Mad Money w/Jim Cramer 08/02/19

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Technology is becoming more open data more accessible on the world more innovative. We're confining the industry expertise of IBM with the open source leadership red hat to bring you more freedom more security more flexibility. Let's unlock the world's potential. Let's put smart to work learn more at I._B._M.. Dot Com slash slash red hat. Mission is simple to make you money. I'm here to level the playing field investors. There's always the summer and I promised help you find mad. Money starts now. I'm cramer. Welcome at money any welcome to America people. WanNa make France. I'm just trying to make some money by job center team but educating teachers a call me at one eight hundred sixty three or tweet me Jim in Kramer tough days don't last forever but when it come on you need to know how to respond you need a game plan totally developed and and ready so you can decide what kind of self we're dealing with. I wish I could say that. We always know how to respond but the early days of decline well. They're never easy to navigate I borrow from tolstoy's Fabulous Anna Karenina. All happy. Rallies are alike. Each selloff is unhappy be in its own way. It's so true. Bull markets send stocks higher and everyone thinks they're genius for dissipating in them. It seems so darn easy declines because they could be the start of a bear market. They could be just the beginning of something unfathomable or they they might actually be a by Lynch. That's why I WANNA use history to try to identify some of the common qualities so that you can figure out how to handle these inevitable moments moments of weakness without panicking. I let me offer some historically constructive words of relief sanity and real not phony but reassurance there have only been two truly horrendous sell off since I started investing nine hundred seventy nine the one day crash of Nineteen eighty-seven and the rolling rolling crash of two thousand seven to two thousand nine I could have done the Nasdaq crash but the S. and P. L. Pretty well. Let's deal with these two big ones though head on because because these two declines are great examples the polar opposites of each other even as the percentage the clients were somewhat similar on October Nineteenth Nineteen eighty-seven black doc Monday the Dow fell five hundred hundred twenty two percent in a single session twenty two percent of his trading that day and even as the previous week had been one of the worst weeks market history Monday hit fast hit hard. It was almost as if there were no buyers to be found from. Dow Two thousand two hundred forty six with a crash started to dow seventeen eight hundred thirty eight where it ended that day it was telling a friend into the clothes I remember thinking I remember thinking saved by the bell accept. It felt like there weren't many left to be saved but most people don't remember as I mentioned is that the week before was one of the market's worst weeks ever as doubt already plunged from Gal Twenty five hundred to twenty to forty five. That's the ten percent club that encourage bargain hunters and it turned out to be classic bad money in retrospect because these intrepid souls that they could flip Monday morning in some strength rain and that strength never developed in fact the weakness that they were buying occurred the next day in what became known as terrible Tuesday where the Dal actually he kind of just broke down the market simply stop functioning but you know what I was there and I was actually able to calculate that bottom the actual bottom that occurred her and it was around fourteen hundred off another sphere and thirty eight points from where the market close implant flack one day then Fed Chairman Alan Greenspan step stopped the decline in these tracks when he said he'd provide all quitting necessary to stabilize the market. I still remember that Green Line. When it came over your screen he listed multiple first round Wall Street to help put in the bottom and the market states remarkable two-day rally that took us up more than five hundred points. The effects of the crash lasted for three months when we had a retested held but it took almost sixteen months until the averages returned to where they were trading before this big break down the bear market began October two thousand seven. It was totally different animal. The Dow fell from fourteen thousand eight hundred sixty four. It didn't bottom until March of two thousand nine when it landed six thousand five hundred forty seven. We didn't return to that how in two thousand seven level to watch two thousand thirteen. Why did one off and so quickly while the other took six years? That's the question that defines the two extremes of unhappy offs the initial one black Monday was mechanical so off the first one I can remember that occurred simply because the stock market failed to be able to function. It's it's instructive to unpacked black Monday because the way it played out was reminiscent of two other crashes the Flash Crash Twenty ten and it's Dapo Ganger in two thousand fifteen. You may have heard theories about what causes these spree crashes but most of them are wrong. Okay all three started with the stock market futures yes and P five hundred futures in Chicago Overwhelming Wall Street New York. We're the stocks underneath