we're going to have some answers for you. >> that's a rude way to end our holiday weekend. we're going to see you back here on tuesday. you guys, have a great day. we'll see you. >> bye-bye. >> oh, that does look good. i'm jim cramer, and welcome to my world. >> you need to get in the game! >> firms are going to go out of business, and he's nuts! they're nuts! they know nothing! >> i always like to say there's a bull market somewhere. >> "mad money." you can't afford to miss it. >> hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. just trying to make a little money. my job is not just to entertain but to educate and coach. call me at 1-800-743-cnbc. tonight's show is devoted to helping you, cramericans avoid some of the most common and money-losing mistakes that investors continue to make! and recognizing misinformation when you see it. the best way to do this is with

discipline. and tonight i'm laying out these rules. to help make money in what can be an incredibly bewildering, confusing, and even infuriating, certainly irritating market. you follow my rules, you should be able to recognize an opportunity when you see it. and to manage to avoid losing money when you don't have to. no matter what the circumstances. including a collapsing euro or a slowing in china. or even skyrocketing oil prices. let's get down to business. here's the first one. i don't want you digging in your heels anymore when you're wrong. or if the immortal words of the late great economist and equally accomplished investor john maynard keynes, when the facts change i change my mind. what do you do, sir? one of the easiest mistakes to make. and i know this. why? because i've done it countless times myself. i refuse to change my stripes after the facts are in and i've been proven wrong. it's natural to dig in your

heels and refuse to change your mind when you think you're right but the market's going against you. it's also a quick and easy way to lose money. yet mad mailers and particularly twitter followers @jimcramer refuse to believe this principle. i have been blasted into reality over and over and over again whenever i've dug in my heels on either side. you are always angry when you get run over, and you're always willing to take it out on the people who are on the other side, the ones who got it right. the fact that i am about it -- i am open about this whole process and that i actually read the angry e-mails, oh, boy, and those tweets, and i engage with people, sometimes in a cranky way, has helped me to learn stories and learn how to invest better. but it has also been an exercise in pain. >> the house of pain! >> and when the e-mails and tweets are the most hurtful, that's when i know i'm the most right. for example, i got an incredibly heavy volume of hate mail after the market bottomed

ahh! pretty close to bottom. i came out side the downside was minimal. i came out said you had to start buying. i didn't say it was done, it was minimal. i had put together the doomsday scenario, a model where i thought the market would go in case the worst was at hand, including not a great recession but honest to goodness depression. bottoms up, i tallied all of the members of the dow jones average and presumed every single financial would go to zero including bank of america, general electric, yep, people consider this a financial because of its capital division even though is shrunk, citigroup and morgan. on top of that i took into account caterpillar and gm and added in alcoa, all dire assumptions to say the least. even under the ghastly conditions i still couldn't see a low that took us down significantly from where prices already were.

from the moment i made that call there were people telling me i was crazy and i had no idea what i was talking about. [ boos ] but a month later with the do you 1500 points higher, these people were still there, still sending me e-mails more impassioned and claiming that it was still too soon to tell. told me i lost my rigor, that i lost -- i was no longer with the hedge fund so i didn't know what i was doing. if you find yourself making that argument, you know what you're doing there, digging in your heels and you should be changing your mind. this is something that's hard for the most emotional investors and traders out there to come to terms with. i know. it's also crucial if you want to be a better investor than you are. people do this all the time with stocks. we would never allow ourselves to make the same argument about sports. let me use an analogy to drive this point on. would you claim that your favorite basketball team still had a chance of coming back from behind to win an hour after the game ended?

