held. but do you know that it took until mid 1989 for the average to return to where they were trading before this big breakdown? the bear market that began in october of 2007 was a totally different animal. dow fell from 14,001 198, 1188. to 14,000. remember the other ones to 2000. 14,000. and it didn't bottom until march 6th of 2009, when it landed at a staggering 6470. we didn't return to that house in 2007 level until march of 2013. why did one sell off end so quickly while the other took six six years to unwind? well, that's the question that defines the two extremes of unhappy sell offs. see, black monday was a mechanical sell off. the first one i can remember where the averages melted down because of pure market dysfunction. it's instructive to unpack black monday because the way it played out was reminiscent of two other crashes the flash crash of 2010

and its doppelganger in 2015. both times when the market simply failed to work. now, all three of these started with the s&p 500 futures pits in chicago. see chicago overwhelmed wall street in new york, where the stocks underneath the futures are traded. black monday happened because stock traders didn't understand the power of the futures market back then, which could flood the stock market with instant, unseen supply. no one was ready for it. these days we accept the futures are worth watching, but it wasn't like it back then because they were relatively new instruments created about five years before the crash, and no one knew the power they had. see, the power of the future snuck up on us, as they were initially a much smaller market than the stocks themselves. because portfolio managers could go in easily and out easily, though the futures became the most powerful drivers of stock prices, particularly for hedge funds. even more powerful than the actual performance of the underlying companies, the stocks are meant to represent underlying corporate earnings used to be mean much more to the day to day action of the stock. the thing is, even with the relatively new impact of futures, black monday was highly

unusual. we'd had a big run going into the crash of 87. it was a remarkable multiyear rally with nary a substantial decline. and don't i know it? i left goldman sachs in 1987 to start my own hedge fund, because my returns had been so bad for investors. the rally in the mid to late 80s, the mid to late 80s, had created such stupendous gains that a group of clever salespeople started offering big funds, what they claim were insurance policies that could lock in gains and stop out losses after the funds had gone up so much. so-called portfolio insurance involves something called dynamic hedging, where these specialists said they could use futures to insure that you no longer be exposed to stock market risk, say, down 5 or 10% or some other number, depending on the policy took out. yeah, it was like a stop loss. these the idea was that these policies would let you sidestep the losses. of course, it's impossible to do that, but they had such a great sales pitch and people believed them because the stock futures were so novel. in reality, though, when the losses all kicked in at once on black monday, the portfolio insurance didn't work.

if anything, the futures selling from these insurance policies actually accelerated the decline in the stock market, causing massive losses for the poor saps who bought these things. many of the of the actual clients were wiped out. the people who sold these policies, they were charlatans and mountebanks. although history remembers them as just really is idiots, not the crooks i thought they were. i lean toward the latter theory because there's no magic trick that can get you returns from investing in the stock market without much risk. come on. the two go hand in hand. don't believe anyone who tells you different. those people are charlatans. of course, at the time, we didn't know that the power of the futures could cause a crash. we figured where there's smoke, there's fire. if the markets crash, then there's going to be something wrong with the economy. right? it simply had to be recession lurking. the stocks couldn't go down on their own. there had to. otherwise, how could the dow plummet 22% in a single day after falling 10% the week before? i say, though, it turned out wrong. the economy was strong going into the 87 crash. it was strong coming out of it. there just wasn't any

economic correlation with black monday at all. it was the interplay between chicago much more powerful than realized in new york, much weaker, that set off the conflagration. and when the treasury department examined what happened that day, it concluded that the futures set off immense selling. while some specialist firms on the floor of the exchange and some brokerage houses failed to step up in what known as stabilize the tape, the latter had no duty to stabilize things, but the former were supposed to do so. the treasury found out that many didn't do their jobs. now, i was fortunate enough to actually be in cash on black monday, having liquidated my portfolio early in the previous week because the market so badly, i didn't want any part of it. now, in retrospect, it did make my career i look like a true genius. but the truth is, i was just frightened of the market and wanted to regroup. i always say, though, it's better to be lucky than good, but discipline can help maximize your luck, which is why we spend so much time teaching you discipline in the cbc investing club. so here's the bottom line. sometimes crashes have nothing to do with the economy. they're

caused by the mechanics of the market. stay tuned for more examples of this kind of decline and the more serious animal the bear market of 2007 2009. so you can figure out what to do when they really more or less irma in new york. irma. >> yes. >> good evening, mr. cramer. >> good morning. >> i'm planning. >> to open. >> a roth. >> nondeductible roth iras. >> iras for. >> my. grandchildren who are all in their 20s. >> and i. >> better off with. >> a growth. >> fund or an index fund. >> i want you to be in growth, growth, growth because they're young. you can switch to index in the 30s. let's go for some real risk here because they got their whole life ahead of them. i really want you to hit it big right now for them. tony, i am on i am alone in that, but i don't care. i really want risk taking when they're younger. tony in florida. tony. >> hey, jim. >> i just want to let you know i'm. a member. >> from.

