Tonight’s CNBC “Mad Money” was a repeat of an original episode that last aired on Aug. 30, 2008.
Watching from the sidelines will not make you a great investor. Being willing to get in the game and stay in it is the only way to become that investor. It can be hard to keep your head in the game, but there are three “forces” Jim stated that keep people out of stocks, they were: “boredom, bummers and brokers.” Boredom was called a big problem. A recipe for disaster is when the market players are not interested in the stocks they own, and when attention is not being payed unexpected losses will come. If people invest and stay interested they can make a fortune. Speculation was called a cure for boredom as it makes them feel like they are good investors when successful. Speculation can be considered “foolhardy and more immoral than gambling” but Jim has made some of his biggest gains speculating and he called it “good for investors.” He told us that it is “OK and necessary to speculate.” When talking diversification, Jim is referring to it across sectors, and unless you own some high risk stocks you are not really diversified. A few ground rules of speculating were laid out. The first was “never invest retirement money in speculation.” Second “do not ever have more than 20% of non retirement portfolio in speculative stocks.” A tiny bit of money should be put in speculative stocks, “make 1% to 2% of the portfolio if you are that conservative” he said. Speculation is small cap stocks with a market cap of between $250 million to $2 billion. These are usually less expensive per share, selling from $2 to $10 per share. A catalyst should be lurking and often speculative stocks are unprofitable. You should never buy a stock with no revenue or sales, but a stock with accelerated revenue growth. Two ways to go about speculating is to either pick an individual stock with which to speculate or they can speculate on a sector trend buy putting together a basket of stocks. With the whole industry, people should not miss out by buying the one stock from that group that gets left behind. Cast a wide net and spread the risk around. An industry that has been knocked around and beaten up should be sought. Speculating means always trading too. These small stocks will generally move up or down a great deal. You should have an exit strategy too as to not endanger all of your gains. A good investor should be “excited, interested and careful” Jim says. Worse than boredom is losing a lot of money. If Jim were to quit every time he lost money he would have never gotten anywhere. A magic formula against losing money he does not have, but giving up is not the answer. Two rules for damage control were: expect corrections and do not fear them. The S&P was used as an example as a correction when it had a decent run and then fell in May through June of last year. After bottoming the first half of June it came roaring back all the way through December. People who lost money would have been tempted to give up on stocks due to where the market had climbed and giving up would have been a bad idea. Investors need to understand that sometimes stocks go down and keep going down. They need to be psychologically prepared for big corrections like the one that started in May so they’ll develop a “superior attitude” and stay in the game, he said. The next rule is about preventing losses, Cramer continued. One of the best ways to try to avoid losses is to “watch out for multiple contraction,” which means that the market will start paying a lot less for the same amount of earnings, he said. If players see a “marketwide nosedive” or a “big, ugly downturn,” especially one that’s caused by interest rate hikes, they should identify and sell their high-multiple stocks, as they are the only certain types of stocks that are “truly vulnerable” to multiple contraction, Cramer said. As severe multiple contractions usually won’t occur a stock until the company reports earnings, people should sell their high-multiple stocks before the companies report, unless they want “a world of pain,” he advised. Lastly, Cramer urged his viewers to place limit orders instead of market orders. “Limit orders keep you in the driver’s seat, they keep you from being totally ripped off, and they’re really easy to execute, he said. “Please, if you listen to nothing else I say, use limit orders instead of market orders.” Join the fastest growing community of small cap investors at Stockhideout.com

This show originally aired on Aug. 4, 2008.
Jim Cramer told investors that it’s important to learn how to limit your losses when you’re investing. Cramer introduced 25 rules that will help market players avoid big losses and play it safe when investing in the stock market.
1. Stay Diversified. Cramer reminded viewers of the losses that investors took in Enron when they weren’t properly diversified.
2. Buy and sell slowly. Don’t buy or sell any position all at once. Look to enter positions slowly, using sell offs to add, and take profits in the way up.
3. Your first loss is your best loss. “If your thesis on a stock changes, take the loss and sell.
4. Dividends limit losses.
5. It’s always good to have some cash. Professional investors always allocate a percentage of their capital in cash.
6. Don’t own too many volatile stocks.
7. Know what you own so you don’t buy into a broken company.
8. Don’t own low-dollar stocks it can wipe out a portfolio.
9. Accounting irregularities equals sell.
10. Stay away for two quarters following an earnings shortfall. It takes at least six months for a company to turn itself around after a screw up.
11. When your broker stops talking about a stock, it’s time to sell.
12. After a big run, get defensive.
13. If a stock’s dividend yield is twice that of Treasuries, sell it. Dividends that high are a warning sign that the yield may be in trouble. There are two exceptions: oil tanker stocks, whose yield is based on their day rates, and master limited partnerships.
14. If a company has a new CEO, stay away.
15. Never turn a trade into an investment. If you bought a stock because of a specific catalyst, sell it when that catalyst doesn’t materialize.
16. Never sell call or put options.
17. Never use margin.
18. Never buy a stock at its all-time high. Wait for a 5% to 8% pullback before getting in from the all-time high.
19. Play with the house’s money. Take money off the table as stocks go up until you’ve recovered your initial investment.
20. Keep your head clear. When times are hard it’s okay to sell.
21. Contribute to retirement accounts throughout the year. Don’t invest in that 401k all at once. Spread your retirement investments out during the year and contribute more during the months when the market goes south.
22. Mutual funds should be diversified, too. If you have money in multiple funds, make sure they don’t all invest in the same kind of stocks or sectors.
23. Playing defense is crucial in volatile markets. Don’t wait for stocks that are down a lot to recover. Bad stocks usually go lower.
24. Invest in stocks with buyback programs.
25. Don’t stop looking at your monthly statement. Get the scoop on tomorrow’s hottest trade ideas TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!

