← Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer 8/1/25
00:44:26
Listen to Jim Cramer’s personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind - to help you make money. Mad Money Disclaimer
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- [00:00]
Keith Lansford
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update. Wherever you get your podcasts.
- [00:32]
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- [01:25]
Jim Cramer
Hey, I'm Kramer. Welcome to Met Money. Welcome to Crane Mark. I'll do my friends. I'm just trying to make you a little money. My job is not just entertain, but to educate. To teach you. Call me 1-800-73- CNBC tweet Mitch Mcim Kramer now we're still in earnings Hades, but at least it's getting a little cooler out there. That's right, we've now gotten over the hump of the big time growth stocks, the hyperscalers, but there's plenty left. Why don't we do this? Let's go right to the game plan. First we get the usual caveats. We will get a breakthrough in the trade talks with China this weekend. I don't know. Will we hear anything about Canada? I hope so. Anything change now that Mexico's gotten another 90 day reprieve? Everything's on the table as usual. Saturday morning we get results from Berkshire Hathaway. It's going to be a little different this year with Greg Ebel running the place. We're hearing some grumblings of late about the performance of the stock, to which I say, are you kidding me? Warren Buffett's about to retire CEO. Of course the stock's not going to do as well as it used to, but even with Buffett taking a step back, we can still care about Berkshire with a the company with its amazing properties, by the way, including Burlington Northern, the railroad. And if the conglomerate has a good quarter, the stock's going to run. So let's just back down a little bit from the negative. After the close Monday we hear from the most controversial stock in the entire market and that's Palantir Technologies, the AI fueled Software companies become one of the hottest stocks there is with an almost cult like shareholder base led by the Messianics CEO Alex Karp. I predict a total blowout that will smoke the shorts because Carp still getting a ton of business and repeat business from everything from super packaged goods to the federal government is growing like a weed. Tuesday morning we get results from DuPont which we own for the travel trust and we see if that break up this company is on track. We think DuPont is dramatically undervalued but we feel very lonely. This one that doesn't bother me because I think the bull case here is very straightforward. The parks are worth dramatically more than the whole which makes this an ideal breakup story. Companies that announced breakups like dupont enter another investing club named Honeywell fall into this kind of purgatory funk while the parts are being divvied up. So they require patience. But I bet you'll be rewarded. The once erratic Caterpillar has now become a smooth secular grower thanks to former CEO now chairman Jim Appleby. We used to think the cap was impossible gain. Now I'm telling you I think it'll print one more good quarter as it rides the tailwinds of infrastructure spending reshoring in this country. I like it. There's another one that I'm not so sure of reporting at the same time though, Pfizer. We need to see some really dramatic results here from the clinical trials like the ones that Pfizer picked up when they bought the C gen at the end of 2023. It's enough time to see more than we've seen already. I got to tell you that. And they better hurry up because the shareholder base get very restive and who knows what the president has up against sleeve against this industry. We also get numbers from the always reliable Marriott. Now I do want to point out that when this great hotel year reports its stock often goes down even if the numbers are good. Usually though that's a buying opportunity. But let's wait until the day after before we pull the trigger. On Wednesday morning we hear from a couple of iconic companies reporting that I like Disney and McDonald's. Now the former has just. Well I got to say it's moved up very nicely but it's starting to get back some of those gains. I think Disney plus will be good old fashioned TV led by sports got a little better than theme parks. Continue to hum, start paying attention to cruises. They will make a ton of Money. As for McDonald's, the stock has been out of sync with McDonald's. The company which has gotten a lot better lately with some new offerings, limited ones. I think it's a buy. After we close, we had two more companies I like very much and I bet they'll give us good numbers and that's Dutch Bros. And Elf Beauty. These two renegades, young companies that have disrupted the coffee and cosmetic business. Wow, they got a lot of room to grow and take share. And that's exactly what they're going to do. Again, good stocks Thursday. We're waiting for the numbers from club name Eli Lilly with bated breath frankly, because of the horrendous numbers from their only real GLP1 competitor, Novo Nordisk. We don't know if that's happening because Lilly's taking share from the poorly run Novo or if companies are seeing a peak in these revolutionary weight loss drugs. My presumption is that it could be a little bit of both. I'm concerned that they might be a little diluted because Novo cut prices on WeGovy pretty substantially now. We sold a little this week for the travel trust I used gain. Give me a break. You can follow what we're doing by joining the CBC investing club. May I suggest you do so next? I want to hear from Warner Brothers Discovery in the morning because CEO David Zaslav has been doing a lot to reorganize the company and pay down debt. This stock's been moving up as we're getting more facts about the impending breakup and the balance sheet improves. Thursday night we'll find out more about the deal that the US Government is made with MP Materials. That's that rare earth minerals company. As it reports, there's plenty more to learn and I think it'll all be positive because the White House doesn't want to be hostage to China for these important materials. Don't forget Apple's in there too, buying recycled minerals. We want to. We went to see Wynn Resorts earlier this year and I thought the story was a great one. I buy, by the way. I really like the wireless too, if you get in there. So tough ticket win originally wasn't so great, but you know what? I talked it up too early, but now it's really starting to climb. I'm feeling better about it. What else? I believe the Pinterest reported number that puts it in the elite online advertising formats or with, by the way, Reddit. Now if we're talking social media sites to advertise on, Pinterest is by far the most family friendly. And while the market is not as big as it used to be, it still counts. Finally, on Friday, we hear from the bedraggled Wendy's. Now, last time we got weak numbers and a dividend cut. Could it get worse? I got to tell you, the competition in that business is so rife, I don't, I can't guarantee any numbers from that company. So here's the bottom line. There you have it. Not a big week. But then again, what could have been bigger than this week? And I know about you, but I'm exhausted. So can I suggest you just stay with Kramer?