>> day one. it will be. >> a. >> lifetime member. >> i love. >> you for your thing. >> what i want to ask you is when. when we like a stock. and or love a. >> stock. >> and it reports. earnings that are really good, but then for some reason the market buys it down. can we buy it day one or do we have to use that rule like anybody says, wait three days before you buy a stock that goes down. >> no, 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 in the club. and we've been very successful in most of our battles. some of them have been tougher, but that's the way you make it, so your battle won't be too hard. buying it all at once does that, and we don't want that. tough days don't last forever, people, but when they come along, you need to know how to respond. well, mad tonight i'm giving you a crash course in crashes. so pullbacks and big market declines. so you can prepare to get the best possible outcome from the worst possible

situations. so stay with cramer. >> don't miss a second of mad money follow jimcramer on x. have a question. tweet cramer hashtag mad mentions. send jim an email to madmoney.cnbc.com. or give us a call at one 800 743 cnbc. miss something. head to madmoney.cnbc.com. brian madmoney.cnbc.com. brian sullivan ♪(voya)♪ there are some things that work better together. like your workplace benefits and retirement savings. presentation looks great. thanks! thanks! voya provides tools that help you make the right investment and benefit choices so you can reach today's financial goals. that one! and look forward, to a more confident future. that is one dynamic duo. voya, well planned, well invested, well protected.

a beast lurks between the numbers. some watch from the safety of the sidelines, but others saddle up and ride that one ton rowdy ribeye for all he's got. if that's you, join us on tasty treat, named best online broker for options trading. genius loves company. hindsight may be 2020, but what investors need today is 2020. foresight vector vest has it. i'd be trading blind if it wasn't for vector vest. the best stock sight period test drive vector vest 30 days under $10. >> one way. or another, i'm gonna find you i'm gonna get you, get you, get you, get you. oh, my god, i'm gonna where

our xfinity network is built for streaming all the stuff people love. how can it get any better? -i'm just spitballin' here, but, what if we offer people apple tv+, netflix and peacock? for one low monthly price. -yes. so, people could stream the shows they love. and we could call it... xfinity streamsaver! mmmmm. what about something like: streamsaver? ooooooo. -i love that. add streamsaver with apple tv+, netflix and peacock included for only $15 a month... and stream all your favorite entertainment, all in one place. amazing and is something that we. >> get to use every day. >> time to teach you how to cope with all sorts of declines. i already covered the crash of 1987 and how it wasn't really related to the economy. shocker. so it made sense to buy stocks when the smoke cleared. 1987 was a rare opportunity that took a little time to reveal itself. but when it did ooh la la, it

was also the first instance of the s&p 500 futures exercising the pernicious power over individual stocks. sadly, it was the first of many. which brings me to the fabled flash crash in 2010, one of those negative moments that drove away so many investors who never came back to stocks because they didn't know their value could be destroyed so quickly, almost whimsically, who wants to keep their life savings in instruments that can blow up in the blink of an eye? i don't blame anyone for not wanting to be in after the flash crash. what happened that afternoon was pretty much the same deal as black monday of 87. the futures overwhelmed the stock market and buyers just walked away, betting that there had to be some substance behind the destruction. right? couldn't you couldn't just be the machines breaking down, for heaven's sakes, could it? the flash crash started at 2:32 p.m. on may 6th of 20, 2010 of 2010. it lasted for 36 minutes and that 36 minutes, the dow fell almost 1000 points from roughly 10,000 level. very memorable for me because i have to be on air at the time. immediately, money managers tried to play the pin, the tail on the sell off. there were riots in greece and maybe

this time was everyone was focused on southern europe thanks to endless sovereign debt crises. others pinned it on the newfound weakness in the us economy, of which, for the record, there really wasn't any. perhaps because i had the benefit of trading on black monday, i recognized the flash crash exactly for what it was another situation when the machines were breaking as the futures overwhelmed the stocks. it wasn't the fundamentals we didn't know at the time, but a gigantic sell order caused tremendous fear. the spread like wildfire. many buyers just simply disappeared. they walked away. they didn't wait to wait around to find out what was causing the landslide. had to be something big, right? they just wanted to get out as fast as possible. lightning on air. i called it a phony sell off because the decline had no basis in economic reality, which made for a tremendous buying opportunity. that is not a real stock. it's too bad the system obviously broke down. we find out that there was a glitch. >> analyst from pnc. >> talking about. >> the machines failed. it obviously broke down, obviously.

>> broke down. >> the market didn't work. it broke down. the machines broke down. that's what happened. that's exactly what happened. it had nothing to do with the fundamentals, just more of this nonsense. while some listened and actually bought stocks and what i had to say, many people simply didn't believe that equities could be that fragile and they left. it was shocking. in all the years i've been doing this show, i hope i've taught you that stocks are not hard assets. they are subject to all sorts of whims that can reduce their value in a heartbeat, including mechanical issues like we saw during that 36 minute selloff. they're just they're just not perfect enough and people think they are anyway. the market quickly regained its equilibrium, but not before another round of individual investors left the asset class entirely. and they never came back. oh, how about august 2015 selloff where the dow fell 1000 points right at the opening. now, that was seemingly related to fears that the federal reserve would raise interest rates right into the teeth of still one more story about the china market collapsing. hey, china has been collapsing for ages. right back then, the chinese market was the most

dominant negative story out there. kind of, you know, it's always been out there, but the whole economic edifice of the prc could collapse from too much leverage at any given time. it's been a common refrain. somehow i find myself on air at all the right times to witness these events. that friday, before the self had been. it had been a monstrously ugly day, as a fed official late in the afternoon had suggested it was time to raise rates despite the chinese sell off. it was an aggressive statement that demonstrated a cavalier attitude toward the market's ugly but also fragile mood. now, when we came in on monday, august 24th, we heard that there were some very large sell orders in place for major stocks. we weren't ready, though, for the gap downs we saw where large capitalization stocks were shedding hundreds of billions of dollars of value, many down 20% as the market opened. and we had no ability to tell why. like the crash of 87 was very tough to see what the real prices were. the confusion was that horrific. it was like trading in the fog of war. yes, the fog of trading. some prominent stocks were down 40, 50, 50%. it was indeed crazy