what about a week? how about a month? of course not. if anyone did that they'd think you're insane. i'm just urging you to apply the same level of rigor to stocks that you would to sports. the facts are always changing and at some point you need to acknowledge the game is over and that you were wrong. i'm not trying to be glib about this. it's part of the emotional side of investing while difficult to measure is just as important as the intellectual side. it's tough to come out, most people are embarrassed by this stuff. swallowing your pride is never easy but the more time you spend digging in your heels the less you have to take advantage of the new situation and profit from it. how can you know for sure that it's time to say game over, if you find yourself feeling the need to come up with more and more excuses and reasons why things will go your way, then it's probably a good time for you to instead start pondering why they haven't. remember you got this huge edge. i got this national tv show

calling the market's direction five days a week. i try. it's easy to say just you wait and see, and not to eat any crow or admit defeat. focus on the potential profits and not your ego and also i'm not a politician either. see they can't change their mind without ridicule. if i don't change my mind i lose money. here's the bottom line, when the facts are in and you've been proven wrong, don't dig in your heels. simply change your mind. ray in georgia, ray. >> caller: yes, sir. >> yo, yo, what's up, ray? >> caller: i got a quick question on the stops. i think i heard you one time say you didn't like to use stops, and i just trying to figure for us home gamers how do you protect yourself if you don't use stops or stops with limits? what do you think? >> okay, first think about the flash crash, okay? you're stopped out at some horrible price, who knows what you got and then the market

comes right back, you got hurt. more importantly, what are you doing here? come on, this is real money. you got to stay close to your money. you're putting it in some machine's hand when do you that. i want you to be able to say hey, how is the market doing? i want to stay close to it. i don't want to go on autopilot. put the stop losses in is autopilot. stick with the facts, figure out whether it's a buy, not a sell and stop bailing out when the fundamentals may not have changed. skip? new jersey, skip. >> caller: hi, jim, i'm from avalon, a big boo-yah to you. >> skip i'm around the block from you in the summer. what's going on? >> caller: jim, are mlcs, matter limited partnerships an appropriate investment for i.r.a. retirement accounts? >> there are -- here's where i hardly ever do this, you have to forgive me but you have got to speak to your captain for this, because there is a penalty that can be paid if you have too much income coming from these in your i.r.a. you need to speak to your accounting professional because you do not want to run afoul of

that penalty. to anup in california. >> caller: hi, jim, boo-yah to you. >> how about you, how are you? >> caller: good. listen you mentioned in previous episodes that it's valuable to track a group of fundamentally good stocks and buy when prices down. >> right. >> caller: much like you might scope out a fancy watch at macy's and buy during the after-christmas sale. >> it's all working. >> caller: in charting the inflation adjusted price to -- price to earnings per share ratio for equity, would it help to more appropriately time a purchase? secondly, with tracking the inflation adjusted price the cash flow ratio be a better metric due to earnings? >> we don't have a lot of inflation. i totally like this idea. that is truly rigorous. however in the end what's going to tell you whether to buy or not is if the market takes a stock down, not the company's fundamentals but the

fundamentals are in intact, particularly if it pulls back 5%. that's when i want to you strike. don't be stubborn when it comes to your money in this market. when the facts change i'm urging you, don't dig in your heels. have some discipline. change your mind. "mad money" will be right back. >> miss out on some "mad money"? get your "mad money" text alert today. text "mm" to 26221. to get cramer on your phone. for more, visit

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me money for college. kids calling in saying boo-yah! welcome back to this disciplinary edition of "mad money." i'm not talking discipline as in crime and punishment or the cat and nine tails. i mean investing disciplines, rules that can help you sidestep losses and help you try to make money in incredibly befuddling stock market like this one. the one i developed based on 31 years of investing insights is among the most important and that is that price matters, and i know seems obvious but bear with me. i know it's anything but. price matters so much, it means you can buy the stocks of companies you don't like. that's right. ones you don't even like, provided they go low enough. for the right price even inferior merchandise is worth buying as long as it's not deteriorating. some of the best come from holding the nose and buying the

stocks of companies you never imagined wanting to own in the first place, just because they've become so darned cheap. now i will never endorse a stock when i think the fundamentals of the underlying company are deteriorating and i won't go near anything that could be headed toward bankruptcy because of a hard balance sheet. you need to always look at the balance sheet. but there's a whole lot of space between a best of breed company and one that's uninvestable. okay this is really important. the normal circumstances the stocks of the lowliest companies that still pass the smell test sell for much more than i'd be willing to pay for them usually because there are hopeful investors speculating unwisely and buying barely adequate merchandise because it appears cheap when it's in fact selling for the appropriate discount. however if the price drops far enough then it's perfectly okay to buy a stock when you merely have a low opinion of the underlying company. that's how much price matters.