- [07:08]
Keith Lansford
Don't miss a second of Mad Money. Follow imkramer on X. Have a question? Tweet Kramer Madmentions. Send Jim an email to madmoneynbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.
- [07:31]
Jim Cramer
Booyah for the Emperor of Cramerica, Honorable James J. Kramer. Me jumping around my office right now. Thank you so much for all you do for us. I enjoy your show and I find it very entertaining and informative. I watched your first ever episode of Mad money back in 2005, and I've been watching every single episode ever since.
- [07:50]
Keith Lansford
Don't miss Mad Money every night at 6pm Eastern. Plus, join the CNBC investing Club and stick with Kramer around the clock.
- [08:01]
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- [08:18]
Keith Lansford
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- [08:25]
Jeff Marks
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- [08:27]
Jim Cramer
Building your personal brand.
- [08:28]
Keith Lansford
Register now@cnbcmakeit.com Personal Brand.
- [08:38]
Jim Cramer
I am constantly on this show telling you that discipline always trumps conviction. I tell it to you over and over and over again. In other words, no matter how much you may love a stock, no matter how enthralled you are with the underlying story, if the rules say sell, sell, sell, sell, you sell it. One thing I've learned from my investing career, no matter how much you might believe in something, you violate the rules of the road at your own peril. That's why we obey them religiously with the chatt and they become our core guide for the CNBC Investing Club, which I want you to be in. But where the heck do these rules come from? It's not like they were handed down from on high and carved into stone tablets. Hey, they're not the lowest five commanders for the history of the World, part one. They're not like the laws of physics. You can't just deduce them from observing the way markets works. That you can. You can do, say, gravity. No, the rules come from my experience. That's right, from my experience. I spent over 40 years in this business, and in that time, you better believe I've learned some powerful lessons. In many cases, I did have to learn them the hard way. And because I don't want you to repeat my mistakes, because I want you to have the benefit of my whole career. Tonight I'm going to lay out some of the most important rules for investing. And they are indeed timeless. Some of this stuff may seem basic, but again, you forget the rules at your own peril. Back in my old hedge fund, I occasionally convinced myself that it was okay to make an exception. To have a cheat day, so to speak, to. To ignore my discipline just this once. For some reason, this seemed compelling at the time. And whenever I broke my own rules, I almost always got burned. It's like that old joke about the doctor. The guy who goes to the doctor and he says, hey, doc, Doc, listen to me. It hurts when I stretch out and shake my hand around. To which the doctor blushes. Don't do that anymore. So. So what exactly should you be doing? Or not doing, as the case may be. All right, let's tick down my most important rules for investors. We're going to start with the first one, which is. Bulls make money, bears make money. Pigs, well, they get slaughtered. Look, I say this all the time because that's. Because so often in my business, I see moments where stocks went up and up and up so much that people were intoxicated with their gains and thought they were geniuses. However, it's precisely at that point of intoxication that you need to regulate. Remind yourself that you don't want to act like a pig. I first heard this phrase in the old trading desk. Legendary Steinhardt Partners, an amazing old hedge fund. I've been having a big run. Some stock in the brilliant Michael Start would tell me that I'd made a lot of money, perhaps too much money. And maybe I was being a. I had no idea he was talking about how do you make too much money? I was just grateful I caught a major gain. Of course, not that long ago, not get that long after we got a vicious sell off and I gave back everything I made and then some. And that's when I enshrined the bulls make money, bears make money, pigs get slaughtered. Thesis is one of my own rules and it's now so deeply ingrained that I got a barnyard full of sound effect buttons to tell the whole story. The bull, the bear, the pig, and of course the gid. Just to be clear, bull's don't have monopoly on piggyness. The same idea applies to investors who press their bets too shortly, too aggressively. On the short side, we've had some major declines over the years. But other than the dot com bust in 2000 and the financial crisis 2008, 2009, most stocks bounced back pretty darn quickly. Even in the Fed induced meltdown that started the end of 2021, you had to turn positive by the fall of 2022, because if you pushed your luck by staying short too long, you got sent to the slaughterhouse. So the question is, how do you know when you yourself are being a pig? Look, allegedly there's no such thing as stupid questions, only stupid answers. But honestly, you really don't need me to tell when you're being a pig. The NASDAQ more than doubled from March of 2020 to November of 2021. If you didn't feel greedy up there, you didn't need an investment advice, you need a psychiatrist. If it's a profits, you sidestep the huge decline if you let your winners ride. But you gave a lot, if not all the money back. Financial crisis was even more stark. Stark if you were walking around owning a huge amount of stock in 2008 as the bank started dropping flies, well you were beyond biggish. Why is this rule so important? Simple. One of my chief goals is to help you stay in the game. That's the hardest part of investing is holding on through the difficult periods, taking short term pain so you can have long term gains. Which is what's happened to stock market for a century. The people got wiped out in 2022 or the dotcom collapse. Before they tended to be