“It’s OK to sell stocks in a down market,” Jim Cramer told fans of his “Mad Money” TV show Monday. “Just don’t sell everything,” he said, as he highlighted his rules for surviving a difficult stock market. Cramer said investors should never be afraid to sell stocks when the market turns south, but they need to use discipline, and never panic and sell everything. Over the last few months, he’s been advocating that investors secure what money they may need in the next five years. Cramer said if investors are buying a house, paying for tuition, or buying a car over the next five years, it may be smart to hold money allocated for those purchases in cash. “Take the money out of stocks, and keep it in cash or equivalents so you can sleep comfortably at night,” he said. Cramer highlighted another to sell stocks, and that’s to build up cash positions to buy them back cheaper. “The worst markets make the best buying opportunities,” he said. Cramer told viewers that the chance to buy stocks at Dow 8,000 is a great opportunity that they may never see again. Only by selling stocks into strength will investors have the money they need when the bargains reveal themselves. However, for retirement savings he advised against selling. “Retirement is for the long term, and that money should stay in stocks. We go through bad spells, it’s happened before and it will happen again,” he explained. Next, Cramer identified three types of stocks that can be owned, even in bar markets. First are the recession-resistant stocks. He said that any company that makes something you can eat, drink, smoke, wash with or use to cure diseases can all be bought in bad markets. Next are stocks with strong fundamentals that trade at or near their cash value. Cramer explained that these companies have strong balance sheets, which provide a floor for their shares. Finally, are the stocks that have “accidental high-dividend yields” because their shares have been beaten-down so much and are now yielding over 4%. Cramer said he trusts the high yielders because many of them are industrial companies, such as Nucor (NUE) and Caterpillar (CAT). Many of these companies have long histories of paying dividends and little risk of a dividend being cut. “The accidental high yielders are reliable,” said Cramer.In a bad market, Cramer said the way to play high yielders is by buying them on a scale based on the yield. For example, an investor can buy a small position when the stock yields 4% then buy more as it yields 5%, and even more if its yield reaches 6%. “There’s a dangerous word being tossed around the markets, and that word is cheap,” Cramer said. He warned investors to beware of anyone using the word cheap because cheap can get you killed. Cramer explained that it’s natural to assume stocks are cheap after the markets have fallen thousands of points in just weeks. However, he told viewers they concentrate not on stocks that look cheap, but on stocks that will go higher. He said the worst reason to buy a stock during a downturn is because of valuation. Cramer said in a bear market the old equation of earnings times multiple equals price gets thrown out the window. The reason for this, he explained, is because in a bad economy no one knows what the earnings will be.  Without earnings, there can be no multiple, and without a multiple there is only free fall. He said this premise is especially true for cyclical stocks. These companies need a strong economy to turn a profit. These companies can go from a profit to a loss fast, all while their estimates are still way too high, making them appear cheap. The bottom line, when investors seem to be selling everything, looks can be deceiving, and cheap can get even cheaper.
Hedge Fund Power
Cramer told viewers that another way to avoid bad stocks in a downturn, is to know who the fellow shareholders are. “In a nasty environment, who owns a stock is almost as important as the stock itself. “Your fellow shareholders can become your worst enemy,” he said. Cramer said investors need to be suspicious of any stock that is owned be a large amount of hedge funds. He explained that in down markets, when hedge funds start losing money and are hit with many redemptions, it forces selling that pushes the stock and the market down significantly. Cramer said when several hedge funds start selling a stock it can be disastrous for the share price. Also, money managers tend to think alike, and if one fund is selling they often all follow along. “Hedge funds have the ability to roll back tremendous multiyear gains in just months,’ Cramer said.
Bottom Call
Cramer’s final suggestion for investing in bad markets was to avoid calling a bottom. He said if investors aren’t sure of a bottom, they will get burned. Cramer said in order for a true bottom, and not a trading bottom, to happen a few things need to happen. First, things need to stop getting worse. “The bad news can’t be priced into a stock if the bad news is still happening,” he said. Second, the markets need to see capitulation. Sentiment, he explained, needs to be entirely negative. “You don’t bottom with a lot of bulls out there; you bottom when most of the bulls are converted to bears,” he said. Cramer pointed out that a bottom will only happen when there’s no one left to sell. “That’s when you get a real bottom, and not a false bottom,” he said. Join the fastest growing community of small cap investors at Stockhideout.com