i get enormous vibes, hate mail and vicious tweets on this subject, normally when i recommend selling a company that i say previously i liked. cramer, how can you not like it now? it's really hot. just as companies become too expensive, there are levels where worst companies are cheap enough to be worth buying even companies i've slammed at a high price. worst of breed is different than worst. a worst of breed may not look like much but at least it can get you to the dog show. [ barking ] how do you know when the price is right on something you wouldn't otherwise buy? obviously there's a sliding scale. the better the company the more you should be willing to pay for it. if you're speculating it's worth looking for companies left for dead, even though they still have a perfectly strong pulse on closer inspection. there's no price you should be willing to pay for a company

that could potentially go under, never, never, never. if you're truly convinced bankruptcy isn't on the table and the street has it wrong, buying an unattractive company at an attractive price can make a whole lot of sense. think of this, at the end of -- the bottom of the barrel, at the end of 2011, the regional banks, they began to break away from the international banks that were hostage to europe. i had disliked these banks, like u.s. bank corps and wells fargo. i had to warm up to them because employment was coming back, housing market was getting better. i held my nose and told to you buy it even though i said i don't like the bank group. it worked, even though i was blasted for flip-flopping, i'd leave the show, go to twitter @jim cramer and there it was, "hey, i thought you hated the banks." at certain prices can't hate. it's harder to find situations something that doesn't interest you suddenly becomes worth buying because there aren't many times when a half way decent stock will get hit that hard. here is a great way to make some money, doesn't take much effort in an environment where so many try to raise capital through

secondaries. i'm finding this right now some of the european situations. you can often find great deals on merchandise that you never would have looked at once, let alone twice. these deals happen all the time. and i try to get you attuned to them on the show so you can pounce when they come up. just in terms of price, on the same day, one day, may 13th of 2009, i'll never forget this because it was one of the great opportunity days i've ever seen. both ford and bb&t, a southern regional bank that had a lot of loans on its book, i thought it looked like a survivor, not think had rifer, sold stock at radically discounted prices. ford secondary priced at a 5% discount to the previous day's close and 24% discount to the previous weeks and bb&t sold 10% to the previous close and 27% discount the week before.

before bb&t got the deal done the market was softened so the price was able to spring back after the secondary, that plus the company is worth more than before because the solvency was no longer in doubt made the second offering a steal. both deals immediately made you money even if you had no prior interest in either ford or bb&t and thought they were mediocre at best. at discounts that steep both stocks changes my mind. those are great buys. keep your eyes on the price. even less than stellar companies can turn out to be big winners if you get a chance to buy them low enough. the old example of this worst of breed buying opportunity came at the bottom of 2008 with amd, a stock that i have hated almost since the beginning of the show. i hated it for 22 years, when jerry sanders ran it in the '80s and '90s. when it took two bucks, and after its graphic chip division

began to take share from market leaders like intel and nvidia the opportunity was too great. i called this one a hold your nose and buy situation. if you listened to me you could have caught a double in a matter of months. the trade was made, the money booked and by the way here's a little insight. they don't ask you how you made it when you deposit at the bank. just as some fixer-uppers have a price you wouldn't want to pay in another time, stocks can get so cheap that they become diamonds, rough diamonds, but diamonds nonetheless. stay with cramer. [ jim koch ] what do fresh flowers, bourbon barrels,