town. as the market rolled open, the dow ended up tallying a decline of about 1000 points. when the smoke cleared at 10 a.m, i and my partners on squawk on the street were pretty stymied at the time. i remember turning to david faber to chat about the meaning of the sell off. his reaction, i thought, was priceless. >> i don't this. >> is i got. >> i. >> got to make. >> some phone. >> calls because. >> that's these are. >> these find out whether someone busted. >> these are enormous moves. >> i got to make some phone calls. i mean, i remember when he said it, i said, yeah, that's it. i got to make some phone calls. that's how confused we were. that's how wrong we knew it was. but you can't just go out and say it's wrong again. we figured there had to be something very bad in the economy. somebody knew something we didn't. something mysterious, something otherworldly, something nefarious. maybe china had actually collapsed. maybe there was war somewhere. maybe something occurred in europe we didn't know about. we had to assume there'd be a good reason for that kind of decline. i was suspicious, though, because some of the hardest hit stocks were the recession proof names, especially the biotechs, which for some reason declined harder than almost all the rest of the

market. now, that really made no sense. that's exactly what people buy when the economy softens up, for heaven's sake, they are safe havens. once again, i suggest that it was the machines that were causing the problem that the futures had overwhelmed the stocks and the computers had gone haywire. just like 2010, just like the flash crash. by mid-morning, we learned that that was exactly the case in the stock market, then underwent a beautiful metamorphosis into a furious rally, jumping 500 points from the bottom. strong stomach buyers came in and took advantage of the opportunity. the economy was gaining strength, not losing it, and a thoughtful federal reserve wasn't really about to tighten, not with china teetering. it was an excellent time to buy stocks. why was there such fear and confusion at the time, both in 2010 and 2015? why were those mini crashes so frightening? i think investors weren't ready for either flash crash, because post 1987, the government had put in what are known as circuit breakers. they were supposed to cool these declines by stopping trading momentarily, but the circuit breakers created a false sense of security that, oddly still exists today, even as they failed to work properly on both occasions and did very little to

stop the destruction of your nest egg. so please, when you hear talk of circuit breakers protecting you from fast declines, know. don't believe it. fear can't be legislated or regulated out of the market. it will always be there. there will always be people who react horribly after an initial event, even as that event is mechanical and not truly substantive in nature in any way, shape or form. now, there have been many declines worse than the flash crashes of 2010 and 2015. i can think of three days during the covid crash, when we were down almost from 7.8% to almost 13% in a single session. but the covid crash was very straightforward. we knew exactly where the problem was. government shut down the whole economy to fight a deadly plague. zero confusion. the flash crash is different. by the way, if you thought my on air commentary was useful in 2010 and 2015 and it was then, well, that's actually kind of a more reason to join the cnbc investing club. let me show you how to run a portfolio in real time. we take all this stuff into account. in fact, these kinds of moves are never going to go away as we get further from the last one, i always anticipate the next one. so

what's the bottom line here? if you can figure out when a sell off is caused by the mechanics of the market breaking down, then you might have an incredible buying opportunity. first, though, you have to determine whether the sell off is related to the fundamentals of the economy or not. if it is, stay tuned. if it isn't, stay tuned anyway, but recognize you have a first class panic on your hands and nobody ever made a dime panicking. but boy oh boy did they coin money. taking the other side of the trade. money is back after the break. >> some people took deep seek to mean actually that you need less compute. >> from. >> a demand. >> perspective. >> deep seek. >> was fantastic. >> it open. >> sourced the reasoning model. >> that's absolutely world class. >> ai has. >> become better. >> if you believe every customer experience is going to be reinvented by. generative ai. >> then you're. >> going to be building. >> a lot of generative ai apps. >> even if. >> you say i, i don't think. >> there's going to be. >> deflationary in the short run. >> it may very well be deflationary, you know, after 3

or 4 years. but most of us for now, we're spending more money on, not less. >> as a financial. >> advisor. >> you know. >> building a retirement. >> plan, practice takes work, but it doesn't have to. >> be all. >> on you. capital group can streamline the job with a platform that helps you guide and grow clients more efficiently. because we know. >> you're just. >> one person. >> build your retirement plan. >> practice with capital group. >> meet avocados best selling green mattress made with certified organic cotton, wool and latex, plus ergonomic coils to support your body's natural curves for cool and restorative sleep. featuring a one year in-home sleep trial, save up to 20% on organic mattresses. shop today at avocado mattress. proud

supporter of 1% for the planet. >> music is the ultimate uniter. it belongs to all of us, and now you can own a share of it for yourself. my name is j.w. roth, founder and ceo here at venue. i've always been a music fan. first and foremost, i was the kid camping out for stones tickets and singing along in the pouring rain. it's those moments that inspired me to build the first live music company that's fan founded and fan owned, a company devoted to creating memories that will last a lifetime. as one of the fastest growing live entertainment companies in the world, we're disrupting the music industry and the hospitality landscape by offering one of a kind destinations where music, dining and premium converge venue is now traded on the new york stock exchange, so you can join the revolution by owning a share of our rapidly expanding portfolio of the most state of the art venues on earth. own your venues on earth. own your passion for great your shipping manager left to "find themself."

leaving you lost. you need to hire. i need indeed. indeed you do. sponsored jobs on indeed are two and a half times faster to first hire. visit indeed.com/hire life things. >> happen. and little ones too. >> this is. >> your car. >> and. >> sometimes your office. >> oh. >> it's okay, we're good. and you're going. big places. great. where are. >> you going at cargurus we get it. >> as the number one most visited car shopping site. >> with the biggest selection. >> of cars, we make sure your big deal is the best deal. if you're shopping for a home. realtor.com real compute tool lets you find homes close to work, school, even grandma's house. >> don't all apps do that? >> not really.