the ones who never took anything off the table. They never felt greedy and their piggishness, well they never felt it. And so they got slaughtered. Being cautious and ringing the register near the top ended up keeping the drip. No, he said near because look, catching the old bit top is just so impossible. Just catching you the top, that's great. That's why I remind people every day, have you taken any profits? Have you booked anything? Why are you being a pig? Because you never know when the stocks you own are going to crash. You never Know when the market could be wiped out. You can't have certainty. Stock market doesn't let you have certainty. If you assume stocks will keep going up forever in a straight line, well, you are in for the house of everyone would own stocks if that were the case. And we know they don't because it's so risky. Sure there'll be times when stocks just going go up and up and up. They just keep going going. When I coined the term fang over a decade ago for Facebook which became better platforms Amazon, Netflix and Google which became Alphabet, I love them all. But I did give up on Amazon after an incredible run. I was trying to be disciplined yet it did continue to move up another 50%. I did feel felt like a pig after the stocks extremely popular run. But when I felt like I felt like a fool after I kept Gallup. You've had the feeling you know what it's that's just the price you have to pay for following the rules. I had been a pig. But the pig kept running. Didn't get slaughtered. Fortunately got back in Amazon for the Chapel Trust when then President Trump kept bashing him for ripping off the post office. You remember that, probably even don't. But it was torture to watch it go up with Albion. It was terrific to get back in. Now you need to recognize though that for every huge pile of cash that gets left on the table with a situation like Amazon, your sidestepping gigantic losses, that the kind of what you would have would have had if you had left everything on the table 2000, 2008 or late 2021. Experiences that turned two generations of investors against stocks. And hopefully I'm trying to preserve the last one. So never forget bulls make money, pig bears make money. But pigs, no pigs. Yeah, you get it. And I'm going to keep repeating that forever. I'm going to give you the sound effects because it is just that important. How about rule number two? This is one that people I see them on the street, almost everyone says this to me when I ask them if they've taken made some sales. Rule number two is it's okay to pay the taxes. Look, no one ever likes paying taxes. I don't. You don't. But like death, taxes are inevitable and unavoidable. Yet the aversion of paying taxes on stock market winnings often borders on the pathological. So many times people have gigantic gains but they simply, simply refuse to take any profits because they don't want to incur taxes that cut into their winnings. Never mind the capital gains Rates are pretty darn low versus ordinary income. Wall Street's littered with the broken hearts of investors who made this mistake. Several years ago, for example, I went to a presentation from a prominent hedge fund manager who recommended buying Macy's because of its real estate value. The stock had already run a great deal before the presentation and it was ripe for some profit taking regardless. But I know people who'd owned it for years with hefty profits. And they did want to bring the register because they would have to write a check to Uncle Sam. And of course they were thinking about how much that real estate was worth. Next you know, Macy's saw its stock get cut in half. And it wasn't a 2 for 1 split. The whole shopping mall space had hit a tipping point courtesy of competition from the Amazon. And the darn thing got obliterated. Those who didn't want to share their profits with the IRS ended up with no profits at all. Instead of hoping the stock could go to 100 because it might have a lot of risk. Real estate. So I want you to make your peace with the tax man. Some gains are simply unsustainable. A profit on paper is not the same as a profit in your bank account. Gains can be ephemeral. You haven't made any money until you ring the register. The last thing you need is to be worrying about capital gains tax and taxes. When it's time to sell, sell. In short, stop fearing the tax man. Start fearing the lost man. You won't regret it. The bottom line, remember my first two rules. Bulls make money, bears make money, but pigs get slaughtered. Don't be greedy, be disciplined, and don't be afraid to pay the tax man on profits that you've earned. Let's go to Tyler in California. Tyler. Hey. Big booyah from California. How are you doing, Jim? I am doing well. How about you? I am doing good. Thank you, sir. I don't know how many times I've sold a position in the next day or two, watched it reverse. So I'd like to know is when is a good time to just reevaluate and cut my losses? Okay, I think that this is a terrific question and don't feel bad because it's. I obsess in the losses for the Travel Trust and I know and I bother Jeff Marks endlessly. I. We're down on this. We're down there. We got. No, what you do is try to look at it once a week, okay? Just once. Because I don't want you to get down. You're going to miss other opportunities. And what you're looking for is a change, change at the margin. It's something set on the quarter, on the quarterly conference call. You don't want to just get up in the morning and say, you know what? I don't like the way that acts. I'm taking the loss. Wait for something definitive and if there is a bump up, don't be afraid to turn the position no matter what. How about Robert in Minnesota? Robert. Hey, Jim. Thanks for taking the call. My pleasure. Yeah. When I retired my company let me keep my 4:1, which is in a time dated fund at the corporate rate which is very cheap, but it has limited choices. My question is, should I switch it over to a managed fund with another company like fidelity or etc. At a higher standard rate but has more options? Look, I'm big in favor of the S&P 500 index fund. I think that'll be terrific. That's what my retirement's in. That's what your retirement should be. And I think that'll be fine. I love diversification. Remember my first two rules. Bulls make money, bears make money. But pigs? They get slaughtered. Don't be greedy, be disciplined, and don't be afraid to pay the tax ban on profits you've earned. We love taking profits coming up. From portfolio maintenance to learning how to do your homework, I'm hitting my investing rules that I think are the key to mastering this market. You don't want to miss them, so stay with Kramer.
