Listen to Jim Cramer’s personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind - to help you make money.
Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer 6/20/24
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And the by-product of the merger is the new delicious Jif Peanut Butter and Chocolate Flavored Spread. I got the press release and get this. Critics tried to say it creates a monopoly on cravability. But obviously, it's not illegal to be irresistible. Calling it now, this will revolutionize the snack industry and the contents of my pantry. Visit pbcincorporated.com to try the flavor merger of the century Jif PB&C. My mission is simple. To make you money. I'm here to level the playing field for all investors. There's always a more market somewhere and I promise to help you find it. May have money starts now. Hey, I'm Kramer. Welcome to May have money. Welcome to Kramer. I'm going to make friends. I'm just trying to make you some money. My job is not just to entertain but to educate and teach you. So call me at 10743 CMC or tweet me at Jim Kramer. Whenever you're listening to anyone's investing advice, you need to consider the source. And ideally, you want to know where that person is coming from. That's why tonight I'm going to tell you exactly who I am and how I got here. No, not the standard introduction. I'm Jim Kramer, host of May have money, co-hosts, the squawkless, reach even the CMC, investing club. What I want to do tonight in an extremely special show by even bioactive standards is trace the arc that brought me to may have money. Not for some autobiographical ego trip, but to give you some money making lessons from the phases of my various careers. And explain, of course, how you can pop the phone. Remember, in the end, this is Kramer arc. And everything we do here is about trying to help you make money. In short, I'm giving you the Invested Kramer guidebook. Call that the skinny on how I learned to be a good investor and how I continue to learn every day so I can help you become better than I ever, or I want you to be better than I ever would be. By the way, that's our mission in investing club too. Let's start real early. My love of stocks didn't begin after law school or college or even high school. Now, my love for stocks started back in fourth grade. That's for fourth grade. You see, my dad would bring home the old Philadelphia bulletin, but that brings, well, a long time ago that was. At that point, the philosophy bulletin was one of the largest newspapers in the country. He didn't have it when he came back from work every night and give it to me. I wanted the comics and the sports. I was ridiculous. Philly's fan back then. I still am. It's a lifelong focus, and I guess, although I have pivoted hard toward the angles. I was also curious kid. Curiosity's always been both a blessing and a curse for me. I'm like the proverbial cat that's always probing, looking occasionally jumping on some hot stoves. Anyway, there was always this solid chunk of the paper that seemed impenetrable to me, the business session. It was impenetrable because it had these giant lists and names of an agate type that seemed to go on forever. There were the other tables, different from the batting averages tables and box scores. I'd scrutinized the regularity. When I read them from left to right, they made no sense to me whatsoever. Open range clothes? I mean, what's open? What range? What clothes? What were these strange things? Why did they matter? I asked my dad, who I knew dabbled at the stock market because occasionally, I hear him get mad when he heard prices that were mentioned on the radio, and particularly always seemed to get angry when I heard something called National Video and how it went out. I don't know what video did or then go out and why it went out. I don't know if popped it either though, but I know it made him furious. I wanted to know why. So, he sat me down one day and explained that each of those lines represented the performance of a stock at a company on a different day. The open was where the stock opened in the morning. The range was how low and high it traded during the day, and the closest what it was worth at the end of the day. Fascinated me. I mean, how could there be so many companies and why the heck did they trade in ranges? He told me that each day, people tried very hard to figure out which stocks would go off in value, and they wanted to buy them so they could make money from those moves. Frankly, this struck me as down my tilly. I told him that when I looked at baseball tables, I was always trying to figure out who was hot, who'd go up on average, who'd go down, and what it means for the teams I liked. So, of course, the Phillies. He said it was pretty much the same thing with stocks. You studied the companies, like you studied the players. So players were doing it just okay, somewhere hot as a pistol, and of course, others were just playing duds. I told him I wanted to figure out the stock market too. I wanted to figure out which stocks would go hard. Just to get everybody else. I wanted to know if I could learn something from just following the ranges and reading the tables. He said, why don't you try? It seemed in my house, the radio was always wanted to pop up the TV one in time for dinner. We always watched the news while