a traitor. They happen to the stock. Traders didn't understand the power of the futures market which could flood the stock market with instant unseen supply these these days we accepted the futures are worth watching but wasn't like that back then because they were relatively new instruments founded five years before the crash the power of the future snuck a couple of people because they were they were initially a much smaller market than the stocks themselves because of the great liquidity though the ease with which portfolio manager you can go in and out of them. They became the most powerful drivers in stock prices even more powerful than the actual performance of the underlying companies that stocks are meant to represent underlying companies earnings used to mean much more now. It's really these futures that matter. The thing is even with relatively new impact of futures black. Monday was unusual. We had had a big run going into eighty. He's seven remarkable multi rallied with nary substantial decline and don't I know it. I love Goldman Sachs that year to start my own hedge fund because my returns had been so bountiful. Ah The more you rally creates stupendous games that a group of clever sales people started selling what clay what they claimed were insurance policies they could locking gains and stop out losses for big funds so called portfolio insurance involved what was known as dynamic heggie would sound sounds so dynamic hedging. These specialists said that using futures you could ensure that you would no longer be exposed to stock market risk say down five percent ten percent or whatever the policy. Halsey took out determine the idea was that they let you side stepped the the law after labs. I said the losses is impossible to do that. Unfortunately unfortunately much like Communism portfolio insurances well conceived in theory but it doesn't work it live. The losses will kick didn't want some black. Bundy and insurance didn't work if anything anything the future selling from insurance accelerated the decline and costs incredibly large losses for the actual insurance. The people who sold these policies were charlatans and Mount bunks folks. They were never exposed to such of interest now but that's exactly they were. There's no magic trick. Get the returns from investing in the Stock Martin without much of the risk. Don't anyone ever tells you any different. Of course it's 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 market crash. There's gotta be something real with the economy. Simply has to be a recession lurking there had to at least that's what we taller cells the economists strong going the eighty seven crash and 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 and New York that set off the conflict gration and when the Treasury Department examine what occurred that day in a Utah report it concluded the future future said off so much sally that some specialist firms on the floor of the exchange and some brokerage houses failed to step up and stabilize the tape the latter ladder had no duty to do so but the former were supposed to do it and treasury found that many didn't do their jobs. I was fortunate enough to being cash on black Monday having liquidated but liquidated my portfolio early in the previous week because the market had acted so badly it made my career for the next fourteen years of professional issue money management. I could show perspective investors that I had sidestepped the crash for real. They thought I was a genius but the truth is I was just frightened of the the market and wanted to regroup but as I never tire saying it's better to be lucky than good so here's the bottomline sometimes crashes have nothing to do with the economy author caused by the mechanics of the market stay tuned for more examples of this kind of declined and the more serious Hannibal the market two thousand seven two thousand nine C.. You can figure out what to do when it happened. Let's go to Keith in Texas cave. Hey Jim how're you doing doing. I'm well. How about you pretty good. <hes> my question is hey. How do you decide when a correction like we had back in February has made a bottom and it's okay okay to get back into the market. Well what I like to do is elect to see try to get a sense on whether the selling has run its course and what it takes to do that is to be able. I you get a level where it bounces and then it comes back and test that level it that second test as we call it holds holds then it's more than likely that you have to come back from the sidelines and I sometimes crashes have nothing to do with the economy they have to do with the mechanics so the market knowing how to respond is essential to your money on money tonight myself strategy session continues. Don't Miss my take on the micro. Crash is that may be sure but could have lasting effects when you view investing then you might know chicken little and the boy who cried wolf from fairy tales but they also play a role in the stock market market is it all the feds fall not always online the rational reasons rational that the market declines when it comes to the Central Bank <music> so stick with cream. Don't miss a second of mad money follow at Jim Cramer on twitter I.. I have a question tweet Gramer Hashtag mad tweets send Jimmy Mail to mad money at C._N._B._C. dot com or give us a call at one eight hundred seven four