- [19:15]
Keith Lansford
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you.
- [19:42]
Capella University Ad
Get your podcasts at Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at Capella. Edu.
- [20:08]
Jim Cramer
At the end of the day, we're only human. If you remember only one thing about being an investor, that's it. Nobody's perfect, everyone's fallible. And it's inevitable that we're going to make mistakes. It's just the nature of the business. That's why if you want to own individual stocks, you need to follow a Set of rules. Rules that are designed to protect you from yourself. Which brings me to my next commandment, and this is a really important one. Never buy all at once. I can't stress it enough. Do not, under any circumstances, buy your whole position at once. This is something you can see us put into practice constantly. The child trust. One more reason I think you should join the CBC Investing Club. Shameless promotion. Buying all at once is your follow. Yet no broker likes to fool around with partial orders. No financial advisor has the time to buy stocks methodically over time. The game is to get the trade done at one level in a big way. Make the statement buy. Boy, do I hate statement buys. Get to position on the sheets or in the portfolio. Now, I don't like that either. Where I stand, it's all wrong. 100% wrong. You should never buy all at once and you should never sell all at once. Instead, I need you to stage your buys, work your orders, try to get the best price over time. Why? Okay. When I first started as a professional money manager I really wanted to prove to everyone just how clever and smart I was and how right I would be. So if I felt like buying, say, Caterpillar, okay, I said, by golly, I'll buy it now big. All at once. Make a statement. Because I was so sure how right I was. Put me up on 50,000 cat. I'd scream as if I were the smartest guy in the universe. When I think back about that young Kramer, mostly full head of hair, by the way, all I can say is that I was one arrogant son of a gun. Arrogant and wrong. What was my mistake? If you want to buy 50,000 shares of Caterpillar, you don't pick them all at once. That's pure hubris. What happens if it goes down? You feel like a dope and it might go down. Thus my rule, never buy all at once. Instead, I should have bought CAT in increments of, say, 5,000 shares gradually over time during that day, trying to get the best price I could. You put on a small position, then you cross your fingers, hope it goes down so you can buy more at a lower level to get a better cost basis. Here. What? I said I don't mind when stock goes down if I can buy more. Now, I know trade institution, as you know. I don't say trade in size, as we used to call it. Probably still do. But I still invest my capital trust. And whenever we have a new name, we buy and spoil income improvements. Say 500 shares at a time to get, say a 2000 share position over the course of multiple days, preferably again at lower prices. That's right. We like it if our stocks go down so we can get an even better cost basis. And we lay out this whole process to members of the club. It makes sense. When you buy all at once, you're basically declaring that the stock absolute won't go any lower. I mean, come on, that's crazy. Nobody has that kind of insight all the time. Buying gradually, in stages is about recognizing that our judgment is fallible. So why don't more people do it my way? Why don't investors, if they want 500 shares in ExxonMobil, decide to buy it? 100 share equals why won't they? I think it's because they want to be big too. They don't want to waste the broker's time. Your broker wants to get the trade done. I know why brokers hate it when my old hedge fund would place incremental orders. But it's just plain hubris to put a major chunk of your net worth into any stock all at once. Who knows, maybe it will go into free fall. Of course, it doesn't just apply to having a broker. Applies to to electronic trading too. At the same time, many others simply want to pull the trigger on the whole position and then get it over. They don't want to agonize over each increment. Wrong again. That's why you need to resist feeling like you're making a statement buy when you purchase a stock. I bought and sold billions of shares of stock my time. Both My old hedge fund for my Chapel Trust. Do you know how often I got in the absolute bottom? How often? The last price I paid was the lowest and then it was off to the races. I mean, maybe one trade in 100. And I'm pretty good at this game. So resist the arrogance. Buy slowly. Even buy over a couple of days if you have to. As I do for the chat with trust. Humility beats Ubers every time. Next rule, I need you to buy damaged stocks, not damaged companies. Let's say the mall is having a sale and you pick up a piece of merchandise only to find out that it's broken when you get home. Maybe it doesn't work. Maybe there's a hole in it in the real world. You can return that merchandise, get your money back. Those there are guarantees and warranties galore on Main Street. Wall street is different. If you buy a stock that turns out to be a defective company, it ain't the losses. There's no Money back guarantee caveat empty. And that's why you need to be very careful distinguish between broken stocks, names that are down