>> trust the number. >> one app real estate professionals trust. >> not all days are winners in the market, and knowing how to handle the down days is key. we have you covered. good and bad days here on mad money, and there are lessons in the really bad days that can help. so let's set the stage. back in october of 2007, the dow peaked at a little more than 14,000 after the fed had raised rates over and over and over again 17 times, and the economy, after teetering for just a bit, fell off a cliff, took the stock market with it. it's one of those things that you could have seen coming if you paid attention, specifically if you paid attention to me. back on august 3rd of 2007, when i excoriated the fed for having raised rates so much oblivious to the damage it was doing to the real economy. i have talked to the heads of almost every single one of these firms in the last 72 hours, and he has no idea what it's like out there. none. and bill poole. has no

idea what it's 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. >> and he's nuts. >> they're nuts. they know nothing. you all right? what did i mean by that? well, shortly before i came out and set that moment with my old friend erin burnett, i've been talking to the head of a major wall street firm about problems in the mortgage market. pretty much everyone who followed the mortgage market, which is incredibly important to the health economy, knew that there were a lot of unsound practices occurring. still, it was jarring when i was told by executive that he couldn't believe how many people were beginning to default on their mortgages. yeah, here's the keys. he talked about how many mortgages of the 2005 vintage. he used, the term that i previously only associated with fine wine just weren't money good. something that only happened once in our country's history and that was never supposed to happen again. that's the great depression. i was aghast, but you know what? i had a lot of friends and a lot of firms, so i started making a lot of calls. i wanted to see if this 2005 vintage thing was in trouble everywhere. i was ashamed when i got off the phone

as the problem seemed to be spreading like wildfire. i called mortgage bankers. i called guys who ran major firms. yeah, that's what i said. my people, everybody said the same thing. we're in big trouble. and that's why i went off so strongly on my rant. sadly, the fed didn't listen, especially this fellow bill poole, who at the time was an incredibly important fed official. he was so sanguine about things that i had to single him out in the rant. years later, when the fed transcripts for that period were released, i found out that my rant was brought up, but only as a joke soon after my. they know nothing. we had a series of horrendous defaults of large banks and savings and loans, some of which were thought to be too big to fail and failed anyway, including the largest savings and loan and two of the largest and most fabled brokerage houses. i did my best to try to get people out, even went on the today show to urge anyone who needed money near term to take it out of the stock market before it was all lost. >> for investors. what is your advice today? >> whatever money you may need for the next five years, please

take it out of the stock market right now. >> very dramatic statement. first. >> i thought about this all weekend. i did not want to say these things on tv. i'm well, sure enough, the market fell another 40% for a bottom. it's a good call now if you bought any time from them when the stock market peaked at 14,000 until it was cut more more than half by march 9th of 2009. you lost a fortune. probably never came back in stocks, probably gave up. so how do you know to avoid buying this kind of dip? how do you tell the difference between that lead up to the financial crisis and the sell off? that's a buying opportunity like black monday in 1987. well, first you have to ask yourself about the state of the economy. is business really getting crushed? is employment falling off and falling off hard? is the fed standing pat or even raising rates when the real signs of cracks like major firms going under, big companies unable to pay their bills? are there actual runs of multiple financial institutions around the country, not just in one area? if the answer is yes, then you have a decline that could be joined at the hip with the real economy. one that is true systemic risk. that's the term

meaning that the entire country could collapse. that's how it was during the financial crisis. it's why i got so angry when people say, hey, this is going to be like, i get angry every time, oh, it's going to be as bad as 2007 2009, when there's, of course, nothing like that occurred because, like i said, only twice in 80 years has it occurred. even the covid recession wasn't as bad because the moment we got a viable vaccine, everything immediately went back to normal. we heard about systemic risk when some of the regional banks went under in 2023, but within a few months we were over it. so if you're worried about systemic risk, the odds are you're worrying too much. second, you want to know if there's anything in place that can actually save the economy or turn it around. that's important to our elected leaders did very little to soften the blow of the financial crisis. what brought the market out of its funk was the statement by then fed chair ben bernanke. so forceful statement made on 60 minutes, no less, that he no longer allowed american banks go under. boy, he was letting him go under left and right. until then, he had watched. the fed was just sitting on its hands. but the moment bernanke decided that he needed that something needed to be done, the stock market

bottomed. were there ways to spot the bottom? i got a couple of signs that can help. there's a proprietary oscillator i watch it very heavily for the cnbc investing club. it's a paid subscription. product measures buying or selling pressure. when you get a minus five, that indicates there's most likely too much selling. hey, when you get a minus ten, well, you got to do some buying, even if everything seems horrible. we were getting signals that things were much worse than that near the bottom in 2009. another way to look at it, i got one. i like to see who's been pessimistic or concerned about stocks, but is reluctant to say anything positive. who then changes his tune? the best example of that kind of that big switch came from the late, great mark haines, who had this to say back then. >> i'm going to step out on a. >> limb here. >> the big hold. >> on everyone waiting for. >> this, we're at the bottom. >> i really do. i think we're going to have. >> a rally. >> there we go, man. >> unafraid to. >> make a call. and. >> well. >> let me. >> tell you the rally.