three C._n._B._C.. Something Ed Tha Mad Money Dutt C._N._B._C. Dot Com in Asia remains the fastest growing region in the world and will wake up two thirds of global middle class consumption by the year twenty fifty at Matthews Asia. We've been investing in Asia for over twenty five years and our mission is to champion Asia focused investment solutions the May profit from this growth and build wealth for our global clients over the long term find out what a dedicated allocation to Asia cannot to your portfolio at Matthews Asia Dot com slash opportunity welcome back to a special S. Joel how to deal with all sorts of declines edition of Man my name we've already covered with hot in the crash eighty seven how wasn't really related to the economy shocker so it was okay to buy stocks that we this nineteen eighty-seven was a rare opportunity that took a little time to reveal itself but when it did Ooh la La aw was also the first inside the s and p futures exercising their pernicious power over individual stocks they were like playthings stocks Fox sadly was the first of many which brings me to the fable flash crash of twenty ten. What are those negative moments that drove away so many investors who never came? I'm back to stocks because they didn't know their value could be destroyed so quickly almost wims clea who wants to keep their life savings instruments instruments that can blow up in the blink of an eye what happened at June. It was pretty much the same deals black money of eighty seven the futures overwhelm the stock market and buyers just walked away betting there had to be something subset behind the destruction. It couldn't just be the machines breaking down for heaven's sake plus crash started to thirty two two P._M.. May Six two thousand ten it lasted for thirty six minutes and that thirty six minutes the Dow fell almost one thousand points from roughly the ten thousand level. It was member for me me because I happen to be on T._v.. At the same time some money managers have been speculating that the market was going down precipitously because riots Greece oh queens was on everyone's mind back then because there have been endless worries Henry about what would happen if the Greeks defaulted on their bonds others pinned it on newfound weakness in the U._S.. Economy which for the record there really wasn't any passerbys. I had the benefit of trading on black Monday. I recognize exactly where what it really was. When it was happening now the situation where the futures were overwhelming stocks and the machines were breaking we we didn't know at the time but a gigantic Aaron Selwyn or caused tremendous fear that spread like wildfire many buyers simply disappear? They didn't want to wait around to find out what was causing the landslide landslide. They just wanted to get away from it as fast as they could. One Air I call them. The phony sell off because the declining no basis at economic reality which made it a a tremendous buying opportunity what we're seeing right. Now I mean maybe I believe maybe unprecedented their sock. which stupid cupid system obviously broke down replying from machines failed obviously broke? This job didn't work at broke down. The machines broke down. That's what happens. It didn't work. The machines broke down and that's what happened on that later. Well some listening actually bought stocks. Komo GonNa talk about that too. Many people simply didn't believe equities could be that fragile was shocking in all the years. I've been doing this show. I hope I've taught you that stocks are not hard assets. Let's they're subject to all sorts of whims that can reduce their value in a heartbeat including mechanical issues like those that happened during that thirty six minutes Selwyn anyway the market you quickly regained its equilibrium but not before another round of individual investors left the asset class entirely and never came back. Okay how about twenty fifteen so off with the Dow fell one thousand points. Why did they open that will seemingly related to fears that the Fed was it's in raise interest rates right into the week at this in the CIA after what was happening in the Chinese market not our market as the Chinese market just eight percent in a single day many seem to forget but back then the Chinese market was the most dominant negative story out there as people fretted that the whole economic edifice of the P. R. C. could collapse from too much leverage and too little liquidity so l.? I thought I find myself air at all. The right time witnessed these events that Friday for the cell had been a monstrously ugly days a fed official late in the afternoon June 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 markets ugly but also fragile mood when we came in on Monday August twenty fourth. We heard that there were some very large sell order some places for major stocks. I mean we we weren't ready for the gap down. We saw we'll pick capitalization. Stocks were shedding hundreds of billions of dollars value with many twenty percent down as the market open like the crash I should maybe seven it was very tough to tell what the real prices were. The confusion was that horrific it was like the fog of war the training but VAL ended up tally a decline of of about one thousand points when the smoke cleared at ten o'clock. I my partner some squawk on the street. We're pretty stymied at the time