Final Trade
For the final trades segment, Terranova liked Intel (INTC), Adami picked Wal-Mart (WMT), Finerman recommended Dynegy (DYN) and Najarian liked Ford (F).

This recap last aired on Dec. 26, 2008.
“Investing is all about discipline,” Jim Cramer told viewers of his “Mad Money” TV show Wednesday. He said it’s not enough to know which parts of the market are working or which stocks are buys and which ones are sells. The key to successful investing, Cramer said, is to know thyself. Far too many people invest like gamblers, said Cramer, and not even good gamblers. “Investing isn’t a game and it’s not random,” he said. Investors need a plan and they need to stick to it. Understanding what you’re doing and why is the key. Understanding your own weaknesses and removing emotion from the equation are also crucial, but very hard, skills to master, said Cramer. Cramer recommended investors be honest about why they’re buying certain stocks. Only by having a good understanding of why you think a stock will go up, will you then know when it’s time to sell, he said. “Never turn a trade into an investment,” he reminded viewers. “Be honest about your expectations, clear about your plan, and willing to abandon ship the moment those expectations are not met,” said Cramer, “then you’ll make yourself a lot of money.”
Comfort Zone
“Know what kind of investor you are and stay away from stocks that make you uncomfortable,” was Cramer’s second lesson in knowing thyself. Not all stocks are for everyone, he said, and all stocks are not right for every purpose. For younger investors, Cramer said its OK to speculate and take more risks. For older investors, income and capital preservation should be on the menu. But that does not mean however, that every young investor should be a risk taker or that every retiree shouldn’t speculate. Speculation, said Cramer, should be a part of every balanced portfolio. He said investors who are able to dedicate one hour per week per stock should speculate with a portion of their portfolios. Sometimes, however, the market tells us not to speculate, he said. Bear markets are one of those times. So whether it’s a slow moving value stock or a volatile growth stock, Cramer said investors should look for stocks that make them comfortable and evaluate them.
Doing the Homework
Once investors know themselves and the types of stocks they should own, Cramer said the next step is to evaluate the companies they own. Rigorous homework is what leads to good judgement, he told viewers. Investors need to make sure the companies they own are viable, he said. Viable companies, Cramer said, make money and don’t have a lot of debt. Companies with a lot of debt can’t pay the bills and get into trouble. When that happens, he said, the bond bullies take over and leave shareholders in the dust. Looking at a company’s balance sheet may seem daunting, said Cramer, but try to bring it down to a human level. “If you make $40,000 a year and owe $50,000 a year in interest on your mortgage, you’re going to lose your house,” he said. The same principles apply to big companies. Bottom line: Always pay attention to a company’s debt and cashflow, he said. Indebted companies, he explained, make bad stocks. The recent string of bank failures and mortgage meltdowns should drive this point home.
Nitty-Gritty
“What specifically constitutes rigorous homework?” asked Cramer. He got down into the nitty-gritty to explain exactly what investors need to go through if they want to own stocks. Cramer said investors should never feel like a small fish in a big pond. He said that while there are professional analysts on Wall Street that do homework on stocks all day long, individual investors should not be discouraged. Regulation FD, passed by the Securities Exchange Commission in 1999, says that any information known about a company has to be made public. This regulation levels the playing field between Wall Street insiders and the rest of us, he said. To find out everything an investor needs to know, Cramer said they can go to “www.sec.gov” and enter the company’s ticker symbol. There, investors will find the company’s 10-K annual reports, along with other filings that will explain everything a company does and how well it’s been doing. Cramer said a company’s quarterly conference call will shed a lot of light on its operations. On the call, a company’s management will field tough questions from analysts and shareholders and offer valuable insight into its business. Cramer said these hour-and-a-half calls may seem long and boring, (but) “there’s no excuse not to listen.”
Key Metrics
“Not all information is created equal,” Cramer told viewer. The key metrics for a company, he said, will vary depending on whether it’s a new company or an old one, a cyclical company or a secular company. When evaluating a company, investors need to consider the industry it’s in. Microsoft (MSFT), for example, has very high margins with its Windows operating system due to its virtual monopoly, while grocery stores and airlines have razor thin margins due to their cut throat competition. Cramer said investors must also consider where a company is secular or cyclical. Secular stocks, like Coca-Cola (KO), aren’t as affected by an economic downturn than more traditional cyclical manufacturing companies like Whirlpool (WHR). Finally, Cramer said investors must also look at how a company compares to its peers in its industry. Every industry, he said, has its own set of key metrics that it’s judged by. In the cable business, the key metric is the enterprise value divided by the total number of subscribers. For hotels, the key figure is the average revenue per room, while for wireless companies its average revenue per user. Only when investors truly know the companies they own, the industries they’re in and the key metrics in those industries will they be able to make good, informed decisions on when to buy and when to sell. 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!

Word On The Street
The market rose on Monday despite news out of Honduras that the military in the region had ousted the sitting president. The Dow Jones Industrial Average jumped 90.99 points, or 1.08%, to 8,529.38, while the S&P 500 added 8.33 points, or 0.91%, to 927.23. The Nasdaq traded up 5.84 points, or 0.32%, to 1,844.06. Karen Finerman told viewers to not read to much into today’s action. She thinks the market move was caused by some window dressing. Finerman said the market will be stuck in a range until we get earnings in about 2 to 3 weeks. Tim Seymour said today’s run was more than just wishful thinking and window dressing. He mentioned that industrial production in Japan rose by 5.9% and consumer confidence in Europe also rose. Guy Adami pointed out that the transports didn’t participate while the rails were lower. “I just can’t embrace this rally right here given that kind of action,” he said.  Joe Terranova said we keep on hearing that a correction is coming but it never comes. He said the market looks like a replay of 2003 where it headed higher and higher. Tim Seymour said he wouldn’t want to be out of the market during the first few days of July.
POPS&DROPS

Final Trade
Seymour said go long Alcoa (AA). Adami picked Nike (NKE) cause he thinks the stock has bottomed out. Finerman likes Hewlett Packard (HPQ) for their good numbers. Terranova said American Express (AXP), IBM (IBM) and Microsoft (MSFT) are all worth a look as the top 3 performers in the Dow. 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!