>> but i think, in other words, i think. >> today this is for real. >> man, what a call. look at that. march 10th of 2009, the day after bernanke was on 60 minutes. just a huge contrarian call from someone who hadn't been willing to make one until that moment. best call i've ever seen. now, it certainly made a ton of sense to sell when i said to sell in october of 2008. but before you say to yourself, what happens if no one warns you again the next time? well, i got you know what? i got some good news for you. it's a little sobering, but it's good news if you waited long enough. six years to be exact. you actually did get back to where you were before the bear market began. all right, six years. but if you sat tight in the worst market in living memory, you eventually got back to even and went on to make a killing. yes, it would've been better to take something off the table. 2008 like i told you to, but a lot of people struggle to get back in the lower level because they got burned out of the whole asset class. they did worse than the ones who simply sat tight. so here's the bottom line. the financial crisis gave us a once in a lifetime bear market with true systemic risk. but that's the exception, not the rule.

let's take questions. let's go to starkwell in washington, starkwell. >> booyah jim. >> what's going on. man i don't know. having a cup of water right now. what's going on with you. >> oh man. >> you know i'm trying to have a cup of water. >> i got a lot of bad weather out here and i'm trying to get it together. i can definitely say we got to give a big shout out to you from the great northwest, though. jim, you're doing. >> a great job. done. thank you. i'll take that shout out now. >> now, because we get a lot of advice from all around the world. i figured like this. >> if you want a good read, you might as well go to a qualified banker. so what i want to go and say to you, man, is. >> that i'm curious, is. >> your feelings on using high yielding dividend stocks. as a form of investment? because the reason i'm asking is i'd like to know that if you are too risky or if they cut dividends down or lose market value, are you going to be hit? and if you do agree, is there a barbell approach or can we take a balance in our in our portfolio in a certain way that you feel stuck? >> well, i love it, i love it, i love it now i don't want to reach i don't want dividends that are so high yielding that something's fishy. what i want are very solid companies with

good balance sheets that pay dividends, that we reinvest constantly. that is nirvana for me, and that's the way i would love to invest if i could own individual stocks. the 2008 financial crisis gave us a once in a lifetime bear market. true systemic risk. but you have to remember that's the exception, not the rule. much more mad money ahead. in this special show, i'm giving you a flash crash survival guide with some takeaways from the crashes of 2010 and 2015, and the best ways to profit from market pullbacks. then i'm answering all your burning questions with my colleague jeff marx. so stay with cramer. we teach you the right way to develop your own investment strategy. >> the more disciplined. >> and not. >> making irrational decisions, we stick to the strategy and continue to invest and stay long term. >> go to cnbc.com. join jim why do you invest to win obviously to secure your future. brokerages can't tell you exactly how vector vest can with 2020 insight. what to buy, when to sell. consistent growth, more

wins and more winners with vector vest. don't buy another stock before. >> reading this. >> book. because when you see the returns you could be making on options versus stocks. >> you'll realize that in today's. >> market, buying and holding stocks alone is. not an option. the simple, beginner friendly option strategies you'll. >> learn in our new book. >> could take. >> your investing. >> returns to a whole new level, and today we'll. >> give. >> you a copy for free. get your free copy while they last at. >> it's not. >> an option.com it's not an option.com. 16 million. >> americans suffer from chronic back pain, the six most costly health condition in the us. meet creative medical technology stock symbol sells on the nasdaq. creators of stem spine a regenerative medicine using stem cells to help fix the multibillion dollar chronic back pain problem. stem spine was shown to be 87% effective at improving mobility and reducing chronic back pain, and that could be worth a fortune.

creative medical technology stock symbol sells. >> if you are shopping for a home, you could browse hundreds of listings to find homes with big yards or compare lot sizes all at once. >> search in full color. >> to find space to grow. home search will never be the same again. again. >> when you finally decide you founded your kayak company because you love the ocean, not spreadsheets. you need to hire. i need indeed. indeed you do. when you sponsor a job on indeed, candidates can find it easier. so you can hire easier. visit indeed.com/hire

you can improve your skin at omni luxe ledcom. >> in tonight's special survival guide edition of mad money, we're discussing how to deal with brutal sell offs.

>> specifically. >> how to defend against them. take advantage of them even because, you know, i like to be opportunistic. now, i've told you not to be glib about the systemic risk sell offs that involve potential collapse of the us economy, but those are easy to spot because it'll seem like the world is falling apart, like in 2008. you don't need me for that. but now i want to help you game out the other, less dangerous kind of crash, the mechanical kind caused by a broken market in a healthy economy. now, the best way to deal with these sudden declines is to recognize that there's a bottoming process when you can spot. so what should you do? i have a solution that has worked in even the toughest of times. i like to look at something i call the accidental high yielders. i actually actually call them a h s on this show. those are stocks of companies that are doing fine, have good balance sheets. that's very important, by the way, but their share prices have fallen so low that their dividends are starting to give you an unbelievable return. that's right. good yield. how do

you spot these. well you look at the level of dividend yields you've gotten from certain stocks. you also want to look at the yield on the ten year treasury. if a stock typically yields say 2%, suddenly it's paying double that because of a market wide decline. then you're probably looking at an accidentally high yield. as long as the stock's been going down for no particular reason. and that's why when you're hunting for these dividend stocks, you should focus on companies that are particularly sensitive to swings in the economy that have very good balance sheets. second, if the yield level isn't giving you opportunities, i use a mechanical sell off to pick some stocks that you like. you can begin buying them using what's is wide scales. that's why i recommended during the 2010 flash crash i told people to use wide scales. pick one of your best stocks out there, premier stock and buy some using limit orders only. don't use market orders because you might end up getting terrible prices. frankly, you should never use market orders because it's especially stupid during a crash. i like this method because if the market does come right back, as it did after the two flash crashes, you've picked up some terrific merchandise at amazing prices. then you can