you know what I remember. Turning David Faber the Chad about the meaning of the sell off in the midst of the conflict gration his reaction Priceless The Dallas House down a thousand Zain points and the wall says on some of these names U._N._H.. Verizon G._e.. Down Thirteen I I don't I I gotta make some phone calls. That's these are someone boss. These are enormous moves. GonNa make some phone uncles. I remember what he said. Yeah that's it. I gotTa make some costs. That's how confused we were again. We figured the had to be something that if you get the kind of decline right that'd be something going on the economy. Some somebody knew something. We did something mysterious something other worldly something nefarious. Maybe China actually collapsed. Maybe there've been something that occurred in Europe we didn't know about the economy is still fragile. That warranted the decline. I was suspicious officious though suspicious 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 think about about that that shouldn't be happening if there was really something wrong with the economy. That's what people buy. Those talks are often the safest of havens moments when it's the economy that's at work once again. I suggested just machines that were causing the problem that the future should overwhelm the stocks and into computers they'd gone haywire by mid morning. We learn that was exactly the case case and the stock market underwent a beautiful metamorphosis a furious rally jumping five hundred points from the bottom strong stomach buyers came in and took advantage wjr that opportunity the economy is gaining strength not losing it but a thoughtful fed actually wasn't about to tighten with not with China teetering excellent time to buy stocks. Why was there such fear and confusion at the time of both the two thousand ten in two thousand fifteen minute crashes? I think investors weren't ready for either flash crash because post nineteen eighty-seven and the government put him known as circuit breakers there were supposed to cruel these declines by stopping trading momentarily but these circuit breakers created a false sense of security that oddly we still exist today even as they failed to work properly both occasions did very little to stop the destruction so please when you hear talk of circuit breakers protecting you from fast declines. No no don't believe it can't be legislated or regulated out of the market it will always be there. There will always be people react horribly after after initial then even that event mechanical naturally substantive in nature so what's the bottom line here if you can determine whether so office caused by the mechanics of the market breaking down then you might have an incredible buying opportunity I though you have to figure out whether the SELLOFF is related to the fundamentals economy if it is then state who if if it isn't stay tuned in any way but recognize that you have a first class panic in your hands and nobody ever made a dime panicking but boy oh boy did they coin money taking the other her side of the trade. We're going to Jeff in Florida Jeff Your Majesty mad money. It's an honor your very very what's going on. You're welcome. Here's my question Jim. Is there an equation of formula rule of thumb anything to dictate when or especially what percentage of profits to take off the table and really good gains or grabs. We you know what I had the show's influx at all times. I always try to measure these things and what I've come to realize is that I used to tell people when things were really bad in the market yeah look up twenty five per cent. Take some off the table but for actual owners plus COM learn. It's gotta be a little more patient that when you have a really good stock goes up fifty percent then you start taking somewhat and then a hundred percent percent then you take out that you take out your basis now let's put in and then you let the rest ride on not as anxious to trade or recommend in trading as I used to like water investing situations long remember nobody ever made a dime panicking okay. If a soap is caused by the mechanics of the mortgage. You may actually have an incredible buying up to what's made money. The lock is falling the modest born. It's more than just a nurse. You could teach you a lot about any As trading fidelity brokerage services L._L._C. member N._Y._S._e.. S._I._P._C. Tonight's special survival guide edition bed money. We're discussing how to deal with brutal sell-offs simply how to defend against them. Take advantage of even. I told you not to be Glib about the systemic risk so often involve the potential collapse of the U._S. economy but those are easy to spot because it will seem like the world's Flam like in two thousand eight. You don't need me for that but now I WANNA help you game out the other less dangerous kind hind crash the mechanical kind caused by a broken market in a healthy economy. The best way to deal with these sudden declines is directing is that there's a bottoming process when you can spot what do I look for what are called accidentally high yield or so used to call A. H.. Wise on the show those are stocks companies that are doing fine and have a good balance sheets but their stocks have fallen so well dividends are starting to give you an outstanding return not one that you could ever believe would be from such a high quality