eating. Even as I admitted I hated it, because most of the news was about the war, and that meant the Vietnam War, and it was really seemed going well at all. But right after the world news on the radio or TV, they always mentioned Dow Jones industrial averages, and they either talked about or showed the most active stocks than the ones that had done best or worst. National video, pop stock was all from the worst list, and that's why I guess my dad was so angry. So what I did was write down the names that I heard, and I tracked them, kept them in a ledger I still have. What a terrific game it was, trying to figure out the next move of a stock, not a player. Even as, oh I really knew it was the name, most of them were defense stocks, and they went up a lot in tandem with the war. After a year, I decided that was such a cool game that I wanted to introduce into my fifth-day class, and so I did. Going in, show and tell with the Philadelphia Bolden, showing them the ledger, inviting them to play to see who could find stocks that went up the most during the week. It means they say not everyone was into it, but the darnest thing happened not long after. My dad's company at the time, National Gift Trap and Box Company, represented 3M, then known as the Minnesota Mining and Manufacturing Company in the Philadelphia area. He sold tape and sashine. That was a fancy ribbon that bowed easily. Remember there was a time when you had to make your own bows? Triple M, as we called it, was always innovating, coming up with new product lines, which it still does. These days also plagued, unfortunately, by major litigation issues. What about fifth-grade pop came home with a new line of 3M products he was selling? Games! That's right, they got into what was known as 3M bookshelf games. He said, perhaps I might want to learn more about the stock market, and he had two games that he was selling well, about business. One was a choir, about takeovers, and the other was stocks and bonds. I was quiet when a good friend bought me this recently. I love that game so much, and at one point, I even asked the old CEO of 3M, bring the games back. Apparently, I don't have the rights anymore, but the point of mentioning all this from my own makeshift stock game to stocks and bonds is that stocks are fastening up to get your kids started on them right now, and I'm urging you to do just that. It's easier than ever. Pick some stocks. Maybe some stocks and companies that your kids are familiar with that have them track those and guess which will do best over time. So here's the bottom line. The bottom line, at least in my childhood stock market obsession, get them started early, and they may play for life, because unless the stock market, it's a long-term contest, the early you get in, where you can potentially win over the long haul. Let's go to Dave in California, please, Dave. Hey, Jim, thanks for taking my call. Of course, what's up, Dave? Jim, I'm an older retired investor who's moving most of my stock portfolio games into key bonds and CVs. What are the advantages of bond ladders and how do those work? Well, I mean, look, I think that what I like about a bond ladder is it would normally matter, great deal. The yield curve is so flat. I'm trying to think it really doesn't make me. People want a ladder bonds right now. It really doesn't make a lot of sense. I want to just stay short. No reason to go out in the long end, and you can just keep reinvesting like that. But I also want, I'm not sure of your age, but I always want people to remember that I think you don't want to bet against yourself with too much money in bonds, because stocks still represent the greatest opportunity. And don't forget, utility stocks, they can play a role too. They could have multiple years of goodness. Let's go to Philip and Michigan, please, Philip. What's up, Philip? Hey, I wanted to thank you. I've been listening to your show since 2006, before my co-op attorney turned me on to the show, and you've made me all sorts of mad money. Oh, fantastic. Thank you for that. Thank you. I'm also a member of the All right. My specific question, Amy, should I involve myself in my brokerage dip program, or should I take the cash and then pay back to work in a stock name? No, I am a huge dividend reinvestment plan person. That's, and I, in fact, I wish there weren't an alternative, but for my travel trust, I have to send the dividends out, and it has really hurt my long-term performance. You can't, you've got to reinvest, and that's where some big money can be made. All right. One of the biggest things I learned from getting into this stock market early is that it is a long-term contest. The earlier you get in, the more you can potentially win over the long haul. Oh, my money tonight, I'm giving you an inside look at how I got to where I am today, from growing up to Goldman Sachs, but on the way, you'll learn the best practices I learned about the market and how you can incorporate these life lessons yourself. So stay with Kramer. Don't miss a second of Mad Money. Follow @chimpcramer on X. Have a question? Tweet Kramer, #MadMensions. Send Jim an email to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. Miss something, head to madmoney.cnbc.com. Schwab Trading is now powered by a Ameritrade. 