Mad Money w/Jim Cramer 03/15/19

Automatic TRANSCRIPT

What if when interest rates rose your portfolio rose to the occasion, active income investing from Franklin Templeton reach for better? All investments involve risks Franklin Templeton distributors, inC. Why mission is simple to make you money on here to level the playing field, all investors. There's always work at summer, and I promised to help you find it. Mad money starts now. Cleaver? Welcome at money. Welcome new Cray. Mark. I'll be wanna make friends. I'm just trying to make some money. My job is Cain you but educate you so call me at one eight hundred seven four three CBC or tweet me at Jim Cramer. I'm constantly telling you the discipline. Always Trump's conviction. I say over and over and over again in other words, no matter how much you make love stock. No matter how enthralled you are with the underlying company if the rules say sell it. So subset sell sell sell. You sell it one thing I've learned in my investing career, no matter how much you might believe in something you violate the rules of the road at your own peril. But what are the heck to these wolves? Come from. It sounds like they were handed down from one high and carved into stone, tablets, then I like the laws of physics. She can't just deduce them from observing the way the market works. The way you can do say gravity. No the rules come from experience. In particular, my experience, I've spent nearly forty years in this business. And in that time, you better believe I've learned some powerful lessons, in many cases, I learned the hard way. And because I don't want you to repeat my mistakes because I do want you to have the benefit of my whole career tonight. I wanna lay out some of my most important rules for investing the stuff I really live by now. Some of this stuff may seem basic. But again, you forget the rules at your own Pearl. Back in my old hedge fund where I labor for a long time. I'd occasion convince myself that it was okay to make an exception to have a cheap day to ignore my discipline. Just this once for some reason that seemed compelling at the time, and whenever I broke my rules. Well, let's just say I got burn. It's like that old joke about the guy who goes to the doctor says doctor doctor it hurts when I stretch out and shake my hand around to which the doctor plus and don't do that. So what exactly should you be doing or not doing as the case may be? Let's stick down my most important rules for investing starting with number. One bulls make money bears make money. And pigs thing it's sorta. Look, I say this all the time because that's because so often in my career I've seen moments where stocks went up so much that people were intoxicated with their games. Of course, they'll slip they were jeans to hovers precisely at this point of intoxication that you need to remind yourself not to act like a pig. I I heard this phrase on the desk of the old trading of the legendary Steinhardt partners. I'd be having a big run some stock in the legendary Michael Steinhardt would tell me that I'd made a lot of money perhaps too much money. Maybe us being picked. I had no idea what it was talking about. I was just grateful that I caught a major game. Of course, not that long after we got a vicious show off. And I gave back everything I made. And then some that's one nine enshrine. The bulls make money Peirce make money pigs. Get slurred thesis as one of my rules. And now, it's so deeply ingrained that I've got a barnyard full sound effect buttons to tell the whole story as I just did the bull the bear the pig. And of course, the guilty just to be clear bulls don't have a monopoly on pinkish nece. The exact same idea. Applies to investors who press they're bits to aggressively in the short side. We've that's a major declines over the years but other than the dot com. Burst in two thousand in the financial crisis in two thousand eight two thousand nine systematic risk most docs did bounce back pretty quickly. And at this point that you've made a killing if you went long at the Lowes two thousand nine, but if you stayed short if you were pig gut greenie betting against the market when it was going down. You got slaughtered. Of course, it begs the question, how do you know when you're being pig? Look a legend. There's no such thing as stupid questions only stupid answers. But honestly, you don't need me to tell you when you're being a pig if you didn't feel greedy, but me hit an all time high and the NASDAQ in two thousand after three thousand point running almost no time flat you need investment advisor. In your psychiatrist if it took profits, you sidestepped the climb. If you let your winners ride you lost a fortune, the financial questions even more stark. If you're walking around earning a huge amount of stock in two thousand eight as the Bank started dropping like flies. You were beyond biggish. Why is this? We'll so important. It's simple. One of my chief goals is to help you stay in the game. The hardest part of investing is holding on through difficult periods. Take some short term pain. So you can have long-term games the people who got wiped out by the dotcom collapse. They tend to be the ones who never took anything off the table, where do they live house pleasure. They never felt greedy in their Piggott's snus. Well, got him slaughtered. Same goes for those who never came back from the financial crisis being cautious and ringing the registered. Near tops ended up. Keep you in the game. That's why I remind people every day have taken out your profit. Have you booked any gains at all? Or are you being a pig because you never know when stocks you own