company. How'd you spot these? I like look at the historic level. We'll dividend yields. You've gotten from certain stocks as well as the rate the ten year Treasury gives you if it's docked typically you'll take two percent suddenly his pay double that because of a market wide decline it means the stock went down then you're probably looking at what we call an accidental high yield as long as the stocks going down for no particular reason. That's why I like to look at companies is that are particularly sensitive to the economy second. If you've level isn't constructive or giving you opportunities I use a mechanical sell off to pick some stocks that you like and beginning to buy them using what's known as wide skills. That's what I recommended. During the twenty ten flash crash pick one of the best stocks out there premier stock and buy some using limit orders only don't use market orders booze. You might end up getting terrible prices. Frankly you should never use market orders but it's especially stupid during a crash Smith because if the market does come right back because it didn't to flash crashes you've picked up some terrific merchandise at amazing prices then you can flip the stocks if you want want to for big profits or you can hold on thick look I demonstrated how to do this in the flash crash twenty and ten forty nine and a quarter bid for fifty thousand proctor Dr Fire at my Hedge Fund I mean this is just taking that that name down in the past few minutes I walked out. It was a sixty one. I'm not that interested in it. It's a forty eighty seven 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 forty nine so I mean you know you gotta be careful. That's that's craziness. I'm talking about and a lot of people ended up doing that. Procter trade so I always feel good. Remember the limit order vice still rings true now. We've covered how to recognize systemic. Has Democrats can have a sidestep. We talked about how to profit from many crashes. How about the rest of the selves? We experienced garden variety pobox. Those are the most common types by far what causes this is Easter clients or their bunch of of different varieties. I you've got so offs caused by the Federal Reserve probably the most important because their top of mind and that's the most frequent reason for stock dumping. There's a reason that business media's constant talking about the Fed when the economy is weakening Federal Reserve job is to try to restore growth as long as the Fed is cutting interest rates. Almost every decline is a the Bible and on Wester Systemic risk of course just a fact of life. It's been like that since I got business but when the economy strengthening and perhaps even overheating the Fed has a different different mandate in an expansion its job is to temper growth in order to stop inflation and look the Fed is right to be worried. Inflation erodes the purchasing power of individuals. The job makes US dollars by fewer and fewer goods and your savings are less likely to cover your long term needs but we don't want the Fed to break the economy and here. I'm talking about the B.. We are a K- kind like it did when it raise rates seventeenth straight times in lockstep going the great recession now there are plenty of times in the Fed's tightening the stock market wasn't crushed because because the economy wasn't crushed however whenever the Fed tightened some prognosticators will come out of the woodwork to tell you the market will crash or at least take a very big header. It's inevitable so when you hear these comments do not panic fed rate hikes. Don't necessarily the crashes in fact I've seen plenty to next to nothing but there are rational national reasons why the stock markets shoot and does go down when the Fed raises rates I only one of the assets available to individuals institution. There's gold real estate of of course bonds. I like gold as a safe haven and I believe that every person should wholesome goal preferably Bouillon but if not then the DOD is a hedge against inflation but otherwise is a as we've seen goal has been able to protect you against much in the last two decades sitter a hedge against a catastrophe that hasn't yet occurred real estate actual real estate can be good who'd hedge but most people don't have the money to invest in the kinds of real estate too big institutions can by now we do have real estate investment trust but they're not reliable as a proxy for Real Estate. Finally we have bonds is investment term. Bonds are the source of the problem when the Fed raises rates as the Titans Bah bonds particularly short-term piece of paper become more competitive additive with stocks. You'll notice that is fed. Jackson breaks high yielding dividend stocks are going to be among the worst performers. That's because they're yields suddenly look a lot less attractive versus what you get if bonds in their stocks are inherently more risky than Treasury's so please be careful of these stocks is safe havens to win. The sell off is caused by the fit. They're very different. I'm from accidental high dealers. They can spring back when the Fed is tightening the second reason why stocks can go down legitimate when the Fed raises rates because the Fed is perfect nick I keep talking about the seventeen lockstep rate hikes will cause the Fed is imperfect the Fed kept tightening and tightening long after it should have