for no particularly good reason and broken companies which absolutely deserve to see their stocks trade lower. Sometimes damaged companies can be easier to see and look. When every nearly everybody got their COVID vaccinations and we put the pandemic in the rearview mirror, all sorts of COVID winners fell by the wayside. Some of them were unfairly punished, but many of them got obliterated because a big chunk of the business disappeared as we knew it would happen. Take some video. A company that took the world by storm during the worst days of the pandemic to the point where it became, well, let's say the very name became a verb. We would zoom just like we Googled. But once we got quality vaccines, the growth opportunity opportunity evaporated and the company struggled to use all the money it made during the pandemic to pivot into something else. It had a huge cash position then gradually its competitors caught up. Very tough to go up against Microsoft and Google and Cisco. Zoom only plunged from 588its all time high in October of 2020 down to the mid 70s less than two years later. There were points on the way down where people assumed it had to be a bargain. But every time they did, they got burned. Because you can't call a bottom in a stock that's in free fall if the business is changing and getting slower. We saw something very similar to all the financial tech stocks that had roared during the period of ultra low interest rates that coincided with the pandemic. Lots of buy now, pay later out of a firm, which is one of the better ones. But once the Federal Reserve warned that it would start rapidly raising interest rates, the whole business model was called into question. This group was annihilated. The worst of these was a company called Upstart, which is really supposed to facilitate loans. But they started leaving many of these loans what's known as on the balance sheet. Just as the Fed caused credit risk to skyrocket, the stock plummeted. Get this from just over 400 its late 2021 peak capital Otis less than two years later for eventually rebounding somewhat from its lows. On the other hand, sometimes the stock will sell off for reasons that have nothing to do with the underlying company. It could be caused by ETFs or problems overseas. Washington worries. Just because the stock is down to doesn't necessarily mean that there's anything wrong with the underlying business. Damaged stock, not damaged Company. So how do you distinguish between a broken company and a broken stock? Complicated. Complicated. Question. What I like to do is develop a list of stocks I like very much. I call this the bullpen of my investing club Charitable Trust portfolio. We give you the bullpen all the time. When Wall street throws a sale with the whole market coming down, we use that as an opportunity to pick up the stocks on our list made in a calm of no trading versus the battlefield of when the market's open. We know these stocks ahead of time so we know there's nothing wrong with the underlying companies because we've done the research ahead. But the bottom line is you never really know. That's why this rule works in tandem with the last one. Never buy a position all at once because what you think is merely a damaged stock might turn out to be a damaged company. If you take your time, you're much more likely, much less likely to end up with a large quantity of broken merchandise. And remember, there's no money back guarantee. The word on the street is caveat. Amateur. They have money's packet. Good evening, Mr. Kramer. 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. Thanks for making us money. And more importantly, thanks for keeping us from losing money. If you want to build portfolio of individual stocks, that's a big if. Since there's nothing wrong with getting all of your equity exposure from a cheap index fund that mirrors the s and P500. Well, you got to be rigorous about it. Which brings me to my next rule. Do the homework. Listen, my kids hated doing the homework. They thought it was punishment. Sometimes when I looked at what they were studying, I could see where they were coming from. And what's the relevance of most of the things they teach in high school? How will it help you later in life? Even bother? Of course, that's a terrible attitude. As a parent, I always encourage my kids to study because you never know what you'll turn out to be interested in later in life. But I bring this up because I think many of you have the same attitude to the homework you need to do in your stocks. You suspect it might be just as irrelevant to your portfolio as schoolwork seemed. My kids, when I tell people that they need to listen to the, let's say, Starbucks conference call or know what the analysts are Expecting from Netflix. They don't want to hear it. They think I'm being a scold. But that's not true. You need to do the work if you're going to own those kinds of stocks. When I remind people that doing the homework means listen to the conference calls, reading research reports, they want no part of it. They look at me as if I'm some sort of old fashioned teacher who's asking for way too much. In this busy 21st century world, that's just plain wrong. Only stocks without doing the proper research, frankly, is lunacy. But people still do it. And they do it for a couple of years. Different reasons. On the one hand, there's the buy and hold school of thought. The idea that you don't really need to do any work. You don't have to keep track of what's happening at the company because hey, you're in it for the long haul. So what? On the other hand, you got people who just don't have the time to be diligent. For those of you who don't have the time, I got a simple solution. Get someone else to manage your money for heaven's sake. Or do what most experts tell you do and invest in a low cost S&P 500 index fund. Or there is a third option. Find someone else to to help you do the homework for you while teaching you to be your own portfolio manager. Which is what we do with the CBC