Word On The Street
Melissa Lee hosted CNBC’s “Fast Money” TV show Monday night. She started the show by asking the traders if they see any trading opportunities in the light volume market. Joe Terranova said the market is so uncertain that you can’t rely on fundamentals or technicals. He told viewers that the Dow and S&P 500 tested their 50-day moving averages and now we have to see if they hold. Guy Adami said he likes Target (TGT) for a long trade with a stop at $32. He also likes Rohm & Haas (ROH). Pete Najarian said he doesn’t really expect anything to happen until 2009 when investors with trillions of dollars on the sidelines make a move back into the market.
Dow Chemical’s Future
Lee asked the crew on the Dow Chemical (DOW) deal with Rohm & Haas after the Kuwait government pulled out of a deal to buy half of Dow’s plastics unit, which would have been used to finance the Rohm deal. Terranova said the deal fell through because of declining oil revenue in Kuwait. Adami said buy Rohm & Haas when the stock has a $50-handle. Najarian told viewers the trade is to buy Dow Feb 15 calls against the Feb 17 calls.
Oil Moves On Geopolitical News
The traders talked about the spike higher in crude oil today as investors digested the news that Israel attacked Hamas. Terranova thinks we need to get contango out of the market before oil can make a move higher. Adami pointed out that gold is making a pennant formation and if it breaks the trend it could surge much higher. Najarian said investors should consider buying options in Freeport McMoRan (FCX). Macke said he is selling all the commodities stocks because he thinks they can move much lower.
Options Action
Najarian mentioned that he is seeing unusual options action in Linn Energy (LINE) January 15 calls. He said traders are positioning for a move higher in the stock.
Fed’s Balance Sheet Chat
Lyle Gramley, former Federal Reserve governor, joined the traders to talk about the Fed’s balance sheet, which has grown from $950 billion to around $2.25 trillion. Gramley said the worry for 2009 is not inflation it’s deflation with the drop in oil and the global economic slowdown. He said the Fed needs to be aggressive and do whatever is needed to bring back the economy. “I think the Fed is going in the right direction,” he said. However, he thinks the Fed must shrink the balance sheet back down later.
Dow Dogs
Lee asked the traders to comment on  the Dow Dogs like Bank of America (BAC), Citigroup (C), General Electric (GE), Pfizer (PFE) and Aloca – which all have dividend yields of 7% or higher. Macke said the Dogs of the Dow is statistical backdating and it doesn’t work. Najarian told viewers not to measure these stocks by their dividend yields. He said these companies will have to own up to the fact they should not be paying such high dividends. Terranova said he likes McDonald’s (MCD) for a Dow stock play. Adami prefers Kraft (KFT).
Chartology With Carter Worth
Carter Worth, chief market technician for Oppenheimer Asset Management, said he expects the S&P to ride along current levels for the next 8 months. For gold stocks, Worth told viewers to sell names such as Barrick Gold (ABX), Goldcorp (GG) and Newmont Mining (NEM) because these stocks have run-u 100% off their October lows, while gold has only moved 25%. Worth said the decline in oil looks overdone here. He said talk of $20 a barrel oil is probably as sill as talk of $300 oil. He recommended getting long oil here.
Trades for 2010
Lee asked the traders for their forecasts for 2010, since 2009 is already looking bad. “I think in 3 to 5 years energy and natural resource stocks will move higher,” says Terranova. “And eventually Africa will resurrect itself and that alone will create demand for energy and natural resources.” He told viewers he likes stocks such as Exxon Mobil (XOM), Schlumberger (SLB) and Freeport McMoRan (FCX). “There still is a fundamental story underneath all these names of how you grow future supplies. But again these stocks are a longer term story,” he explained. Adami said natural gas stocks like Chesapeake Energy (CHK) look attractive 3 to 5 years out.
POPS&DROPS
Pops- Satyam Computer Services (SAY) rose 6% after the India-based software firm announced it canceled an acquisition. Najarian told viewers to keep an eye on this stock. Barrack Gold (ABX) added 2%. Terranova said sell the rally in gold stocks. Standard Pacific (SPF) traded up 11% after UBS upgraded the stock to buy from neutral. Adami mentioned he wouldn’t chase this stock. Carmike Cinemas (CKEC) soared 14% after Billionaire Marc Cuban reported that he took a 9.4% stake in the company. Najarian pointed out that Cuban is jumping in big to the Cinemas.
Drops- Amazon.com (AMZN) fell 5% despite reporting its best holiday sales on record. Adami said people looked at Amazon’s valuation at 34 times forward earnings and sold it. Walt Disney (DIS) lost 3%. General Motors (GM) dropped 2%. Terranova explained that GM’s December auto sales are going to be down 42%. He said if you want to trade the auto sector buy Toyota Motors (TM). Cabela’s (CAB) plunged 23% after the specialty retailer of hunting and fishing gear reported weak holiday sales. Macke said get long Dick’s Sporting Goods (DKS) if you want to play the sporting goods sector. Ann Taylor (ANN) lost 12% after the retailer said it plans to close down stores. Adami says “not a good sign if you’re selling things.” NordStrom (JWN) dropped 3%. Terranova explained that its a problem that JWN is putting their credit card business on the balance sheet. Cal-Mine (CALM) traded down 8% after the egg producer said second-quarter profits fell 32%. Macke mentioned their input costs are going higher and they aren’t able to charge as much.
Trader Radar
Shares of Liz Claiborne (LIZ) were among the most active names on the NYSE Monday.
Final Trade
Macke picked Toyota (TM). Adami selected Target (TGT). Terranova recommended getting long Schlumberger (SLB) for a play on oil. Najarian said buy Siemens (SI). Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!