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Terms and conditions apply. Need to hire? You need Indeed. Welcome back to a bizarrely special bed buddy, where I'm teaching you life lessons in investing from my life. While I'm not a dollar sign represented by a man or a stock symbol for that matter, ticker JIM, I've stumbled around the stock market long enough to learn a thing or two. So tonight, you're getting some of the wisdom from the School of Hard Knocks that I've enrolled in and passed. Don't you always love it at the beginning of a Pro Football game, where they had the player say his name into school and some say School of Hard Knocks? Well, that's what I intended when it comes to stocks. And you are getting the made for TV version right here, right now. For law school, I went to Harvard though. We covered how I first got involved in the market, my fourth great obsession with keeping a ledger to track stocks. And then ultimately, learn how they trade through the greatest game on earth. No, not monopoly, but stocks advise with its little certificates, his game board, his cards about news that would set a stock higher or lower. I love that game. I left the stock market games behind by the time I got to middle school, which we called junior high back then, where my obsession became sports. I was the second fastest guy in the school forever. So I ran track and then, of course, girls who my teenage self found far more mystifying than the market. Maybe still do. Anyway, that's the subject of a different show entirely. However, my father didn't grain in me the desire to save money. Early on, I learned that even in high school, I saved this. I bust tables at the old block and cleaver, which, of course, we called the block and cleavage because we were really funny and we were at the height of adolescent humor. I saved more working as a vendor at the old veteran stadium selling first cold soda than ice cold. That's why I did it. Hey, ice cold. I got ice cold soda here. Then I only graduated to sell an ice cream. Hey, I got ice cream vanilla and chocolate. Very quickly, I go in the bag of market power, specifically cornering the market. And I pay people to give me the exclusive right to sell ice cream. Hey, ice cream here, won the 600 and then won the 700th level, which I own by keeping everybody else out of it. Can you imagine how much money can be made if you had the only franchise, the whole upper deck? Well, at least it's the upper upper deck. Even for a team of horrible facilities with one almost no games. I made fortunes, except the one time they gave me strawberry ice cream. Talk about having to run from a customer after they sold and sold and that stuff. Or when Steve Carlton pitched because he was left, he was on the mountain. He got fired out so fast that I got stuck, unsold ice cream. I had all this strawberry. You can't take it home real bad. You had to buy it from the company before selling it. So I take a beating whenever I call it, I'm on the mountain. That's a business lesson. Talk about learning how business really works. The shelf life of ice cream on a hot July night after the night thing is about a short, short commit. By the way, during the lightning round, I might just with you about your name calling you a skipper. Hey, cat, how you doing? Chief. I learned these things at the ballpark. It's what people call me to get my attention, to buy ice cream, and chief. And, frankly, I loved it and it's bizarre intimacy and I never forgot the moniker's bud. I mean, partner. And that's why I use those terms on my money. Anyway, I've had a ton of money at the advice of my father. I opened a calendar fidelity with the Magellan Fund. I contribute a little every week. It was the pop top for a mutual fund of its time, run by the great Peter Lynch, who's written two investment books, one up on Wall Street and beating the streets. Still available on Amazon. They are fabulous. Yet them. I didn't save enough when I got to college. The money paid was work study anyway and it went toward my tuition and room board. But when I got out of college and after multiple attempts to get a job in the newspaper business, I was rejected by 57 papers. I still have the rejections. I've saved every one of them. I hate everybody who rejected me. I land in position as a general sign reporter to tell us a demi-cat. Crack naked, 100% bucks a week. 100% bucks a week was not a lot to really kind of. Well, anyway, I still got my tattered paste up. I've got it in an old wallet to remind me of how hard it was when I got started. Nevertheless, you know what? I still saved. I put a few dollars away when I could. A few dollars. I mean, like maybe four dollars. Not that long after that, I applied and got a job at the Now to Funke Los Angeles Heartland Xamarin. Now it was a horrible job paying $179 a week. But as you can imagine, Los Angeles more expensive than Tallahassee. Soon after my soldier began Los Angeles, I found this terrific bungalow apartment, most known as the Fairfax District, right near Caners, pretty sketchy around the corner from Pioneer Chicken, which was way too expensive for me to go to. A few weeks later, I was stalked. My place was broken into repeatedly something that cops were helpless to stop. At the same time, I was assigned a story in San Diego, a horrible shooting. And when I returned, everything was going, everything I had, including