stopped they've raise rates when they should have stood pat because economy has already slowing or even cutting rates fast because of what was going on underneath when that's the case cells can materialize going to the Fed meeting and then the pain will continue after you get that kind of pull back in you know you need to be extra careful not to be aggressive buying any stocks especially defensive defensive high yielding bomb market alternative is not going to work. Here's the bottom line. Gordon variety pullbacks can be gained as long as there's no systemic risk but sell-offs in the awaken the Fed raising rates those are trickier although they can lead to decent opportunities as long as you stay away from the high yielders become less attractive when the Fed tightens and stick with the accidentally high yielders that might just give you that delicious ballots when the Fed is done tight their money's back at the break <music> tonight tonight's special survival guide edition money we're discussing how to deal with brutal sell-offs simply how to defend against them. Take advantage of even. I told you not to be Glib about the systemic risk so often involve the potential collapse of the U._S. economy but those are easy to spot because it will seem like the rules Flam <unk> like in two thousand eight you need me for that but now I WANNA help you game out the other less dangerous kind of crash. The mechanical kind caused by a broken lookin market in a healthy economy. The best way to deal with these sudden declines direction is that there's a bottoming process when you can spot so what did you do. I like to look for what are called accidentally and Lee high yield or so he used to a h wise on the show this stocks of companies that are doing fine and have good balance but their stocks have fallen so well dividends after starting to give you an outstanding return you ever believe would be from such a high quality company. How do you spot these? I like to look at the historic level dividend yields. You've gotten from certain stocks as well as the rate the ten year Treasury gives you if you'll take two percent suddenly is paid double that because of a market wide decline that means the stock went down then you're probably looking at what we call an accidental accidental high yield as long as the stocks going down for no particular reason. That's why I like to look at companies that are particularly sensitive to the economy second. If you've level level isn't constructive or or giving you opportunities I use a mechanical sell off to pick some stocks that you like and beginning to buy them using what's known as wide scales. That's what I recommended. During the two thousand ten flash crash PICK ONE OF THE BEST stocks out there premier stock and buy some using limit orders only don't lose you might end up getting terrible prices. Frankly you should never use more orders but it's especially stupid during a crash I like because if the market does come right back to flash crashes you've picked up some terrific merchandise at amazing prices then you can flip the stocks. If you want to for big profits or you can hold on thick. Oh look I demonstrated mistreated how to do this in the flash crash twenty and ten forty nine and a quarter bid for fifty thousand proctor fire at my hedge fund I mean this is just taking. It's an incredibly not name Sasha minutes. When I walked out it was a sixty one? I'm not that interested in it. It's a forty seven well. That's a different security entirely so what you have to do those of us limit orders because procter just seven points that I said I liked it at forty nine so I mean you know you gotta be careful. That's the craziest I'm talking about. A lot of people ended up doing that. Procter Dr Trade so I always feel good remember the limit order by still rings true now we've covered how to recognize systemic risk and how to sidestep and we've talked about how to profit from many any crashes. How about the rest of the experience the garden variety pobox those are the most common types by far what causes these declines their bunch of of different varieties? I got so off caused by the Federal Reserve probably the most important because their top of mind and that's the most frequent reason for stock dumping. There's a reason of business media's constantly talking about the Fed when the economy is weakening the Federal Reserve jobs to try to restore growth as long as the Fed is cutting interest rates. Almost every decline is a Bible in on Wester Systemic risk of course. It's just a fact of of life it's been like that since they got the business but when the economy strengthening and perhaps even overheating the Fed has a different mandate in the expansion its job is to is is to temper growth in order to stop inflation and look the Fed is right to be worried. Inflation erodes the purchasing power of individuals it makes us feel your dollars by fewer and fewer goods and your savings or less likely to cover your long term means but we don't want the Fed to break the economy and here I'm talking about the beat art k kind Seventeenth Straight Times in lockstep going into recession. Now there are plenty of times in the Fed's tightening the stock market wasn't crushed because the economy was crushed however whenever the Fed tighten some prognosticators will come out of the work to tell you the market will crash or