are going to really get crushed. You never know when the market could be just not really you can't have certainly if you assume stocks will keep going up forever industry line. I think you're going to be in for world of hurt. Sure. There will be times when stocks just keep going and going and going when I coined the term FANG a few years back for Facebook, Amazon Netflix and Google which became alphabet. I love them all but I gave up on Amazon after mazing run. Now, it continued to move up and up and up, but I felt like a pig for the stocks whose family profitable move. But then I felt like a fool one and kept on galloping bug me. But that is the price you have to pay for following these rules you need to recognize for every pile of. Cash that gets left on the table with the situation like Amazon, you're sidestepping gigantic losses like the kind. You would have had if you had stuck with the market in two thousand and two thousand eight experiences the term two generations of investors against stocks, maybe forever. So never forget bulls. Make money bears make money and pigs get slaughtered. And I'll keep them repeating it forever with the sound effects because it is just that important. We'll number two. Hey, it's okay to pay taxes. No one has ever liked paying taxes, but like death taxes are inevitable and unavoidable version of paying taxes on stock market winnings. Often borders on the pathological so many times people have gigantic gains, but they simply refuse to take any profits because they don't wanna incur taxes to cut into the winnings. Wall Street is littered with broken hearts of investors who made this kind of mistake couple of years ago. For example, I went to. A presentation from a prominent hedge fund manager who recommended buying the stock of Macy's because of the real estate. The stock had already run a great deal, and it was ripe for some profit-taking. But I know people who had owned it for years with hefty profits. And they didn't want to ring. The register why they would have had to write a check Dunkel Sam next thing. You know, the stock of Macy's is obliterated cut in more than half. And it wasn't a two for one split the mall. It hit a tipping point courtesy of competition from Amazon and the darn thing. Just got crushed those who didn't want to share the profits with Uncle Sam ended up with no profit at all what kind of lesson is that so make your peace with the tax man, some gains or simply unsustainable. Need to be taken a profit on paper is not the same thing as a prophet in your Bank account gains can be a federal the last thing you need is to be worrying about capital gains taxes when it's time to sell you sell in short. Stop fearing the taxman start fearing the loss. Man, you won't regret it and not same blow out of everything I'm saying, take some profits. Bottom one. Remember my top two rules bulls. Make money. Beers make bunny. And don't be greedy and a variation. That theme so K to pay the taxes. Don't be so worried about taking a taxable profit. Because you may end up with no profit at all, Kristen, Ohio. Chris. How do you think so much for having me Chris good avenue? So my question is we have a thousand dollars of disposable income and neither of us have a 4._0._1._K match with jobs. So we're we're basically just trying to figure out we have we have a mortgage. We're trying to figure out what would be the best thing to do with that extra thousand dollars of disposable income. Well, that's what it index fund is for. I mean. Yeah, you can take ten percent of that. And use it for mad money buying a share of something. And that's okay. By the way, I talk trades. We're one share five share seven shares. But you need it index fund to get started until you build up wealth. And then you can do it. How about Giacomo and Illinois Giacomo? All then thank you so much taking my call. Of course, recently on the show, you talked about how first time investors are younger investor should, you know, stay away from riskier asset classes until they have ten thousand dollars allocated mutual funds or exchange of spot. Yes. Now my question for you is seeing you know, all these crazy bull market that. We've got going on in the market ramp-up seemed crypto currencies go up if I don't have ten thousand dollars invested in mutual funds. Which would I be doing do I sit around and let fraternities path and just wait it out. Wait till I have my savings. Understand a young person. Look, I want people to be able to save. That's by principal goal. If you want to put some money aside, a Samat money aside. And do what I think is basically doing some gambling with it. I'm not going to stop you. But the thing that I most care about is getting people to save if you're saving that way with some risk as long as you understand the risk. I'm okay with it. But I cannot back away from the index funds as the fundament of how you invest Jeff in California. Jeff. Hi, jim. This is Jeff at Lake Tahoe. Thanks to you and your staff for your informative and helpful program. Thank you. I have a two part question pertaining to interest rates and specifically yield curves. Can you explain to us a home gamers, how what a platinum yoke Kurt means? And more importantly, why did the analysts say when there's in birded yoke or that it portends a recession coming into last part of my. Question is what happens if the ten year t Bill goes to over three percent, our that a fact the stock market and in two thousand eighteen and grab your skis and come on that and see us here in Tahoe. Thanks, very guy. Cow. I used to play Carson Devadas site. Okay. So I've inverting euchre fed is raise rates too, high rested