The following “Mad Money” recap is for a previously aired show that last played on Jan. 16, 2009.
“If you want to use your money to make money, stocks are your best shot,” Jim Cramer told viewers of his “Mad Money” TV Show Monday. He said high-quality, dividend-paying stocks are still the single best asset class over any 20-year period. The key, he said, is to stay in the game, even when every instinct you have tells you to give up. Cramer said staying in the markets is hard, especially after a big loss. He said there’s no magic formula to turn all stocks into winners, so being able to deal with losing a boatload of money is a necessity. Investors need to expect market corrections, not fear them, he said. Corrections are hard to predict, said Cramer, and investors shouldn’t beat themselves up for not seeing them coming. But, he said, if investors treat corrections as a natural part of how the market works, and something they can’t avoid, their frustration will be minimal. Cramer said the thing to remember is to always have a superior attitude and a superior state of mind.
The Right Mix
“If we’ve learned anything from the market meltdown of 2008, it’s that diversification is more important than ever,” Cramer told viewers. He outlined 10 steps investors should take to achieve a truly diversified portfolio. Cramer said investors need to always treat their portfolios as two separate streams, a conservative stream for retirement, and a second for their discretionary portfolios. He said each stream should contain at least five stocks, but no more than 10. Investors should be prepared, he said, to devote at least one hour a week of homework to each stock in their portfolio. Once investors have decided how many stocks to research in their portfolios, he said the stock they should pick should be one from their neighborhood, a local name that can relate to. Second, Cramer said a portfolio must include a defensive, recession- resistant company. Third, investors should consider a high-quality cyclical stock. Next, Cramer said investors needs a high quality brand name stock in the mix, along with a financial stock. Rounding out a well balanced portfolio should be a speculative stock, said Cramer, something to add some excitement. He said there should also be a retailer in the portfolio, a tech stock, an energy play, and a gold stock. He said none of these stocks should account for more than 20% of a portfolio.
Timing is Crucial
Investors looking to get the edge on Wall Street need to understand one thing, said Cramer, and that’s the business cycle. “It’s huge,” he said, “50% of how a stock moves depends on the sector it’s in.” He said the reason for this is that big fund managers are committed to sector-based thinking, and they’re the big buyers and sellers that set prices. Cramer explained there are two types of companies: cyclical ones that do well when the economy is growing, and secular companies that aren’t sensitive to the strength or weakness of the economy. It’s the secular names, he added, that are the ones to own during a recession. Cramer said that at the top of the business cycle, right before the Federal Reserve is about to raise rates, that’s when to buy the secular names. And at the bottom, when people can see the light at the end of the tunnel, is the time investors should swap out of those names and back into the cyclicals. Why jump back into the cyclicals at all? Cramer said the reason is simple. At the bottom, all of the earnings estimates have all to be cut, making the cyclicals’ price/earnings ratios low. This, in turn, makes them look cheap and promotes the increased buying.
The First Hint
Avoiding losses, said Cramer, is another important lesson to learn. He said that one way to avoid huge losses is to pay attention to a stock’s price/earnings multiple and look for multiple contraction, a period when the market decides it’s just not going to pay a high premium for a certain stock. Cramer said when a stock catches a case of multiple contraction, it only gets cheaper and cheaper, as the market decides it’s willing to pay less and less for a company’s future earnings. But, he said, investors needn’t worry too much, as there is often time before the symptoms of multiple contraction set in. Cramer used Whole Foods (WMFI) as an example of multiple contraction. On July 31, 2006, Whole Foods, a high-flying, high-multiple stock, reported earnings with just a hint of negativity in their same-store sales growth. For the next two years, the stock just drifted lower and lower as investors decided Whole Food just wasn’t worth the multiple they were giving the company. Cramer said his bottom line is that investors need to sell high- multiple names at the first sign of a slowdown.
Protect Yourself
Cramer said his last rule for staying in the game is to know your broker. “Some brokers will rob you blind,” he said, “and you’re probably handing them your wallet.” Cramer explained that many amateur investors make the mistake of placing market orders, which get placed at whatever the current price of a stock is, rather than limit orders, which specify a price that the investor wants to pay. Cramer pleaded with viewers to always use limit orders. He said that by using limit orders, investors can get way ahead of the pack, adding there’s absolutely no risk in using them. Limit orders, he said, are the only way to know a broker’s not cheating you. 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!

The New York Times reported on Wednesday that Citigroup (C) has decided to raise employees’ base salaries to avoid the  backlash that could hit the firm from the general public if they were to pay out big year-end bonuses. It was reported that some employees could earn as much as 50% under the new plan. Jim Cramer was outraged by the move because the bonuses are being paid to employees at a firm that is 34% owned by the government. Cramer said he doubted just the rank and file would be the only workers getting fatter paychecks. He also said he might feel different had Citigroup paid back its TARP loans, but Citigroup has not done that. Instead, he advocated a two-tier system, where short-term incentives are paid to those workers who are no risk to the company, and longer term, such as vesting stock for those who do. “The latter is especially important because it was long-term risk in exchange for short-term gain that sparked the banking crisis in the first place,” Cramer said. Cramer told viewers he understands the need to keep good people at Citigroup, but he cannot support pay packages that don’t make sense for a government owned firm. 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!

Bullish
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Bearish
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