my checkbook, of which of course was cleaned out. So it began, my terrible but thrilling six months of living in my car, basically trying to get by. While my ultimate goal was to save enough to get an apartment, I was living hand to mouth. And people would take me in now and then, so I could get a shower. That's really, it's really important to live in a car to get that shower. Or maybe in a good night's sleep. But you know what, I never quit saving. I never captured my patient every other week and then writing a check, yes, to Fidelity, but gel and fun. For what I could afford. You only had your gas, the car insurance, and food expensive, your living in your car. During saving on homeowners insurance, by the way, it was very expensive back then. Needless to say, it was unsustainable. When I opened, I came down with a modern nucleiosis, and then the attendant joined a sliver, a yellow spot about the size of Greenland, you know, on those Mercado projectors on my stomach. I had no healthcare. The HMO, my newspaper belonged to. I had no branch where I was at last station when the company mercifully put me on the road. So I could at least submit some expenses for my day to day. So I had a little migrant farm workers clinic to get fixed up. And I still put money away. Even then, even though I was making weekly trips to the doctor, was one of the best I've ever had. But the upshot of investing is this is a challenge, a whole story is a challenge, and this is what it is. If I was living in my car and I invested, I never went here that you didn't see. Never. That's why I went through this. Amazing with the Magellan to fun back. Back then, I was giving money to the best stock figure of all time. Fast forward 35 years later, I ended up taking advantage of one of the greatest pull markets in history. Magellan, money, ultimately amounted to a fund well into the six figures. Not because of my additional contributions, which remember only just a few dollars a month. But purely from capital appreciation and the power of compounding, I never touched it. Still haven't. I just let it build. I think the takeaway here is that I want you to save no matter what the excuse. Obviously, they're really the better. You're thick and thin. Listen, when CBC has those all-star managers on, keep it over your open. If you've got to have money or handle the time to own stock portfolio, you can only own one or two stocks. Send the money in as little as money as you can to an index fund, do a one up to one of these big mutual funds. If you need help managing your own portfolio, join the investing club. I think that's the best way to go. And here's the real bottom line. If I could still send those checks into the gallery, Magellan, fun when I was living in my car, sleeping in the back, Jack Daniels, and a hatchet, and then olderly a yes, pistol, sick as a dog, join a sliver. Then what's your excuse for not getting started? You can put some money away too. That's the way I was living. Get money back there. Coming up, take a trip down memory lane. The hair is gone, but the wisdom tolls on. Stick with Kramer. Support for this program is provided by Chevron. Demand for energy is projected to continue rising in the future. To help keep up, Chevron is increasing their U.S. oil and gas production, and they're innovating to help do it responsibly across their operations, including their Gulf of Mexico facilities, which are some of the world's lowest carbon intensity operations, helping supply energy that's affordable, reliable, and ever cleaner. That's Energy in Progress. Learn more at chevron.com/meetingdemand. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career, so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. We're riding the magical money mystery tour tonight. I'm giving you the life lessons I've learned the hard way through decades of investing. Right now, I want to tell you how I got started in individual stock picking. Some of you know I love and still believe in, even after multiple periods of paying chaos in your catering. Presumably, you believe too, or else you wouldn't be watching. If you're picking stocks, playing with real money, not just with a ledger over the game of stocks and bonds, you need to open an account. When I got started in 1979, there was no such thing as an online account. I had my money with Fidelity courtesy of my Magellan Fund account, so I chose to put my individual stock account there too. When I first began, I didn't know where to look for ideas, so I turned to a magazine I liked Forbes. Now, people of Forbes, please don't take this personally, but I read a nifty article about American agronomics, a terrific orange grower in Florida. Seems so compelling, I bought 10 shares of it for nine bucks. Link later, Frost hit, wiped out the crop, and my investment was more than cut in half. Like the plot of trading places, an all-time great ending Murphy movie, if you've ever seen it. Well, what can I say? Pretty similar. I was devastated but not defeated. I sold it out, took the capital, and bought seven shares of Bobby Brooks, a clothing outfit I'd heard of, which again Forbes said could be to reply. Almost immediately the company reported a big quarter my money had to get. Fortunately, I had a decent job at a magazine called American War, which had just started. I was making 20 