curve goes down out ten five ten twenty years that has that is a curve that has shown in many cases to lead to recession. But in other cases, not so on that I'm not hard and fast in that rule. I do think that as rates go up business does slow that's undeniable, but we are such a low rate and businesses so strong that we can afford it. Mike in California, Mike. Good afternoon. Mr Cramer, Mike. Listen to things one. I thanks for taking my call number two is thanks for leading us nine to five or nine to five years down the right path this little extra money. So I wanted him. Thank you. Here's my questions here. I know you're not you're you're in a hurry here. Give it it's concerning dividends. Just women. Oh, do you take the money and put it in your pocket or do you put it back in the stocks? And if you do how do you make that work, and how do you set that up? Okay. You gotta do dividend. Reinvest just have to do dividend reinvest. It's just a checkoff basically, but you have to my travel trust not allowed to got to give the dividends away. And it's always hurt the performance. I always tell club members. Please reinvest just take that money because there's nothing like the calm pounding the great compound in that you get particularly with stocks that have good sprite. Remember my first two bulls make money bears. Make plenty and pigs get sworn please don't be reading please beat this and don't be afraid to pay the taxman on province. You earn? It's a lot better than buy things to loss. His AAC some day. Much more money had putting my nearly four decades of experience to work tonight. Handing down the most important wolves for investing help you navigate the stick. Don't miss a second of mad money. Follow at Jim Cramer on Twitter. Have a question. Tweet graver hashtag mad tweets sin. Jim Email to mad money at CNBC dot com or give us a call at one eight hundred seven four three CNBC miss something. Ed to mad money Dutt, CNBC dot com. Hey, I'm John Harwood host of CNBC's Speakeasy podcast. Listen into my in-depth conversations with political decision-makers, folks. Like, John Delaney, the first declared democratic presidential candidate for election twenty twenty along with Senator Sherrod Brown. Senator Elizabeth Warren and Stephanie trio of Emily's list. Those interviews and more on the Speakeasy podcast. Subscribe today. Newsflash. If you remember only one up being investor. That's it. Nobody's perfect. Everyone is fallible. And it's inevitable that we're going to make mistakes. It's just the nature of the business and the nature of unions. That's why if you're going to own individual stocks you need to follow a set of rules rules that are designed to protect you from yourself Wilson. I learned the hard way and that brings me to my next commandment. This is a real important one never buy a stock all at once. I can't stress enough to not under any circumstances by all at once. Now, no broker likes to fool around with partial orders. Like, I'm telling you give no financial advisor has the time to buy stocks thoughtfully over time. The game is to get the trade on at one level pig way. Make the statement by get the position on the sheets are in the portfolio. But from where I stand that's all wrong hundred percent of all you should never by. What once and you should never sell once. Instead what I want. You to do is stay. Age your buys stage, your cells use this term, the term we use. When Wall Street is work your orders. Try to get the best price over time and not necessarily in one day napi multiple days. Why? Okay. When I first started out federal money match. I really wanted to prove to everyone just how clever I was at how right. I would be. So if I felt like buying Caterpillar by golly, I buy it. Now by big by all one price because I was so sure of is right. Put me up fifty thousand tat ice cream, which means by fifty thousand cat as if I were the smartest guy in universe. No one could be spotted. I am doing big when I think back about that young Kramer with the most full head of hair, by the way, why can say is that I was one era that son of a gun arrogant, and I was wrong. What was my mistake? Well, if you want to buy fifty thousand shares Caterpillar, you don't pick them all up at once. That's really dumb. What happens if it goes down immediately? You'll feel like a dope. This my rule. Never by all at once. Instead, I should've been buying cat in increments of five thousand shares. I know it sounds measly if you're professional, but believe me, I'm right by gradually over time. Trying to get the best price could now you can put it on a small position in question fingers. Hope it goes down. So you can buy more and lower levels get better cost basis. Now, I know trade institutionally, and I know people would institutionalize you're saying chimp come on fifty thousand nothing, but you know, what I don't trade and size as we'd say, but I still invest invest for my travel trust and follow along at actual plus dot com. And whenever we have a new name to tell club members, we buy it and small increments say five hundred shares at a time where even smaller over the course of multiple days. It makes sense when you buy once you're basically declaring that the stock absolutely won't go any lower. Don't you think that's crazy when I say it, right? No one is that kind of insight buying gradually in stage is all about recognizing enter judgment is fouled. So why don't people do it my way why don't investors if they want five hundred shares next on mobile decided to buy it and say one hundred sharing commits I think it's because they want to be big too. They don't wanna waste the brokers time your broker