Jim Cramer told fans of his “Mad Money” TV show Wednesday, that all he wants for Christmas is for a bottom to occur in the housing market. Cramer explained that if the housing market can find a bottom, the rest of the economy will most likely follow. However, Cramer thinks that housing can only bottom if the government takes the right steps or grants him four Christmas wishes. First, Cramer says Treasury Secretary Hank Paulson needs to promise not to give any of the TARP money to the homebuilders. Second, Cramer mentioned that President-elect Barack Obama needs to provide tax credits for people who buy a new home. Third, he wants to see some homebuilders go bankrupt or merge because he feels there are just too many builders out there. Finally, Cramer said the Federal Reserve needs to keep lowering interest rates until home loans get to 4.5%. Cramer told viewers that if everything on his list happens we could see a bottom in housing during 2009. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!

“It’s no secret that retailers are in trouble this holiday season,” Cramer told viewers of his “Mad Money” TV show Wednesday. However, despite the problems Cramer sees opportunity in the sector. He pointed out that 20 retail stocks currently trade at $10 or less and he picked his favorite three of the bunch. First up was Bebe Stores (BEBE). Bebe trades for under 16 times earnings and has a strong balance sheet with $3.91 in cash per share and investments, plus a $30 million stock buyback program. Second on the list was Jones Apparel (JNY). Cramer mentioned that Jones is taking market share from rival Liz Claiborne (LIZ). Also, the company has a strong partnership with Walmart (WMT) and Macy’s (MO) and the shares could be near a bottom. Finally, Cramer said he likes American Eagle Outfitters (AEO). He said the company has a strong balance sheet and is increasing promotions to bring consumers back to its stores. Cramer thinks the company will be able to easily beat lowered earnings estimates. Chat and share ideas with the best small cap traders LIVE each day free at Stocknetworkonline.com

Jim Cramer had harsh words for the $80 billion bailout of AIG (AIG). He said the problem with the bailout is that we have no accountability for how AIG is using taxpayer’s money. He compared AIG’s bailout to the auto bailout, which was a mere $15 billion and highly hated by the public. AIG shares have dropped 70% and nobody in congress has called for hearings or spoken-out against the insurance firm. Cramer said its true that for every auto job lost, nine more will follow, but capital continues to be allocated towards AIG without any oversight. Join the fastest growing community of small cap investors at Stockhideout.com

The first caller was long the following stocks: American Electric Power (AEP), General Electric (GE), Home Depot (HD), AT&T (T) and Pepsi (PEP). Cramer said this caller has a diversified portfolio. The second caller’s top holdings included: Bank of America (BAC), Diageo (DEO), Enterprise Partners (EPDO, Merck (MRK) and Verizon (VZ). Cramer said he loves this portfolio. The third caller held positions in these stocks: Con Ed (ED), Verizon (VZ), Caterpillar (CAT), Nucor (NUE) and Energy Transfer Partners (ETP). Cramer said blessed this portfolio as diversified. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!