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♪ that's all right because i love the way you love, i love the way you lie ♪ tonight's show is all about helping you better understand the new stock market environment and teach you how to analyze stocks so you know when they're

telling the truth, and you know when you're being misled. how can stocks inanimate pieces of paper but honest or misleading? they can't but the companies behind them can, which brings us to the subject of my next rule. don't take your cue from an inferior company. [ roaring ] when someone says things are bad for the industry -- >> the house of pain. >> -- i don't want to you take it on anymore. they seek to pin their failings on the entire industry. that's what they do. believe them at their own peril. and dell says things are bad and intel says they aren't, you shouldn't still stocks based on that. they're competitors and suppliers. you shouldn't sell apple and ibm which have little to do with dell and intel other than the fact they're all considered tech. let's be honest, you will never

hear a company say we're doing poorly because our competitors have better execution, grabbing our market share and generally eating our lunch. no ceo in his right mind is going to come out on the conference call, saying the fault is not in ourselves but in our stars. the guy would get fired in an instant. shareholders don't respond well to that level of honesty. if an intel or dell tells you their shoddy results were caused by an equally shoddy environment, the odds are good you won't hear the same story from their stronger competitors. bad news for hewlett-packard can sometimes only be bad news for hewlett-packard. if they tell you it's raining the odds are good when you hear from apple or ibm they'll likely tell you it must only be raining on hewlett-packard's side of the street. kohl's, only raining on their side of the street versus macy's. sometimes there just isn't any pin action which is why i keep my pin sounds. you can't extrapolate from one company's results to the rest of

the industry and that's most frequently the case when that company is one of the newsers. [ boos ] it happens in every industry, not just tech stocks that hide behind the sector when the ball drops. we saw with avon, when its business folded even as direct sellers herbal life and tupperware flourished they were talking about the business life. we procter & gamble claimed the world was rebelling from high priced products when colgate was running circling around them. wendy's lamenting the consumer can't afford a hamburger today, but it apparently it could tomorrow when mcdonald's was selling them by the millions. costco stole food shoppers way from traditional supermarkets. the bottom line when a company with a bad track record blames its performance on a tough

environment it's probably just making excuses not telling you something that applies to its stronger competitors which are likely running circles around it. don't believe the hype. patrick in arizona, patrick. let's go to della in california to start. >> caller: yes, boo-yah, jim. >> boo-yah. >> caller: thank you for helping my husband and i with investing. would reinstating the uptick rule help stop the volatility of the market? >> quite simply i think the answer is yet but the institutions are far more powerful than the little guys and the institutions want to see quick trading because the fees are good for the companies that trade and also because you know what, these guys want to short with impunity. i think that the markets are created to be able to raise capital and places to invest for regular people and they've been driven out by this and that makes it so the market can go up and down quickly because the

little guy doesn't trade like that. only the hedge funds do and they need to see the uptick rule staying away from the market. they liked it abolished. i didn't. patrick in arizona? >> caller: hi jim. >> hi, what's what? >> caller: let's talk about diversification. >> sure. >> caller: i understand three factor, sectors, industry and classes. can you tell us about which of the most important which ones are the least important that we should use in making the diversified portfolio? >> well, what i like to do is i use the s&p groupings, for instance the financials are 15%, 16%, 17, takes care of the group, banks, insurers, techs save 15%, that's hardware, software, industrials, companies that are cyclical in nature, another one, obviously the health care drugs, the foods. i like to use the s&p groups. those are the ones that make it so that i can say point blank this is diversified from that group. sweet little lies?

♪ tell my lies, tell me sweet little lies ♪ when a company blames a tough environment it's an excuse for you to not buy. stay away, but stay with cramer.

>> let's go to kentucky. disciplines that can make knew a great investor. this is a market that's full of misdirection just like what you see on the football right, they fake this way, they go that way. if you trust what the people in television are saying you're going to get burned. this next rule to paraphrase friend buddy pal public enemy is all about helping you to not believe the hype. not all upside surprises are worth getting excited about. whenever a company reports quarterly results and earnings per share are higher than what the analysts on wall street who research the company for a living had on expected and upside surprise, simple, put it

in the headline, stocks are supposed to go up when the underlying companies they're attached to deliver higher earnings than anyone expected. what the headlines call an upside surprise and what truly impresses the professionals in the quarter are often two different things. this distinction can get confusing because sometimes when a company reports an upside surprise for the wrong reasons its stock will actually go down. when we buy shares at a company we care about, what it will earn in the future, not what it's earned in the past is what matters. no, i'm talking about a different kind of confusion, i'm talking about the confusion results from the headline writers not drawing a serious distinction, they can't in the headline, serious distinction between a hide quality upside surprise a real one and a low