wants to get the trade done. I know my broker's hated at my old hedge from when I would place incremental orders like on describing, but it's just playing Uber's to put a major chunk of your net worth into any stock all at once who knows maybe go into free full right after that's why you need to resist feeling like you're making a statement when you purchase the stock. I put and sold billions of shares stock billions Joe often, I got into the absolute bottom. How often the last price I paid with the lowest and then it was off to the races. Maybe one trade one hundred. I'm pretty good at this game so resist the air against by slowly even by over a couple of days as I tell them members of the actual plus dot com. Club humility beats Uber's every time next. Will want you to buy damage stocks. Not damage companies. Let's say the malls having 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 it's a whole shirt in the real world. You can return that merchandise get you that there are guarantees in warranties. Goro mainstream Wall Street, very different if you buy stock and it turns out to belong to a defective company. You you have to eat the losses. Hey is caveat emptor your rights cabinet money back guarantee? That's why you need to be very careful distinguish between broken stocks names that are down for no, particularly good reason. Maybe some macro costs and broken companies, which absolutely deserve this either. Stocks trade lower without you, sometimes damage companies can be easy to Sern. When valiant to being former role started plummeting from the two hundred and twenty fifteen combination slowing growth, balance-sheet fears and some chicanery with one of their former sees it wasn't a good sale to rush toward that I in tumbled from to sixty two down to the single. For bottom along it was worth by one fifty one hundred and fifty it's like an auction going down, but the ongoing problems at the company meant that the stock was downright toxic on the other hand. Sometimes stock will sell off for reasons that have nothing to do with the unwind company could be caused by ETF's or problems overseas. Washington worries Greece just because the stock is down that doesn't necessarily mean that there's anything wrong with the actual business. So how do we distinguish between a broken company and a broken stock complicated question? What I like to do is develop a list of stocks. I like very much I call this my bullpen in the actual plus dot com club. When Wall Street throws the sale with the whole market coming down. I use that as an opportunity to pick up the stocks on my list that was designed in a cooler moment with a cooler head. But the bottom line is that you never really know. And that's why this rule works in tandem with the last one you never buy a positional at once. Because what you think is really a damage doc might turn out to be a damage company. If you take your time you're much. Let's like. To end up with a large quantity of broken merchandise with framer. What if when interest rates rose your portfolio rose to the occasion, active income investing from Franklin Templeton reach for better? All investments involve risks Franklin Templeton distributors, inC. You want to build a portfolio of individual stocks bake, if since there's nothing wrong with getting all of your equity exposure from cheap index fund that mirrors, the S and P five hundred. We gotta be rigorous about it, which brings me to my next to the homework. Listen quoting up. My kids hated doing the homework. They thought it was punishment. Sometimes when I looked at what they were studying. I have to miss that. I found it pretty easy to sympathize with their point of view. What's the relevance of most things they teach in high school? How would help you later in life? Why even bother of course, that's a terrible attitude. I just really should take that back. But as a parent, I always encouraged my kids to study because you never know what you'll turn out to be didn't later in life. But I bring this up because I think that many of you have the same attitude to the homework need to do for stocks. You suspect it might be just as irrelevant to your portfolio schoolwork seem to be to my kids when I tell people that they need. Listen to the Starbucks conference. Call for instance, which is really good one. Or they know what the answer expecting from for Netflix, which is always about subscriber growth going to only stocks. They don't wanna hear it. They think I'm being a skull this one own. I don't want to do anything. When I remind people that doing the homework means listening to the conference calls reading research ports. They really want. No part of it. They look be some sort of old fashioned teacher the schoolmarm who's asking for way too much in this busy twenty-first-century world. That's just plain moon. People owning stocks without doing the proper research. I regard it as just plain lunacy. You never wanna do that. But people still do it. And they do it for couple of different reasons on the one hand there's the buy and hold school thought that you don't really need to keep track of what's happening the company because you're in it for the long haul that somehow makes it all ok on the other hand, you got people who just don't have the time to be that diligent for those of you don't have the time. I got the solution for you. Okay. Is it get someone else to manage your money or do? The smart thing invest in a low cost s and p five hundred index fund if it can't devote a few hours a week. You're put folio you really shouldn't be messing around with stocks. But it's the buying whole premise. That's a lot more