flip the stocks for big profits, or you can hold on to them for the long haul. but take a look. i actually demonstrated exactly how this works during an appearance on tv when the flash crash happened in 2010. >> p&g is now down 25%. >> that's true. >> if that stock is there, you just go and buy it. it can't be there. that is not a real stock. when i looked at it, it was a 61. i'm not that interested in it. it's a 47. well that's a different security entirely. so what you have to do though, you have to use limit orders because procter just jumped seven points that i said i liked it at 49. so i mean you know you got to be careful. the market. was down. >> 900 points. we're now down six. >> remember i bought 50,049. i now flip it at 59 i just made i just made 500 gs. yeah. that's the craziness of what i'm talking about. and by the way, a lot of people end up doing that procter trade. i've been thanked for millions. i mean like a dozen times people thank me. remember, the limit order advice really does ring true. now we've talked about meltdowns and systemic risk and gut churning

moves that are untethered from the economy. but how about the garden variety pullbacks we experience all the time? what causes these declines? well, they're usually a bunch of different varieties. first you've got the selloffs caused by the federal reserve. that's probably the most frequent reason for stock dumping. there's a reason that businesses, business, media constantly talks about the fed. when the economy is weakening. it's the federal reserve's job to try to restore growth, which they did with aplomb when covid shut down the economy in 2020. as long as the fed is printing money, almost every decline is a bible one. it's just a fact of life. it's been like that since i got in the business, but when the economy is strengthening, it perhaps starts to overheat. well, the fed has a different mandate stamping out inflation. when the fed declared war on inflation in late 2021, the market started rolling over with the highest risk groups getting eviscerated. now, nobody wants persistently high inflation. those of you who missed the 70s and 80s now know from the post covid experience. but we also don't want the fed to break the economy like it did when it raised rates 17 straight times in lockstep going into the great recession. it caused the great recession. now, there are plenty of times when the fed is

tightening, but the stock market didn't get crushed because the economy didn't get crushed. and that's how we got the incredible bull market in the first half of 2023. however, whenever the fed tightens, some prognosticators will come out of the woodwork to tell you the market will crash or at least take a very big header. that's inevitable. so when you hear these comments, please don't panic. fed rate hikes don't necessarily lead to crashes. in fact, i've seen plenty that do next to nothing. but there are rational reasons why the stock market deserves to go down when the fed tightens and i'm not ignoring them first. stocks are only one of the or only one of the assets available to individuals institutions. for instance, there's gold, there's real estate of course, or bonds. i like gold as a safe haven. i believe that every person should hold some gold, preferably bullion. but if not, then the gold as a hedge against economic chaos. real estate, actual real estate can be a good hedge, but most people don't have the money to invest in that kind of real estate the big institutions can buy. now, we do have real estate investment trusts, but they're not as reliable a proxy for real estate as a whole. finally, we have bonds as an investment alternative, and bonds are the

source of the problem. when the fed tightens, you see it yourself. when short term treasuries give you more than 5% risk free, lots of people cash out of the stock market and put their money in treasuries. hey, listen, it's not a bad return as the fed tightens bonds, particularly short term pieces of paper, become more competitive with stocks. you'll notice as the fed jacks up rates, high yielding dividend stocks are going to be among the worst performers because suddenly they've got some serious competition from fixed income. so please be careful. these dividend stocks have safe havens. when you're dealing with a sell off caused by the fed. they're very different from accidental high yielders that can spring back when the fed starts tightening. the second reason why stocks can go down legitimately when the fed raises rates. because the fed isn't perfect. they've raised rates when they should have stood pat or even been cutting rates fast because the economy was already slowing rapidly. although in recent years jay powell has been much more responsible about not pushing us off a cliff than some of the previous fed chiefs. here's the bottom line garden variety pullbacks can be gamed

as long as there's no systemic risk involved. but sell offs in the wake of the fed raising rates, those are trickier, although they can lead to decent opportunities as long as you stay away from the high yielders that become less attractive when the fed tightens and stick with the accidentally high yielders, that might just give you the delicious bounce. when the fed's done tightening mad money. we'll be back after the break. >> for me. >> squawk box. >> is breakfast with. >> most. interesting people. >> in the world. >> it's a. >> privilege to. >> get to. >> talk to them every day. >> it's more. >> entertaining than any other morning. >> show, but you. might get. >> show, but you. might get. >> some useful informa power e*trade's easy-to-use tools, like dynamic charting and risk-reward analysis, help make trading feel effortless. and its customizable scans with social sentiment help you find and unlock opportunities in the market. e*trade from morgan stanley. ♪♪ with powerful, easy-to-use tools power e*trade makes complex trading easier. react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity.