quality illusory almost sleight of hand surprise. we like the low quality sleight of hand upside surprise doesn't attract much interest. how do you tell the difference? remember this word, once organic, the other word is manufactured. a real better than expected quarter is generated about i higher than expected sales, organic, which then leads to better than expected earnings per share. stronger sales could mean a few different things but they're all good. you can see the industry is improving, more people overall are buying the company's product or the company is taking market share from its competitors or growth coming from an entirely new business. a real surprise tells you the environment improved or the company improved. since both indicate it should be able to grow its sales and earnings at a faster clip in the future and that's the reason to buy as the big boys on wall street value stocks based on growth, revenue. it's rare for a stock to go down with this high quality sales updriven surprise.

even in the depths of our garden variety great depression i'll call it great recession, these stories advance. as you can see by looking back at apple's phenomenal run produced upside after upside, almost entirely on better than expected sales of the iphone, and the ipod and then the ipad. oh, and of course, as we preached incessantly on "mad money" a high qualities earnings beat can often be accompanied by a dividend increase, particularly one of a great magnitude. hey that's a terrific tale of the future. perhaps the best of all because once a dividend is increased it is not easily cut without tremendous embarrassment, much better than the announcement of a buyback which can be chimera. a low quality earnings beat is based purely on a better bottom line, the earnings per share and the top line. here the upside surprise is generated not by improved business but because management cut costs. they cut the head count, maybe

they manipulated the tax rate through that aggressive or legal accounting treatment or again maybe they bought back stock. [ boos ] the latter is now regarded as total illusory by the smart professionals even though a lot of people are fooled by it. as the increased earnings per share indicate a smaller share cap and no the that the profits were better than what the companies are looking for. the drug companies i'm calling a sleight of hand style of surprise and that's where they can't manage the real thing. they don't have real growth. this is the dirty little secret. the reason the big boys don't care about the so-called upside surprises any large enough company with a half way competent management and good cfo in a predictable line of

business can almost ensure the earnings per share beat the street's expectations as long as the quarter isn't a bad one. the food and drug makers fire people or use buybacks to generate earnings per share or they choose to repatriate as much profit from the far markets, it is at their discretion and that's how they beat the estimates. it doesn't indicate that things are in a way better. it just tells you that management is shrewd enough when it comes to making sure its earnings per share number doesn't disappoint anyone. if creating the upside is that routine, well i got to tell you something, believe me, it's not a surprise to the big boys. bottom line, now you can tell what the big boys at the wall street fashion show want to see in a quarter and you won't make the confused assumption as the press often does that the headline earnings per share number is all that matters. company's ability to deliver better than expected sales which turns into a better bottom line accounts for a whole lot more. i need to start with ron in north carolina. >> caller: good evening, jim. thank you for taking my call.

>> absolutely, what's on your mind? >> caller: boo-yah. >> boo-yah. >> caller: i have a question, sir, the multiple ipos some companies are issuing, does that diminish the common stock price? >> the ipo sets the common stock price, you mean the secondary? >> caller: yes. >> secondary can depress because the stock will shoot up and then what the brokers do is soften it. they say it could be a secondary and a secondary and the stock trades down, down, down and boom they slap it on and often-times a buy of a lifetime. i often like to buy secondaries after the market's been softened. think of it like omaha beach they soften it up with gun powder and the navy and soften it up with aircraft and then they send the soldiers in and that's a buy. vincent in colorado, please. >> caller: hi, jim, uhm, i'm wondering, i'm a business and economics student here at the university of denver in tebow-land and i'm wondering if brazil's markets say strong and the yuan, because of the middle

class there should be a way to take advantage of it, i would be surprised if they switch from exports instead of the internal market. if that's true what are the best picks? who are the firms that are flexible enough to take advantage of the new middle class? >> how about the cpfl energia? utility companies were when our country was growing. that makes sense. i would recommend a bank stock but those are a little bit dicier. i think a utility is probably the best way to go. let's go to joe in arizona, please, joe. >> caller: hi, jim, a big desert boo-yah to you. >> yeah. >> caller: i'm a philadelphia born and bred guy living in tucson. >> lucky for you, you got without because we don't have any teams that are winning. what's up? >> caller: i know. thank you last year for recommending us home gamers to switch from high quality stock to gamers and it felt a lot better in this crazy time to make money.