pernicious back during the nineteen nineties by and hope became the Beal and all investing. You know, what I'm just going to hold onto that seem GI yet. A look that one up Google it because it has got to go back to one hundred where I bought it. Oh, man, I could substitute vertical net. I got one hundred comes and put in that sense yet. The experts say that if you hold things for the long term isn't everything supposed to work out for the best. Of course, this fostering took a real blow during the financial crisis. When so many people who practiced by whole wiped out. That's why voice been evangelist for buying and homeworking. What is the homework before you buy stock? You should listen to the consuls you have to. Okay, that's the minimum. You can go to the company's website. You can read the research Reince new stories Google that darn thing. Everything's available on the web, everything us so much more valuable now so much more knowledge that there really is no excuse you aren't up there. Begging at the golden. Saks library for some microfiche statements from three months ago, remember those like plastic sheets, but that was ridiculous. You gotta list where your fingertips, but if you fall back on the buy and hold strategy for any group of stocks and don't pay attention. I can assure you that you'll be soundly beaten by professional managers with good track records who 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 know Homer. It's not a strategy. It's just being lazy the next wills and other central that I harp on constantly diversify diversify and diversify. Some more always beat diversified control. Risk let some firm believer in the idea that if you control the downside, the upside will indeed take care of itself and control. The downside means managing risk. What's the biggest risk out there sectors stocks in the same sector? They tend to trade together, especially at extreme moments. You know that about fifty percent of the action given stock come. His down to its sector in some of these areas because of even higher. I don't care how great a text wasn't two thousand if you'd all your eggs in that one group, you just got scrambled. Same thing. Financial's two thousand eight oils two thousand fourteen from two thousand sixteen and there's only one thing you can keep keep you from getting nailed by the sector wrist, and that's diversification. That's why we play this game of MIT diversified. I've been planning since two thousand two I was like said diversification is the only free lunch business people make fun of me in the office because I say it so much, but it's the only investment concept that works for everyone. If you mix up enough different sectors in your portfolio, at least five you won't be wiped out. One group gets literate something happens for more often than you think. But at diversification so obvious if such a no brainer if every advisor and commentator under the sun has been telling people that do it for years. How's it did? Anyone can still be undiversified IV comes back again to the homework issue. A lot of people simply don't know what they own. They couldn't tell you. If you bumped into them. So they end up with. Stocks that are frighteningly similar that even knowing it. I still feel quite a few calls from people generally think that owning FANG is a diversified strategy. Hardly Facebook, Amazon Netflix and Google now alphabet, he won't variations of the same thing social mobile cloud. They trade together. That's what I call diversification. Or another no matter how much you all stocks get moments, usually wrong. I can't count as a portfolio made up of ExxonMobil's Chesapeake energy, and how I was say no to portfolio, by the way, I'm equal opportunity. Dislike her J J lo in Bristol Myers and United health, even for they just leave you way, to expose to healthcare risk that could overwhelm the whole group at once having an undiversified portfolio. It's not just an amateur mistake though. Many professionals don't let to diversify because the bizarre way that money management works in this country. If you concentrate all your bets and one sector in that sector takes off you pretty much everybody used to I find out there. That's the nature of the piece a hedge fund manager who. Does that and gets lucky can then market himself as a huge success? Get profiled every magazi- raise tons and capital from unsuspecting investors who don't realize how much risk the really truly taking on. Here's the bottom line. Whether you're an amateur professional, you always need to do your homework and keep your portfolio diversified. It. May not be exciting may not be sexy. But this is the kind of routine maintenance stuff that protects you from monster losses down the line, mice in South Carolina. Mike, Mike, South Carolina. Thank you for calling. Just wondering from a new investor Samna about one hundred dollars. What how many should be my portfolio? I've heard about thirty deal. I don't know if that's an alive or not enough. Well, I would tell you that after ten you're kind of a mutual fund. Now, look if you're real stock junkie guy, and you can take on a lot more than if you have help a guide to for the actual lords club. Then it's really not that bad, but ten is about the maximum that most people can do. So don't do more than that. Because you won't be able to do the homework. Let's go to Berta in Texas. Please roberto. Gen may be. Marica? I had a question about. Investor Twenty-nine about small now about fifteen hundred dollars. And I'm wondering how should invested and either index. We were planning simple fifteen hundred I ten thousand index fund. No matter what they start