Investing Club. And I still urge members to do as much of their homework as they can. The truth is, if you can't devote a couple of hours per week to your portfolio, you really shouldn't be messing around with individual stocks unless you join the investing club, which is what we're meant for. Investing may not be a full time job like trading, but it's definitely a part time hobby. That said, it's the buy and hold premise that's a lot more pernicious. Back during the 1990s, buy and hold became the be all and end all of all investing. You know what? I'm just going to own the buy and hold on to my CMG because it's got to go back to 100 where I bought it. Yeah, I mean the experts told you that if you hold things for the long term, everything will work out. Of course I went to zero. But this philosophy took a real blow during the financial crisis when so many people who practice buy and hold got a obliterated. That was easy. Buy and hold became popular again during the pandemic. Keeps popping up anytime there's just a nice smooth period when the market was flooded with cheap money and almost everything worked right. I mean middle of that money and bye, bye, bye. Once again though, it got, it got you burned. When the Fed finally started tightening in 2022 and the cheap money just vanished, a lot of people who bought and held the spacs got crushed because there was nothing worth holding. That was just a travesty, the SPACs. That's why I've always been evangelist for a new concept, which is buy and homework instead. What is the homework though? Before you buy a stock, you should listen to conference calls, go to the company's website. I really like that. I tell you, I've been starting with that lately. Read the research, if you can get a hold of research. Read the news stories. That's called Google. Everything's available on the web. Everything. You have so much more info available now, so much more knowledge that there's really no excuse. You aren't up there banging at the Goldman Sachs library for some microfiber statement from three months ago, as I did four decades ago. Right down the block here you have everything right at your fingertips. But if you fall back on a buy hold strategy for any group of stocks and don't pay attention, I can assure you that you'll be soundly beaten by professional money managers with good track records who are actively searching for high quality stocks all the time. More to the point, I'm quite certain that any index fund can beat someone who does no homework. Which is why so many experts tell you give up on individual stocks and put your money in a cheap S&P 500 index fund. Buy and hold is not a strategy, just lazy. I'm. Like I said, I am in favor of index funds for those who don't have the time. The predilection, the next rule is another essential that I harp on constantly. Diversify, diversify and diversify. Always be diversified. That controls risk. And managing risk is really the holy grail of this business. What's the biggest risk out there? It's called sector risk. Stocks in the same industry, they tend to trade together, especially at extreme moments. In the old days, only about 50% of the action in a given sector came down to this. In a given stock came down to the sector. But thanks to the rise of sector ETFs, that number's gotten much, much higher. Some cases like 80, 90%. I don't care how great a tech stock was in 2000. If you had all your eggs in that one basket, you got scrambled. I got to prevent that. Same with the financials in 2000 I got to prevent that. The oils in 2014 through 2016 and of course tech during that discrete period in 2022 that was so horrible. And there's only one thing that can keep you from getting nailed by sector sector risk and that is diversification. I always say diversification is the only free lunch this business. It's the only investment concept that works for everyone. If you mix up enough different sectors in your portfolio, at least five well I'll tell you, you won't be wiped out when the one group gets obliterated. Something that happens 5 far more often than you might think. But if diversification such a no brainer if every advisor and commentator under the sun has been telling people to do it for years, how can anyone still be under versified? I think it comes back to the homework issue. A lot of people simply don't own, don't know what stocks they own. They don't understand what the companies do. So they end up with stocks that are finally some very similar. I mean they don't understand that one is dis drive company, the other is a semiconductor style. It just drives me crazy. Hey, you know what? Also others have zero respect for the history of the bear and how it attacks individual sectors. I still feel quite a few calls from people who genuinely think that owning Fang is a diversified strategy. Hardly. With Facebook down meta platforms, Amazon, Netflix and Google now you own variation of the same thing social, mobile, cloud may trade together. That's what I call faux diversification. Here's the bottom line. Whether you're an amateur professional, you, you always need to do your homework and keep your portfolio diversified. This is the kind of routine maintenance that protects you from monster losses down the line. Remember, if you can keep your losses to a minimum and let your gains run, you almost always come out ahead. But don't try to rationalize those losses because stocks don't always come back to even or anywhere near that. Let's go to Trey in Texas. Trey. Jim, the second greatest investor of all time, Warren Buffett says individual investors like me should just buy the S and P. My question for you is what does the greatest investor of all time think we should buy? Well, first, I'm no Warren Buffett and I'm a TV guy who tries to do his best to teach you. But I thank you for that. Here is what I have to say. I think it depends on your time and predilection. I think you put away your first 10,000 in a, in an Index fund. If you like picking stocks, let's do it well together. Join