Gs, and living in a less-than-swank studio on 44th Street between first and second in the United Nations. The cheap $400 a month ran to allow me to replenish my stock offers pretty quickly. I was on the road quite a bit back then, and after a particularly hard night on the town of research and history in Kentucky, I fell in love with the breakfast at Bob Evans Farms. Finding out that it was publicly traded when I went back, I visited that huge fabulous Midtown Manhattan, New York Public Library, and ones with the big lines in front of it, and devoured everything I could find about Bob Evans, they had magazines with articles, microfecing four month old financials, investment publications, it would write-ups that allowed me to compare Bob Evans with other companies in the industry, which is what you have to do. I knew I had a good one, so I bought 20 shares. Stopped went up immediately to a good quarter to stock split, and I figured out the first good component investing. Know what you own? What did I know about growing oranges with the market agronomics? I mean, who died no any of them in a woman's fashion? I mean, certainly not me, but a good plate of scrambled ice and sauces you have to harden on the town. Well, that served in a tractive setting, good service, nice enough growth, a big plan to expand the Midwest. That was for me. Next up, SPS Technologies. That's the old standard press deal, an alpha of my old hometown that made faster, or screws for airplanes, something that how Matt now dominates. Why SPS? Because a buddy of mine from high school catching up, and he told me that they were hiring like Matt if I was looking for a job, paying good money. Why already had a job? But back to the library for more research, solid company, no debt, but nothing impreent about its hiring push. Wow, ripe for a trade. SPS doubled not long after, and I caught the bug for good. Twenty-years later, it would be acquired by precision passports. The preeminent supplier to aircraft builders around the globe before PCP went on to sell itself to Berkshire Hathaway in 2016. Good bloodlines. So, now I'm figuring it out. The best investment ideas come from what you know, mumbled with information gleaned from public sources, even if there is late and is hard to access, is taking a surreptitious trip to your public library when I was supposed to be working. I didn't like the random way I was making money. A friend from home is lucky to call about jobs available at SPS Technologies, a hearty breakfast at Bob Evans Farms. I figured that would be a more rigorous approach, right? Then it hit me. Look around, it works stupid. At the time I was covering mergers and acquisitions, but looking at the lawyers who do the deals, profiling some, following the deals they were at once. It seemed like every other deal was in the oil patch. Why did you know that smaller than the size of oil companies were being acquired and all I was doing was standing around writing about them? So, I went back to the library, took out some editions of the thing called Value Line, stock research magazine, and checked out the pages devoted to oil companies. Then I crossed reference with other research to find out which ones could be acquired without problems, either because they were publicly traded without a family owning them, or because they seem to be fit to size. The parameters were so many other deals. So, I said all this thing called Natomas, an oil company with a real gusher in Indonesia. Oh, I didn't have a long do we. Karamiki's struck, bottom, I must tell them my money, and other lesson learned. When I buy takeovers by companies that would do well on their own, Natomas was, but it was under match, which was the consensus I found by reading New Orleans about the oil enterprise. That meant another oil company with bigger scale could do more with Natomas, which was cheaper than it should be if it simply got rid of the existing management. As much as I hit some winners though, I was distraught that I'd given up the ghosts in those first few trades. At the time I'd been hanging around the track on weekends, let's say I could up your bike. And I learned how to handicap by reading the books of Andy Beyer, the legendary horse racing writer, he is something. Beyer's picking winners is among the best investing books ever written, even as it's betting on the ponies. It teaches discipline. How to identify the best thorough best to bet on. How to find the best long shots going to the alloy tracks for information was less well known, not betting really knowing on every horse in each race. Find the ones where the payoff was more sure and bet big, cut your losses if you're having a bad run. Every one of these lessons could be applied to stock market, right? I mean anything you'd swing when you know what you're doing, particularly when others don't want a less well-known stock alloy track. Don't just gamble on stocks from the excitement of it, that is foolish. But it's important to be disciplined, don't let your losses pile on. After five years of professional journalism, I decided to hang it up and go back to law school. The good news? I'd save enough money to pay for my first year all this stock market. As I never would have had enough money to cover the cost of it, I'd just kept my money in a savings account. So here's the bottom line. When it