doing some mad money. Don't forget index funds. Keep you diversify and we like to diversify diversify diversify. Sure. Homework isn't fun. But you know, what lose the money's worse? Monster losses, homework and diversification or key stick with framer. Book. I don't wanna go all in the art of portfolio maintenance on you. But when it comes to managing your own money. You are often your own worst enemy. Don't take it. Personally. I'm my own worst enemy to what do I mean? But okay, if you want to invest wisely, you constantly need to be fighting off your own worst impulses. We're not robots we have emotions those emotions can really throw you off your game. That's why the theme of tonight's show is disciplined Trump's conviction you obey the rules to that. You do the smart thing. Even when you're motions, you're telling you the opposite, which brings me to my next from vesting nobody ever made it dime panicking. Panic to meet, frankly, it's not a strategy. Panic is not a strategy that you see it over and over again if it is a stock gets hammered. Then invest yoursel after the hammering the markets crushed when people bail at the end of the day in short something gets an eyelid and people can't take the pain. So they. Panic is the operating instinct in all these cases, there's something Basic Instinct of panic about the desire to flee. If you're a stone age hunter gatherer who accidentally stumbles a family of grizzly bears. Paddock pretty helpful. But. It tells you to run away, but it started useful motion when it comes to analysing the stock market where you're running away when maybe running toward the truth is almost always be a better time to sell in a panic. A better time to leave the table. Then whatever moment inspired you to panic in the first place in tone. I know it back in two thousand ten was on the air for the flash crash when the market fell nine hundred points in less than a half hour. I watched the monitor for the ticker, the crawl underneath picture. And I couldn't believe what was happening people were dumping stocks simply because everyone else was dumping stock. Didn't even know why they were dumping. And that's what a panic looks like that's textbook. I viewers right there on the set to pick a stock. They loved and by using limit orders. So you wouldn't have to accept the price. You didn't like the result to this day? People still come up to me. In fact, me for that advice during the flash crash, but I simply put my rule into practice realize that nobody ever made a dime panicking. And then I tried to help you profit from. I did this. Same thing back in two thousand sixteen when we had a thousand points off of two days, I told people to buy down, but only using the mid orders, and that's what we did for the chapel trust which you can follow by joining the actual plus dot com club. We got outstanding by simply because we stayed calm and took advantage of everyone else's panic. So the next time there's a big market wide sell off, and you feel like fleeing and never touching stock. Again. I want you to do something for me. I want you to take the opposite side of your motions the opposite side of the trade when you see one of those high speed routes of a sector even individual stock. What by little get a feel for see what I mean, the most rewarding trade you can make are those where the decks have been cleared out by terrified folks, using market orders who did them get that the exit doors aren't as big as they think they are minute. I'm not actually saying what you just by every stock every every sell off. They're not all worth buying often when people freak out. About an individual company. It could be with good reason. But I am saying that it's a rare moment when you won't get some sort of bounce after big decline. So the next time you want to dump everything take it Tepe breath. And wait for the rebound before you sell rather than rushing to join the fleeing masses, you could get trampled. Hey, speaking of hideous down days, I've got another. We'll that can help you handle big declines ready when the stock market gets unrelentingly negative. Remember that he who defends everything defends nothing? Now. It was true and Federick great set it to it in fifty years ago. And it's just as true now granted he was talking about battled plants, and we're talking about put folio plans, but the point stands, so huge defends everything defends nothing. What exactly does that mean? It's about how you evaluate your holdings when the market's flying many stocks were in bull market mood. You don't need to worry about most of your positions. More exposure the bull the batter right? But when things get difficult when you're on the defensive recognize that many of the stops you bought during better times might not fit the new environment. In short when the economy's slowing in the markets getting slim can't hang onto everything you might wanna own. If you try to defend all of your positions in a market that turns against you. That's a recipe for you to be get blown out of the stock market. And when I say defend I mean, you can't treat a declining market like it's a buying opportunity every single stock your portfolio, and you just keep chipping away. If you do that, you'll quickly went out of capital. Anyone would leave you unprepared to buy more? If we do go lower. Maybe they're pushing lower yet when the market gets negative you need to get more selective. Focus your efforts. That's why rankle my stocks at all times. From my action alerts plus dot com. Club members ones stocks that I buy right now twos or stocksi by this. Threes are stocks. I'd sell maybe into strength that way. I'll know