the CNBC Investing Club. If you don't like picking stocks, then let someone else do it for you. But if you want to be involved, I will help teach you to be a good investor. I can do that. I've done it for a very long time, and fortunately, I've been very successful. Let's go to Ann in Indiana. Ann. Hi, Jim. Thanks for taking my call. You're quite welcome, Ann. What's up? I'm a club member, but I've been thinking about this lately. Lately. And I wondered if you could talk more about suspending our judgment and letting the market take a stock up. Even when a CEO does something they said they're not going to do, or a company makes a bunch of mistakes but they have very little competition, or a CEO makes big mistakes that seem to take a long time to fix, well, this is a tough, tough one in. Because I've made this mistake, I've stuck with people for too long. I keep thinking, give me another try. Almost every case, it hasn't been worth it. Almost every single case, including situations I'm in now. All right. Whether you're an amateur or professional, you always need to do your homework and keep your portfolio diversified. There's much more ahead. I'm putting my four decades of experience to work sharing the key rules we follow for this CBC Investing Club. Think of it as a glimpse behind the curtain if you're not a member. So stay with Craver. I don't want to go all Zen in the art of portfolio maintenance on you, but when it comes to managing your own money, you're often your own worst enemy. Don't take it personally. On my own worst enemy, too. If you want to invest wisely, you constantly need to be fighting off your own worst impulses. We're not robots. We have emotions. And those emotions can really throw you off your game. Which brings me to my next rule for investing. Nobody ever made a dime by panicking. Panic is not a strategy. People do it constantly. A stock gets hammered, then investors sell. After the hammering, the market gets crushed. On a huge down day, people bail at the end of the day. In short, something gets annihilated and people can't take the pain. So what do they do? They bolt. There's something instinctive about panic, about the desire to flee. If you're a Stone Age hunter gatherer who accidentally stumbles into a family of grizzly bears, panic is a very helpful strategy. But it's not useful in motion. When you're investing in the stock market, the truth is, there'll almost always be a better time to sell than whatever moment inspired you to panic in the first place. And don't I know it. Remember the spring of 2020 when Covid hit everything shut down. The whole stock market collapsed. The S&P 500 lost a third of its value in a little over a month. And for months after, almost everybody in the business was convinced the world was ending. That April, though, legendary market historian Larry Williams gave us the all clear. He was looking at other countries and realized we'd mostly be out of lockdown by midday. He told you to buy into the teeth of the panic, not flee with the panickers. Sure enough, the SB was making new highs again by the summer. And once the vaccines came along that November, well, the market just never looked back. So the next time there's a big market wide sell off and you feel like fleece fleeing and never touching a stock again, I want you to do something for me. I want you to take the opposite side of your own trade. The most rewarding trades you can make are those where the decks have been cleared out by terrified folks using market orders who just don't get that the exit doors aren't as big as they think they are. Mind you, I am absolutely not saying that every stock that gets hit with a panic sell up is worth buying for the long term. Often people freak out about an individual company. It's with good reason. But I am saying that after a big decline, you usually get some kind of bounce, which gives you a better moment to sell if that's what you want to do. Even when things are really bad, bargain hunters will usually take it up from its lows. And that's when you get out. So the next time you want to dump everything, take a deep breath and wait for the rebound before you sell. Hey, speaking of hideous down days, I got another move that can help you handle big declines. Ready? When the stock market gets unrelentingly negative, remember that he who defends everything defends nothing. It was when Frederick the Great said that centuries ago. And you know what? It's just as true now. So he defends everything, defends the nothing. What exactly does it mean? It's about how you evaluate your holdings. When the market's flying and many stocks are in bull mode, you don't need to worry about most of your positions. The more exposure to a bull market, well, let's just say the better. But when things get difficult, when you're on the Defensive, you need to recognize that many of the stocks you bought during better times might not fit this new environment. In short, when the economy is slowing and the market's getting slammed, you can't hang on to everything you might like. If you try to defend all your positions in a market that turns against you, that's a recipe for getting blown out. And when I say defend, I mean you can't treat a declining market like it's a buying opportunity in every single stock in your portfolio. If you do that, you'll quickly run out of capital, leaving you unprepared to buy more. If we go lower still, and we use usually do. Yep. When the market gets negative, you need to get more selective and focus your efforts. That's why I rank all my travel trust stocks at all times for investing club members. Ones are stocks I buy right now, twos are stocks I buy in weakness, and threes, while threes are outright sells. Sometimes it is some strength, but if you can get out, it's good. That way I'll know which stocks I should defend when things get tough and which ones I'll cut and run with and use that as a source of capital for something better. So let's say tech's getting hammered, but you think it's going to