gets started, it goes small, invested what you know, reshared intensely. Just research, research, research. Back then I got old debt from public library. Now it's as simple as a keystroke in the information is free, including up to the minute financials, the animals' presentations, brokerage research, and of course the conference calls that I tell you are must if you want to actually know what you're doing. Simple? No. Luprid is, you bet it is. That's kind of Michael in California, please, Michael. Yeah, it's Jim. First of all, thanks for taking my call. Of course. I'll try and make this as quick as possible. I know you got a lot of people to help here. Nick has to concern my two children. I inherited recently quite a deal of money, not a million dollars, but a substantial amount. And I'm looking at a 20 to 30 year time frame here. I've been investing for them since the day they were born. They're doing all right, but I want them to leave them some good, good money. I'm thinking on the lines of Berkshire B and now this is putting all this money. Berkshire B and ETF, a Vanguard ETF or some of that, somewhere along those lines. Well, I think that S&P 500 fund and the total return funds are both really good for that kind of situation. Vanguard is total return. The one thing I would caution is as much as I like Warren Buffett, I just think that you have to be, you have to have a kind of a basket if you do one stock. But if you do the ones that I just mentioned, you don't need a basket and you don't have to keep track of them every minute. By the way, if they're young enough, maybe you give them something that they actually want to spend some time learning about. And that could be good, too, to keep them invested and interested in their money. But thank you for those kind questions. And let's go to Loyl and Arkansas, Loyl. Yes, sir. How are you doing, Mr. Kramer? I'm doing well, Loyl. How are you? I'm doing all right. I don't want to know getting back into the market with 11K. What's the best way to have a long-term goal, but get a short-term return within a year or two on your investment? Well, it's too risky, frankly. At one time or another, I think in my earlier years, I would have suggested call options and then also some longer-term stocks and mutual funds. But these days, I'm just against the short-term stuff. I can't deliver and I don't want to encourage trading. But thank you so much. I wish I could do better for you, but it's just not my thing. Trading things, not my thing. Anyway, if you want to get started in stocks, go small, invest in what you know and research intensely. The process may not be simple, but, boy, it can be lucrative. All right, much more mad money ahead, including an inside look at what I learned from my time at Goldman Sachs. Plus, I'm taking your investing questions with my investing club colleague, Jeff Marks. So stay with Kramer. Coming up, how has investing changed since Kramer's hedge fund days? We count the ways and the answer may surprise you next. Tonight's show is all about you learning from my attendance at what we call the University of Financial Hard Docs with a major investing. I have taken you through the importance of getting started early, saving no matter what. I have shown you how to spot winners. I avoid losers. They discipline all through looking at my actual examples in my life. Now, I want to give you a sense of how you can become a trader. Oh, here we go, a good trader. And I don't normally recommend this. It's not the direction I like to take the show. Man, money has changed time and time again. And after the first few years, I've delivered, executed away from trading and trading ideas and much more toward long-term investing. And that's because there's so many more obstacles to trading than investing these days. When you're a trader, you have to watch your positions like a hawk during the day to the point where it's very hard to do your job at the bottom of the market. There are so many people with such a great set of tools and the ability to access information real time. There are so many different products that allow hedge funds to move socks around like toys. It's very hard to compete against them. You can't do the one-on-one, especially when you're doing it part-time. But there's so many advantages you have now that you sure didn't when I started trading in my law school during back in 1901. And I was trading on investing. First, commissions are non-existent for home gamers so you can get in and get out without much friction. Your broker doesn't even take the fee. Second, the information you need is on your personal computer or even your smartphone. Back in the day, I had to call brokers and watch the ticker on F&N. Prickers and CNBC, by the way. And third, trading is lightning fast. Back then, I didn't even know what price I paid for stock or when I pointed market order or whatever. When I was in class, I had to use payphones and a cell. You often had to wait at one payphone and the classroom building while some kid chatted endlessly and aimlessly used girlfriend, maybe someone called mom. At the time though, I had to go with what I knew. I knew individual stocks for all the stories about Harvard Law School, including the movie Paper Chase. I can tell you there was tons of downtime at law school and terrific business school