at least take a very big header. It's inevitable so when you hear read these comments do not panic attack fed rate hikes. Don't necessarily the crashes in fact I've seen plenty to next to nothing but there are rational reasons why the stock markets shoot and does go down when the the Fed raises rates. I only one of the assets available to individual institution. There's real estate of course the bonds I like gold as a safe haven and I believe that every person person should hold some gold preferably billion but if not then the deal is a hedge against inflation but otherwise as we've seen Golez Minneapolis protect you against much in the last two decades senator a hedge against a catastrophe that hasn't yet occurred real estate actual real estate can be good hedge but most people don't have the money you invest in the kinds of real take the big institutions can by now we do have real estate investment trust but they're not reliable as a proxy for real estate. Finally we have bonzes investment term in bonds are the source the problem when the Fed raises rates as the Fed tightens Bah bonds particularly short-term piece of paper become more competitive with stocks. You'll notice that is the Fed Jackson breaks high yielding living dividend stocks are going to be among the worst performers. That's because they're yields suddenly look a lot less attractive versus what you get bonds in their stocks are inherently more risky than Treasury's so so please be careful. A stock safe havens to win. The selloff is caused by the Fed. They're very different from accidental high. Yours can spring back when the Fed it is tightening the second reason why stocks can go down legitimate when the Fed raises rates because the Fed is perfect. I keep talking about those seventeen. Lockstep rate hikes well. The Fed is imperfect. The Fed kept tightening and tightening long after it should have stopped. They've raised rates when they shoot a stood pat because economists already pretty slow or even cutting rates fast because of what was going on underneath when that's the case cells can materialize going to the Fed meeting and then the pain will continue after you get that kind of pull back in you know you need to be extra careful not to be aggressive buying any stocks especially the defensive high-yielding bond market alternatives is not going to work work. Here's the bottom line garden. Variety pullbacks can be gained as long as there's no systemic risk but sell offs the wake and the Fed raising rates those are trickier although they can lead to decent opportunities as long as you stay away from the high yielders become less attractive when the Fed tightens and stick with the accidentally high yielders that might just timmy that delicious ballots when the Fed is darn tight money back at the break and we're talking cell loss specifically during this block what Causes Garden Variety pobox many times problem the Fed as I mentioned before the break but sometimes there are other issues that are really important 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 money than they should so when the stock market goes down they don't have the capital to meet the margin Arjun corks demands these margin used to clients have happened repeatedly including the beginning of two thousand eighteen when funds that had borrowed money to bet against stock market volatility holy the so-called Vicks got their heads. They were short the vix betting the market remained calm stupid people and against them. They bought the S. and P. Five hundred hunter using borrowed money again real stupid when the stock market fell these managers were forced to sell their S. and P. Five hundred positions in I'm wide their trees. There was so many matches doing just once that they're selling it ended up causing severe market wide losses. These mortgages breakdowns often occur after several days that are where the market's damn that's why <music> I'm often reluctant to tell you to be aggressive in the first few days of a big decline because there are always going to be margin clerks against these managers who bought buy stocks with borrow money. They're going to have to keep chopping chopping. How do you spot the lines and when they're going to be over? You know what I use the clock margin clerks don't want their firms to be on the hook for overstretched individuals hedge funds sounds so margin clerks demand the collateral put up raise some cash or they sell you out of your positions without your say so I always consider the margin clerk the butcher and the butchering during occurs between one and two o'clock. If the selling runs its course by two forty five PM. Yes I find it to be actually that specific then. I think you have a decent chance to start buying MM safety stocks. The kind of stocks do tend not to be not to need the economy to be strong in advance to advance like healthcare stocks. You might also want to buy the stocks of the fastest growing in companies with great secular themes that were in any environment and I talk about them all the time. What else can create Bible opportunities so awesome overseas? I cannot tell you how often I've heard commentators who scare the Bejesus out of us because of imported worries from say Greece or Cyprus Turkey Venezuela Mexico countless other places. I always tell you to ask yourself. Self woes really impact the stocks of the American