e*trade from morgan stanley is transformed. >> what. >> you think of as landfills into engineering marvels that can generate energy while helping protect the natural environment. >> and learn more about our modern landfills, and how w.m is always working for a. always working for a. sustainable tomorrow at. only the servicenow platform connects every corner of your business, putting ai agents to work for people. like secret agents? no, more like autonomous minions that you control. to do what? well, jim's agents resolve simple customer issues. and patty's agents flag network problems. - proactively. - yup. i'm lovin' my agents. wait, you all have agents? oh yeah. and on the servicenow platform, everyone's agents work together so everything works better. can i have agents? maybe. ♪♪

that's. >> why i love redfin's home recommendations. they know what i want even before. >> i do. >> a home. >> that's just right. >> yeah. yeah. >> consumer cellular is. lowering the price for those 50 and up. get two unlimited lines for $30 each. that's just $60 a month. so switch to the carrier ranked number one in network coverage satisfaction. visit consumer cellular com today. >> our new book shows you how our simple option strategies offer you a lower cost way to trade stocks with limited downside risk and remarkable upside rewards. get your free copy today at it's not an option.com that's it's not an option.com. >> oh dish soap is on sale. we need it. >> yeah i think we. >> need ketchup too. >> what's in there? >> not in the fridge. >> ketchup does not go in the

fridge. >> ha ha ha ha. >> i'm not. wow. >> good or bad. >> well. >> a us bank. we know how good it feels to reach your milestones, but we also know what really goes into getting you there. that's why we introduced codebrowse, which connects you to a real banker in real time to help you do anything from adding a new debit card, learning how to save smarter, even creating spending habits. you mind if. >> i just. >> grab the one with codebrowse? we're always there for you on your road to here, because there's nothing as powerful as the power of us. >> cnbc live ambitiously. >> tonight we're talking sell offs, specifically during this block. what causes garden variety pullbacks? many times the problem is indeed the fed. as i mentioned before the break. but sometimes there are other

issues that are driving the carnage. for starters, there's the issue of margin. as a former hedge fund guy, i'm well aware that there are many times when money managers borrow more cash than they should. so when the stock market goes down, they don't have the capital to meet the margin clerks demands. these kinds of margin induced declines have repeatedly happened, including, say, february of 2018. that was a good one when funds that had borrowed money to bet against stock market volatility, the so-called vix, got their heads handed to them. they were short the vix betting the market would remain calm, stupid. and at the same time they bought the s&p 500 using borrowed money. again real stupid. when the stock market fell, these managers were forced to dump their s&p 500 positions. they had to raise capital and unwind their trades. there were so many managers doing this at once that their selling ended up causing some severe market wide losses. these margin induced breakdowns often occur after the market is down for several days in a row. that's why i'm often reluctant to tell you to be aggressive in the first few days of big decline, because there will always be margin clerks against these managers, you

know, who buy stock with borrowed money, and that doesn't happen immediately. they've got to have to keep chopping. how do you spot these margin call declines. you know what. i use the clock. margin clocks don't want their firms to be on the hook for overstating individuals, for overstretched individuals, or for hedge funds. they want to get out before the night. so margin clerks demand the collateral be put up, raise some cash, or they sell you out of your positions without your say so. i always consider the margin call the butcher, and the butcher occurs between 1 and 2:00. if the selling runs its course by 2:45 p.m. yes, i find it's actually that specific. and i think you have a decent chance to start buying safety stocks, the kinds of stocks that tend not to need the economy to be strong to advance, like the health cares. you might also want to buy the secular growth plays that work in any environment. mega-cap stocks i look, i talk about them all the time, especially in members of the cnbc investing club, because we like to own the best ones for the charitable trust. what else can create viable opportunities? sell off some overseas? i cannot tell you how often i've heard commentators who scare the

bejesus out of us because of important worry, say, from greece or cyprus, turkey, venezuela, mexico, other places. i always tell you to ask yourself, do any of these woes truly impact the stocks of the american companies in your portfolio? do they really make you want to pay dramatically less for an individual u.s. stock? usually the answer is no. unfortunately, though, you can't just start buying stocks hand over fist into an overseas driven sell off. you should always assume there are people who don't understand how unimportant these worries are, the vast scheme of things. and of course, those people are going to panic and sell after you would have thought they would have known better. that's why these international declines often last for three days. again, the best way to figure out if they're done is to watch the clock, as the sellers usually need to be margined out against their will if there's going to be a bottom. another kind of sell off the ipo related decline. remember, at the end of the day, stock markets are markets first and foremost, and

markets are controlled by supply and demand. so if the bankers start rolling out lots of new ipos, and then these companies sell more shares via secondary offerings, you could end up in a situation where there's just much too much supply and not enough demand. by the way, we saw this near the end of 2021 after we've been drowning under the weight of 600 odd ipos and spac deals. oh, man. >> okay. >> don't buy. >> don't buy. my suggestion avoid the blast zone, the area where most of the new ipos are concentrated, and focus on the stocks that are down due to collateral damage, especially ones with yield protection. sometimes we get declines triggered by multiple simultaneous earnings shortfalls. we've got to be real nimble with these. if you want to buy stocks after an earnings induced pullback, isolate the sectors where the shortfalls are occurring and avoid them like the plague. there's no reason to stick your neck out here. instead, buy unrelated stocks that have been hit by the much broader selling via the s&p 500 futures. then there's the

trickiest kind of risk, one that's truly tolstoy esque political risk. i often find this risk tremendously overblown, whether it's because of strike between parties or trade policies or even all out war risk. i am not a political guy, and i hate talking about this stuff on air and off air. but with every stock you own, you need to ask, does this company have direct earnings risk when it comes to washington? if not, then you've got nothing to worry about. however, if you own something that's directly impacted by, say, a trade dispute with china or a government shutdown, well, it could turn into a house of pain. i know political risk is enticingly negative because, well, there are so many pundits everywhere wading in and giving their $0.02. i think these guys want to scare you. my suggestion? tune it all out, please. instead, look for companies that have nothing to do with the political fray, even as their stocks may be brought down by it like we see every time there's a debt ceiling standoff. i can't tell you how many times since 1979 i've seen politics used as a reason to sell stocks. now, there may be a reason to sell some stocks, but rarely is anything in washington