which stocks, I should defend when things get tough. I make this plan not in the heat of battle. And then I know wants to cut or use the sources of capital to buy the ones, let's say techs kitty hammer, but you think it's going to read them it's important that you don't try to hang onto the whole complex pick. The best tech stocks that you want to buy the weakest toss out the rest raise cash used as newfound cash reserves to buy the stocks of higher quality tech companies that lower prices, that's. The nonsense the ones that have no catalysts. And you only own because you wanted exposure bull market. They get the heave-ho immediately. When things turn bears Karen Kramer with be free ears. Hedge fund used to call this circling the Y gins around your best names the first few times, you do it. You'll curse yourself because you might end up slaughtering stocks. They even for quite some time, but eventually to experience a number of rough markets, you realize just how valuable this process is because over time you'll end up with great cost basis on the stocks. You really like the bottom line? Great investors, ignore their emotions when those emotions get in the way of making money. So the next time the market gets slammed don't panic. Nobody ever made it done by panicking. But also don't double down just with your eyes closed. The whole portfolio the weakest vicious negative markets can give you buying Kinney's. But you need to focus your capital when you're absolute favorites rather than chasing bargains in lower quality merchandise when it turns out, they weren't barg. At all rich in New York, rich. Hi, Mr Cramer. It's the player. How are you? We explain I'm good. Thank you, could you please explain the technique of buying calls. And if it could be or should be used by us home gamers boost or pad are portfolios. Hey, look, it's a great question in this area and brothers. I don't know if you ever seen them they've done some fabulous work on options. And there's also options actions and finance June. They are they can be lowest way to be able to limit your exposure. And if you get the book getting back to even one hundred page exposition of how to use calls to limit your odd downside and get maximum of side exposure, getting back to even David and California, David. Jim cramer? Thank me L. Great. You call. All right. So quick question for millennials who are somewhat knowledgeable about the market where should they invest their money? Other than fangs. We know what there's a lot of different FANG like names and all sorts of different industries. I I like airspace. That's a long-term bull market. Maybe get something in that. I like a little bit of foreign exposure. And I think that that's such a bad idea. Maybe an ETF that has Europe because Europe is way behind where we are. And we'll be that way from multiple years. And then I think that you know, what if you're really young one look at some riskier biotech, stocks got your whole life to make that money back. All right. Remember most have no place in invested. They get in the way of making money. So the next time the market gets Lynn, please don't panic. Nobody ever made it done by panicking sell us. Can you job? Opportunities. Look, you need to do your homework. Don't chase and don't buy damage merchandise just game stocks monies back at. Welcome back. Tonight's check yourself before. You wreck yourself addition of may have money. I'm a big believer in the idea that once you get some money saved up you are in control of your financial destiny. But that also means you need to be very careful because you're the one with the most power to G rail your financial future. Mistake. So as part of the investing, and you can't move them out. And you can't along. I just wanted to be sure that you don't make the same stakes twice or three times or endlessly for that matter. And that's why I've rules for investing to protect you from the kind of misjudgments that I used to make when I was young and inexperienced wills like. For example, don't own too many. That. Hedge fund, I would spend three hours every day in the mistakes the day before you wonder why retired so sick to my stomach every single day. That was my major task one that I complete every morning for anyone else came into the office. Do it generally between four AM and seven AM. Some people are night. Owls early morning. I would analyze every losing trait. You don't need to analyze the winners. They take care of themselves. I try to how I could have made more money were much more importantly lost less money. I was for lack of a better word maniacal about it. And if a couple of years, I hadn't a Pitney I realized that could performance could be linked directly to having fewer positions in short when we own fewer stocks, we tended to make more money. It was just axiomatic. And that's why ever since I won't buy stock without first taking different one off the table. And I try to do that for my child trust. Which is the only way you really can do it these days, you don't just buy shares in more. Companies you need to limit your holdings. That's a great discipline. And when you should adopt pronto, all the bad money managers. I know of have hundreds of positions they keep track. Those I don't know how the heck he was supposed to stay on top of more than thirty all the really good money matches have a few names, they know inside out which means they can buy constantly on the way down when the market goes awry, that's why don't own too many stocks. Now, I know could be constraining you'll end up selling some stocks. That are good for stocks that aren't as good I know that hindsight's twenty twenty