library that had a lot of cell-side research. That's the stuff the brokers turned out. Along with up-to-date microfiche, quarterly importance is probably to those who were too young to remember microfiche. They miniaturized everything to a little piece of film. And then you had to read it through a machine that was basically a glorifying microscope. All things considered, I possessed the best publicly available information at the time for a student that you get in the early 80s. The first thing I decided to do though, given the circumstances, was to work on finding one trading idea per week. My reason was pretty simple. You can't be all over the map if you're doing this as a hobby, even a time intensive one. I figured I couldn't take a lot of chances until I really knew what I was doing. A very valuable lesson if you want to start trading. I discarded a ton of ideas looking for stocks that had catalysts up coming to ports or possible mergers and stock that could rally based on the other parts of the newspaper. An article on the front page might be talking about some breakthrough in medicine. A brokerage report might discuss the potential for new oil fund. I got on a roll. I started my first writing about the market. It was a newsletter called Mr. Bullish, which I made out only to my parents once a week since nobody else cared about what I thought. And it clearly articulated the thesis by any trade I did. I did not trade if I couldn't explain exactly what the company did and why I liked it and what would happen to the stock. What was the catalyst to buy? No buy of anything. It didn't have a clear exit strategy for the moment I put the trade on. Again, an important lesson made disciplined by the insistence of written thesis before I pulled the trigger. When you trade, you've got to trade with confidence. Otherwise, you can easily be shaken up by the broader market. You want to trade with confidence? Well, ask yourself, would you be willing to put a stock recommendation on your voicemail? Yeah, we used to have those and updated every week. Well, at that point, it was a quarter. It was something like this for me. Hi, this is Jim Kramer. I'm not here right now, but I like monolithic memories at $32 ahead of the next quarter. Yeah, I actually did that. That's the level conviction I had about my picks of the week. Of course, I was putting my money where my mouth wasn't managed to augment the winnings with work. I got from my old employer, American lawyer. I was in freelance work for the New York Times and some legal work for a professor who moonlighted doing these criminal defense cases. It's kind of a famous card, but won't go into that. It wasn't before long that I thought about him in Marty Purds. At that point, the publisher from the New Republic, also professor and teacher at Harvard, tried to get me to write a piece. I neglected to call him back, so he inadvertently got three weeks worth of trades from my answer machine, all successful. He told me to meet him at a coffee house nearby. When I did, he said that he made more money from my answer machine than he had with years of professional money managers, and he wanted to give me a half million dollars to manage. I said, "I didn't think I was capable of handling that well." He said he had confidence in me. Shortly thereafter, when we were having a couple of coffees pulled out of check for a half million bucks, that was real money back then. I ran out of fidelity with the money and set up an account and went right to work trading. Almost immediately, I lost a ton of it. I could see how I might have to watch decisions. Marty's house made most long for about 100 years to make back the 70s cheese. I had just blown to smithereens. My mistake, as clinicians told us in that seminal movie, Magna Force, a man's got to know his own limitations. You see, you can't trade a huge chunk of money all at once. Total violation of all my weekly discipline, right? You can't put it all to work once. You had to do something. You only do that after you're done on a huge amount of work. You had to have a chance to pan out an entry point. You had to come up with a reasonable entry point and an accident. In other words, you had to know how to trade, and I didn't, and I had no discipline. I had violated my own rules, and I blew it. I confessed my students to Marty, and he said, "I said please take the money back." Instead, he wanted me to have more money, betting that I'd learn my lesson. You know what? He was right. I reverted to my old style, trying to be right about one idea at a time, keeping the rest in cash, doing a huge amount of homework, going big when I had the most conviction, the way any good trader would. I slowly but truly made it back while I also paper invested a more active but not truly trading before to get a better feel of things. That would become the beginning of my actual professional investing career, and we made a huge amount of money to get it. Don't mind saying that. So here's the bottom line. If you're trying to trade, make sure you have a catalyst, an exit point where something's supposed to happen, and then get out of the stock even if the idea doesn't pan out, because you're trading, not investing. You need conviction, and you have to ask yourself, "Would you be willing for the world to hear, "Hi, it's me. I'm not here right