companies. You've invested in how much we should pay for them Jersey any real impact do they make really make you you want to pay dramatically less for individual stock usually no unfortunately you can't just start by hand over fist. You should always assume there are people who don't understand Stan how unimportant these worries are the best things and of course these people going to sell even panic sell if you would have thought that they know better that's why these international clients often lasts for three days again the best way to figure out if through tons to watch the clock as a sellers usually need to be margin doubt against the world. There's going to be a bottom the kind of self the I._P._O.. Related decline remember at the end of the day stock markets are more. It's first and foremost end markets are controlled by supply demand so if the back start rolling out lots of new I._P._O.'s and then those companies sell more shares bears via secondary offerings you could end up situation where there's just much too much supply not enough demand my suggestion avoid the blast zone. Please the air most of the new I._P._O.'s are concentrated and focused on the stocks that are down because of collateral damage. Sometimes we get declines triggered by multiple simultaneous earnings shortfalls. You need to be real nimble. These you WANNA buy stocks after earnings induced was pulled back isolate. The sectors with shortfalls are occurring and avoid them. There's no reason to be hero here. People instead buy stocks that have been hit by much Puerto Selling V._V._S. and be five hundred futures that have nothing to do with what went wrong then. There's the chickens kind of risks one. That's really truly tolstoy. Ask political risk. I often find this risk tremendously overblown whether it's because because of strife between parties or policies or even all out war with the exception of course of nuclear war where money should be the last thing you're worried about. I'm not a political guy and I. Hey talking about this stuff with every stock you own. You need to ask yourself. Does this company director needs risk when it comes to Washington if not then you've got nothing to worry about however if you on something that's directly impacted by say a trade dispute with China government shutdown that could turn house pain. I O political risk is enticingly negative and fearful because there are so many many pundits everywhere waiting in and get their two cents. These guys want to scare you. My suggestion tune it out. Please instead look for companies that have nothing to do with the political fray even as their stocks have been brought down by it. I can't tell you how many times since nineteen seventy nine I've seen. Politics used as a reason to sell stocks. They may be reason to sell some stocks but really is anything Washington enough to sell everything here's about a mine. There are all sorts of sell offs but unless they involve systemic risk. They're going to prove to be buying opportunities. You just need to recognize why the solve is occurring no signs that it might be subsiding and then take action to buy not sell and never to panic stick wife Kramer you know me I always said add the smartest audience and television. I love to hear from you so let's get to some of your tweets first up at C._I._A.. Eighteen fifty seven tweets hi Jim. I'm a little bit of a dilemma Emma. My mad money is ninety five percent allocated but I know I should have more cash at the same time. I don't want to sell at the bottom. What should I do? Thank you very much in advance okay. This is really important. You gotTA listen me. Do not sell until we get some lift. I know that a lot of people feel there will never be lift. There always is and then after the second in day of the after the second day you sell it the opening okay next up a tweet from Todd Palley. Hey Jim Cramer. This could be new. Many you Hashtag Kramer a Hashtag mad muddy. Hey Kramer welcome Manmohan Kramer Seville veteran and make some friends kids got horse sense next up from Dave. Hey see in nineteen seventy-five truck and with Jim Cramer and audio book. That's gotten lots of us. I get something more out of Hashtag carefully every time thank you so much. I cannot believe how hard those audio books are to re. That took me about four straight weekends and a lot of nights. I'm glad you getting something out of next up a tweet from at Mike House five one six it Jim Cramer may have money on C._N._B._c. a little what how who number one bulls make money bears make money pigs get slaughtered applies to my p. five hundred index fund. It's been a long run. If this bedrock money for retirement you do not touch it. If it's money to put away for kids you do not touch for school. Do not touch it. I am talking about mad money that should be traded and taking some off the table not that basic Jason Index fought. That's be run for as long as you can. Stay still. I like to say there's always a market summer. aecom shot finding just for you right here mad money. I'm Jim Cramer Cenex time. Hey I'm John Harwood host of C._N._B._C. Speakeasy podcast listening to my in depth conversations with political decision-makers folks like John Delaney need the first declared Democratic presidential candidate for election twenty twenty along with Senator Sherrod Brown

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