>> particularly the september/october period when we didn't get hit much at all with our strategies. >> caller: great stocks. my question is in calculating the peg ratio from getting back to even, how do you calculate the growth rate, is it simply current year divided by prior year? >> yeah, well i like future year estimates -- you know i look into step function, last year, this year and next year, and it's between this year and next year that i care most about and what i do, frankly, i honestly use the street estimates to calculate what the peg ratio is. a couple of stocks line apple over the last couple of years i'm satisfied using street estimates as the way to go. i urge you don't believe the hype. check the sales before to make sure it's a real and not a manufactured surprise. stay with cramer. what if you had up to 28 days of beautiful ?

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one of the most natural misleading mistakes most people make is to assume the people on tv criticizing the market are knocking it, telling you to sell or avoid stocks have to be telling the truth. wrong! don't assume that commentators dislike the market are any more honest or less self-interested than those who talk up the market or talk up individual stocks. whenever we hear someone touting a stock on television we instantly accept the idea they

own it and treat everything with healthy dose of skepticism and suspicion. at least we have learned that much, after the viciously volatile last decade in the market. we hardly ever reserve that level of skepticism for people who bad mutt the market. more often than not investor also assume that people who criticize the market either don't have an agenda or must not be pushing one. they got to be the right guys, right? they're at the -- they've got the ethic. to most people expressing a negative view in the market is a way of automatic bolstering credibility. to me as someone who brought in half the profits at my old hedge funds by shorting stocks, that's right, betting against stocks this attitude is totally surreal. people who criticize the market on television in print or the web are not necessarily trying to help you. >> sell, sell, sell. >> when someone says they hate the entire market how often do you think, wait a second, this person might be shorting the

market or underinvested and hoping to knock stocks down in order to buy them at a lower price. see it's easy to recognize that many investors need stocks to go higher but perhaps because the idea of shorting stocks is less familiar to many home gamers it's much less common to make the connection that some people need markets down. some people need markets to go lower in order to outperform their averages. in fact in my professional opinion there's probably more chicanery and dishonesty in the media than the laws. that's right. you have to remember there are people out there who want to push prices down every bit as much as the talent who want to drive them. i'm not sanctifying -- both sides can be misleading, they can be doing rigorous work and pressing their truce when it is most convenient. meaning when it's shortest going against them.

the other issue is that while the money managers come on television have to disclose their positions in any stock they talk about, they never have to tell you hey, i'm underinvested so i'm lag the benchmarks, getting left in the dust by my competitors so it's vital to knock the market down to give myself a decent entry point. if they don't own anything and aren't short anything there's nothing to disclose but they might have an interest in knocking stocks lower because of how they're positioned! you just, you're just never going to hear about it and believe me at any given time there are plenty of people in the industry who benefit from a broad stock market decline and be more happy to go on television and make the case decline is going to happen and encourage you to get out while you still can. >> sell, sell, sell! >> as the bull market gets going the net funds on short, on the whole, betting on stocks to go down or underinvested, they have much less in stock and much more in cash are now underperforming and they are becoming more and

more desperate. money managers left behind in the market start to feel like corner rats getting ready to be butchered by a feral feline. a lot of hedge funds can't afford one year of underperformance. i was in this business for 14 years. i know it. no one else comes on this show, it takes building up good will with your clients. you want to explain how you barely made any money at a time when stocks were soaring and you have to be careful because when stocks are the strongest many of of the hedge fund managers, the ones with the fewest scruples will happily plant negative stories in the press and try to take advantage of the media to spread as much negativity as possible to get stocks down so they can buy or because their shorts need to be able to work for them. so a lot of this in 2008 and 2009, i wish this wasn't the case. it would be wonderful if we lived in a world where everyone

was honest and no one ever tried to manipulate the market. since that's not the world we live in the best way i know how to protect you from this chicanery is shining a light on it and making sure you know what to watch out for. bottom line remember to always be on your guard because the people bad mouthing the market aren't one bit more altruistic or honest than the people who come on tv shows and tout stocks also for their own benefit. "mad money" is back after the break. lysol knows a real clean isn't just something you see. it's something you smell.