rebound. It's important that you don't try to hang on to the whole complex. Pick the best tech stocks, the ones you want to buy into weakness and toss out the rest. Raise cash. Use those newfound cash reserves to buy the stocks of higher quality tech companies at lower prices. That's right, the non essentials, the ones that have no catalysts and that you only owned because you wanted exposure to a bull market. They get to heave ho immediately when things turn bearish. We used to call this circling the wagons around your best names. My old hedge fund. The first few times you do it, you'll curse yourself because you might be ending up putting down stocks that you've loved for quite some time. But eventually, if you experience enough difficult markets, you realize just how valuable this process is because it can protect you from a lot of pain. I never try to battle more than a few losing names at once. Don't buy. Don't buy. It's painful. So remember, you have to take on a lot of stocks that are going against you. I'll wear you. It'll wear you down, I promise. It's just exactly what it's going to do, making it more likely that you'll crack under your pressure and dump everything near the bottom. It's simply human nature. But you have to fight human nature tooth and nail, hammer and tongs, or any of those other cliche phrases that went out of style ages ago. But still some really solid the bottom line, Great investors know how to ignore their emotions when those emotions get in the way of making money. So the next time the market gets slammed, please don't panic. Nobody ever made a dime by panicking. But also don't double down your whole portfolio into weakness. Vicious negative markets can give you buying opportunities, but you need to focus your capital on your absolute favorites rather than chasing bargains in third rate merchandise that actually deserves to trade. Moa Matt Money is back after the break. Booyah Jim. Your integrity makes you the Booyah saint of Wall Street. Booyah Jimmy chill. Booyah Jimmy chill. Booyah Jim. Quadruple. That's a lot of booyahs I always say. My favorite part of the show is answering questions directly from you. Tonight I'm bringing in Jeff Morris, my portfolio analyst partner in crime. Help me answer some of your most burning questions. Could usually have some tough ones. For those of you who are part of the investing club, Jeff will need no introduction. For those of you who aren't, I hope you will be soon. I would say that Jeff's insight and our back and forth forth helped me to do a great job for Mad Money viewers as well as members of the club. Jeff and I do this sort of thing during all our monthly meetings where we give you an in depth look at our latest portfolio decisions. We talk about every single stock and answer your burning questions. If you like this to be something to keep up with, I need you to join the club. And thank you by the way, to people who stop me on the street who love the club. Means the world to me. So let's start with a question from Michael, my home state of Pennsylvania, who asked what do you think about dividend reinvestment strategies? Okay, so Jeff, one of the first things I learned and what I taught at Goldman Sachs was it's one of the great free lunches of our business. You just keep letting it ride. And I have seen in my lifetime the dramatic amount of money you make from the dividend reinvest.
- [43:53]
Jeff Marks
Yeah, absolutely. That's how you take advantage of the power of compounding by reinvesting those dividends quarter after quarter. Now, unless you know, need the income, of course depending on where you are in your life that that may be a reason not to. But always reinvest and it works for high dividend stocks like a consumer packaged good stock or even tech stocks too that offer a dividend. It's a good thing to have. It's another way to dollar cost average into as well.
- [44:18]
Jim Cramer
I remember going over this with my late father where he was adamant, you just take the money and run. And I tried to show him and managed to convince him no, take the money and be back in reinvest. Now we're taking a question from John in California. What are your source of information related to stocks in the overall market economy sources that you go to daily? All right, well look, I, I make no bones about it. We have all the research in the world and what's one of the great things, the luck that we have is we get everybody's research and I tend to let that control things as by the way when I do the mad dash and I talk about what may maybe the most important research calls of the day. So we're blessed with that. Right now let's go to Nino in Maryland who asked is there a multiple that won't, that we won't buy above in each sector? Well, this is really tricky because when you're in tech we have to use out years. So for instance in video, if I had discipline and said that I wouldn't pay more than 20 times earnings, I would have kept out of video for a decade. Because Nvidia is about future. Future.
- [45:19]
Jeff Marks
Yeah. And I think you also have to look at a company's growth rate too. It's all relative. P is so you can compare the growth rates relative to their multiples. I don't think there's necessarily one that would keep me out. But also on the other hand, you can't look at a low multiple and two and say that's a good bargain because sometimes there's value traps. Value traps. There are low multiple for a reason. They could have declining earnings or there just might be another issue fundamentally.
- [45:44]
Jim Cramer
That's a good great point. I mean when people look at the, the automobile stocks they have historically had very low multiples and just trade on dividends. If they ever really got the growth of a Tesla, the stocks would be trickle. Right. So anyway, thank you, Jeff. I like to say, as always, bull market somewhere promise try to find it just for you. Right here on Mad Money. I'm Jim Cramer. See you next time.
- [46:07]
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