been enough to sell everything. here's the bottom line. there are all sorts of sell offs, but unless they involve systemic risk, which is increasingly rare, like in 2007 2009, they're going to prove to be buying opportunities long term. you just need to recognize what's driving the decline. note the signs that it might be subsiding. and then take action to buy not sell. and never to panic. stick with cramer. >> good evening. >> mr. cramer. >> thank you. thank you for. >> everything you do. >> you've been such. >> a wonderful. >> source of. >> information with. >> your teachings. >> i have to say thanks. >> thank you for all your advice and saving us from ourselves. >> your advice? >> let me quit a job that. >> i hated. >> i love you to death. >> thank you for everything you do. thank you for making us do. thank you for making us money. and more importantly, (grunting) at morgan stanley, old school hard work meets bold new thinking. ( ♪♪ ) partnering to unlock new ideas,

to create new legacies, to transform a company, industry, economy, generation. because grit and vision working in lockstep puts you on the path to your full potential. old school grit. new world ideas. morgan stanley. 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. is the internet out? don't worry, we have at&t internet back-up. the next level network for small business. ♪♪ i sold a pillow! icy hot. ice works fast. ♪♪ heat makes it last. feel the power of contrast therapy. ♪♪

so you can rise from pain. icy hot. 7 million us businesses rely on tiktok to compete. within a week of posting, i had over $25,000 in sales. small businesses thrive on tiktok. tiktok brings in so much foot traffic. i need tiktok to keep growing.

>> the most successful people. >> have the strongest. >> principles. >> and clearly. >> you have that. this is the best solution i. have ever seen. >> i'm going. >> to make you. >> an offer. you have a deal. >> shark tank coming up next. cnbc. >> if you want to manage your own portfolio, learn how i do it. >> one of the key benefits for me is. knowing where jim is going to buy or sell before he does it. >> get invested. join the club today. go to cnbc.com. join jim.

>> i always say my favorite part of the show is answering questions directly from you. so tonight i'm going to take a few bernie investing questions from our investing club members. and of course if you like this be sure to join the club. let's start with peter, who says as a younger investor is able to add funds to the market bi weekly when paid and the trust having a set amount of funds, how do you recommend putting new money into the market? i've been working on just on this concept and you literally want to do it straight line. you don't want to care about the market at all. if you want to put $50 to work, say in the market, do 25 and then skip a week and then do 25. absolutely. just precision like that. never try to make a judgment of the market, because we're thinking the market is going to go up over time. next we have michelle in california who asks, how do you know when to break your cost basis? michelle, i first of all, when i do it with jeff marks, here's what we do. we say, no, no, no, no no, don't do it. don't do it. don't. we actually use kind of a checklist. we have to go down. not unlike a quarterback looking dear. we're going to get picked off here. picked off here because it is so dangerous to go

above your your basis only if there is something that is so compelling that is changed dramatically, not just, but dramatically. would we ever do it? because it's a very bad discipline to break? now jeff in florida asks if a stock has been in the red for a couple of years, and i averaged down during that time. when is it a good time to sell some of that stock? do i sell some when it finally gets back to even, or do i risk it? and what and what until i have more substantial gains? oh my god, i'm so glad for this question. this is something i've worked on and worked on, worked on. it's called the stuck in the mud concept, which is that just because your stock has done nothing for a long time to kind of drift down and then suddenly starts going up or it goes up, goes up. so you have to understand when it gets up a little bit more like to where your base is. here's what's going on through the market's mind. everybody else at last that stock's moving i want to buy it. it is really important that you don't trust. don't touch the stock. let it go higher because that's the magic moment. people say it's out of the woods. let me have it. it's been stuck in the mud for so long. bingo. don't touch it. let's go to joseph, who has many stocks that are recommended.

have very high p e ratios. what should we look for to make? make buying a stock with a high p e acceptable? all right. there's two ways to look at this. one way is to say okay here's what i'm going to do. i'm going to look at the past and see whether it's historically traded at a high multiple. and then when we see the actual earnings, it turns out the multiple wasn't that high when it was there. that's one way. the second way is to do a rule of 40, which is to say, okay, i want to know what the growth rate is, revenue growth rate. and i also want to know what the margin is. add them together. if it's over 40 then it's a caper. okay. and that's important because what you're trying to do is figure out whether gross margins are good and revenue is good, because that can give you a clue about what's going to happen down the road. our next question comes from tim in alabama, who asks how to decide whether to take a point, take profit rather than keep a stock longer to receive capital gains tax. okay. this is unfortunately, this is more of a tax advisor question, i find, because i run a charitable trust and i don't run my own money. i can't own stocks. i'm a little oblivious to this. it's just not my world. so i'm going to have to defer to you and your tax person because

everybody's different. all right. look. oh, man, i love the course. as you can tell, i get kind of fired up. don't forget that stuck in the mud. that is often a mistake that people may make. and it drives me crazy i like. so there's always a bull market somewhere. i promise you. i find it just for you right here on mad money i'm jim here on mad money i'm jim cramer, and i'll narrator: tonight on "shark tank"... powell: bunch bikes is sharing the joy of family biking across the country. what would happen if you pulled back the curtain? [ screams ] who wants to milk this deal for all it's worth? you have sales out the wazoo, right? $600 worth. -wow. -oh. that right there is a necessity for the family. the problem for me is it's not your product. corcoran: i'll give you a very greedy offer. i want 40%. john: oh! this product howls at the moon. that breaks their spirit. i'm gonna give you $2 million. -whoa! -oh! -wow! lori, do you have...? are you crazy? what are you doing? i love this stuff. welcome to "shark tank." -- captions by vitac -- ♪♪