but take it for me as someone who's own stocks for forty years. It's former like that you'll be selling marginal companies in order to get bigger in better ones. That's how to make a portfolio really worth you. That's portfolio magic. You don't want to be mutual fund manager. Right. You might as well give it to an index, by the way, the time I lost the most bunny is a hedge fund manager my sheets by positions were thick as a brick when I made the most bunny my sheets will well one sheet of paper doublespace and Iran, hundreds of millions of dollars. So please remember whether you're pro or amateur. It's almost always possible that you have too many positions will if you're just investing for yourself, and you will more than ten positions. That's right. If you more than ten Stotts, maybe pare back of it. So you can have too many stocks. But you know, what it's very hard to have too much of cash, which brings me to buy next is for wimps, the watchman version to cash in this business breaks, my heart times cast is a perfect investment that it drives me crazy how few people recommend it. Now, they hate the market. So they're only ninety five percent long instead of one hundred percent, whether you think the market stake. So they decided to short a few. You high fliers against their long positions. They own. No, no, no. As an investor that is absolutely wrong way to approach things. You don't like the market. You don't like any sectors, then sell stock raise cash don't buy put options in the stocks who own or find other stocks short against your current current positions. The odds if we do not favor you winning on both stocks the short and long. It's a strategy whose goal is mediocrity. But if you can raise some cash and put it to work at lower levels. That's the best way to protect yourself against the lousy market. Let me tell you a little story. Now, I was one of the biggest option traders from Wall Street for time. And I can tell you that when I put put off shes to hedge positions. I almost always ended up losing money. When did I make money when I put put put up Sion's to profit from low quality companies that we're going to have I thought shortfalls or stocks seem hopelessly overvalued versus the fundamentals. If you dislike the market, you don't need. Depend yourself into pretzels to hedge against downside risk though. Just sell some stocks go into some cash. Which is short term treasuries of less than a year variety. People are talking about how little cash earns although it sure earning more than it did a while ago or they say keeping cash that's for losers. No caches for winners. Especially if you think there's a major disaster head or the market's going along so off not up in a different time. I only when I had niche. I can't short it. All right now by contract, not even for the chapel toss. But back when I could I didn't short stocks for the ticket happens some shorts against the longs. I don't care about not having enough exposure by care about not losing money. So if you don't like the market if you think there's nothing compelling to buy into any week. This I suggest that you sell stock and raise cash silence. Nothing wrong with that way for the situation to improve. It's never the rule in call. When you don't like the tape. You can't find anything to truly make sense view. The bottom line. Always be careful not to many stocks and not have too little cash stick with Kramer. Tweets a pilot up. Holy cow. Let's start with one from Quinton who asked axiom caver. What should I put bonds in my retirement account, currently stocks ETF mutual funds at twenty five years old slash tweets. Okay. I don't want bonds until very very late. I liked to actually extend it a little here and say that not until you are in your late fifties. Do I want to start seeing a lot of bonds why because people live longer than they used to in bonds don't generate enough return about higher yielding dividend stocks. That's what I go with moving on could at Germano friends on one of our next producers. He says at him, Kramer, med twats tweets, whatever I would like to see from you a show titled typical errors of emotional investing. Well, that's a great idea. And I'm going to do it because I do know that over and over again emotional investing produces major mistakes that lead to big losses. You gotta check them at the door. And I will do that for you. Another tweet this one from Steve Daniels who says act, Tim Kramer. What are the types of index funds you recommend besides that mirrors, the S and P five hundred tweets? Okay. There is a place called vanguard and Vanguards terrific. And they have a thing called the total return fund of all stocks that one is one of my absolute favorites stick with cream. Crame? The earnings over limbless, but Kramer, has burned the midnight wild. And he's ready to run the all week Kramer, sits down with some of the markets. Most influential cease week players join that money from must see interviews. You can't afford to this. I like to say, there's always market summer, and I promised ratified it just for you. Right here. Mad money. I'm Jim Cramer and seeing next tie. At fidelity, you get value. You won't find anywhere else decisions. They're clear costs they're lower than ever and account fees. There's zero so you can invest with zero trade offs open and account today at fidelity dot com slash trading zero account minimums zero counties apply to retail brokerage accounts. Only expenses charged by investments such as funds managed accounts and HSA's commissions interest charges or other expenses for transactions may still apply. 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