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let's catch up with some mad mail and do some mad tweets. this one from bhi15. jim you mentioned tracking the stocks with 52-week highs and buying them with pull-backs. what are the exceptions? i got this idea running research with goldman sachs. he said try to buy stocks back 5% to 8% on pullback typically because of the market going down, not because of the fundamentals in the stock. not a lot of stocks own the highs but as long as they're going down not because of the fundamentals but because of the market you might have a good buy. some stocks pullback because

they've run up too much but remember i really and truly want you to be sure the easy way to be sure the market that brought it down not the stock itself with the press release or analyst downgrade. "are dividend stocks a crowded trade?" this drives me crazy. jeremy siegel one of the greatest investors ever, professor wharton, he's done multiple years study, 10, 20, 30, years study and it's 50% of the stock price increase. it's only people who trade and trade ridiculously and high frequency, these are the people worried about this nonsense. okay? they are the ones who are trying to gain short term trades. i don't want you doing that. buy the dividend. if you reinvested those dividends you got an 8% return.

how could that be considered crowded? how about smart. okay, here's a mad mail. "boo-yah cramer" from jerry in rhode island. "i've always had trouble selling a stock. if they go up past the strike price it takes the decision out of my hands. yeah i know it limits the upside but i like the automatic nation. am i crazy?" yes you are. any strategy that cuts up your upside but does not limit your downside is a stupid strategy. i say no, if something great happens to your stock you wouldn't have bought it unless something great was going to happen you might not be able to participate. if something bad happens you're short the call, can't take action, afraid of a takeover. i got to tell you i know very smart people who sell cover calls.

it is a sucker strategy to me. i buy stocks because it's good to go higher. i don't want to cap my upside when i do. here is one from schultz in arizona. "jim, how much gold should i hold as a percent of my portfolio?" since i started the show, 10% and 20% should be your benchmark. when gold threw up to $1800 in 2011 i fell what let it pull back and you can sell some but you got to keep that core position. why? because i don't regard gold as a stock. i regard it as a currency. it's an alternative currency to the printing currency that we have in the united states and they have in europe. i got to tell you, i trust gold, i don't trust paper. that's why between 10% and 20% makes sense. here's one, "i am a new investor and afraid i won't pick the right stocks. what should i be looking for?" first one speculative out of every five and two out of ten. the speculation keeps us interested and makes us pay

attention but it can be dangerous. i like to speculate in biotech, that is my chief one, i try to hone biotech companies with more than one drug so if they possibly have a failure, you're still in the game. those have been the most fruitful. check some of the big winners like even a company like orangeneron started in 2005 and a monster run through since the show began, that's the speculative biotech stock i look for. one from sharon in maryland. "jim, thanks for a great show. following your strategies i have moved most of my holdings into high yielding stocks and mlps. the stock prices weren't so high i'd be inclined to reinvest in the winners." this may sound glib but i don't mean to. when the high yielders are no

longer high yielding you want to sell them, trim them back and when the market brings them down you buy them. that was the strategy we used in 2009, 2010 and 2011 and it worked and those were some of the roughest years ever. believe me it will work in the future. thank you sharon, thank you tweeters, thank you e-mailers, stick with cramer. how much coffee are you fellows going to need today? three...four cups? [dumbfounded] well, we... doesn't last long does it? listen. 5-hour energy lasts a whole lot of hours. so you can get a lot done without refills.

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you just got a dose of discipline that i think is going to save and make you a lot of money.