now, but I want you to take a big swing at Disney ahead of the analyst meeting." If you can do these things, start small, give it a try, and get money back. Welcome back to this special edition of Bad Money, where I've been teaching you life lessons and investing from my life. Now we're up to the professional grade when I started at Goldman Sachs. I've been quoted by Goldman for three years before I got a job in what was then the security sales department, helping individuals and institutions manage their money. I've got a ton of those history for those years, and if you want to know more about it, I suggest you read confessions of a street out of my autobiography. But tonight's show, like every show, is about learning how to trade and invest. So I'll dispense with the anecdotes and try to teach you how to make money from the events that transpired from my time at Goldman. First, that's when I began understanding the process of actual money management. The ability to build a portfolio from the ground up, and I had the best teachers in the world. One of the great hedge fund managers of our time, Lee Coopman, he was the research director at Goldman, and he put on investing clinics almost daily. But you know who I learned most from my customers, chiefly wealthy individuals from all walks of life. At Goldman, I learned something that to this day can't be understood by so many professionals in this business. Individuals can and do beat the market quite regularly. I have what's known as non-discretionary accounts, meaning that I wasn't allowed to invest anyone else's money with my own ideas unless I could win them over to make the purchase. Remember, I was on commission and made money only with the buys or sells I could convince people to act on. That's where I learned how important it was to talk over a story with an individual and be able to articulate it in a way that made sense to them. Can you do that to someone when you're picking stock? You had to know your stuff. I often ask my clients questions about whether they knew enough about the stocks that they wanted to buy. I wanted them to be as educated as possible too. That's because I knew that if the stock went up, it would be their idea, but it went down. It'd be mine. Come on, that's human nature. What else did I learn? How about humility? It was a Goldman Sachs that I first figured out how humbliness business could be. The great 80s bull market had just started not long before I'd been hired. Almost all stocks had tremendous tailwinds. But when one of your ideas went against you, you had to get on the horn and explain either why the person should buy more or why they should cut their losses. I also learned to let your gains run while you cut those losses. I learned the hard way. Many of my clients were terrific business people who didn't really know that much about stocks. They'd just been fabulous at running their own enterprises. I had a real cantankerous client, a real estate tycoon, who I worked hard to get, trying to win them over for ages. I told him I'd be judicious to work hard and get it right for him. He said he didn't want trades. He wanted long-term investments. At the time, I happened to like the stock of Kimberly Clark. I told him that I thought this one would be a terrific addition to his portfolio. He agreed, and I bought him 1,000 shares. Also immediately, the stock went up eight points. Oh, I had a winner. So, I called and I said, "Bob, I want to ring the register and sell the 1,000 shares of Kimberly Clark." I thought he would thank me, but he was furious at me. He told me that I had said that Kimberly would be a good long-term position, that it could have great gains over time, and that he wasn't the least bit interested in only making $8,000. Then he questioned my integrity, and wanted to know if I was churning him a horrible charge, meaning I was just trying to generate commissions off his account. You know what? I was scorched. I was burned. But it taught me a terrific lesson. Just as you don't want to turn a trade into investment, because that's usually a sign that you're embracing a loss and trying to invent reasons to stick with it, you also don't want to turn an investment into a trade. When you have a good one, let it run for heaven and say, "Bob was right. Kimberly Clark already doubled." And I was vindicated despite myself. Finally, I learned the science behind building a portfolio and understanding how to create long-term wealth. A lot of my business involved contacting people who just came into a great deal of cash, either through inheritance or through the sale of business. I regarded my first job as listening to their needs, trying to figure out what they wanted. Were they conservative? Did they want capital preservation? Were they aggressive? Did they want capital appreciation? I tried to get them, I tried to get to know them and urge them to get to know themselves, just as you should know yourself. Can you handle the pain of a market decline? Would you prefer your money or appreciate slowly get most of it from fixed income, meaning bonds or from dividends? Do you want to participate in new issues? Do you want to try to hit it out of the park with some of your capital? Of course, many of your familiar with these lessons, I know that. You've heard me say it in time and again on air preaching them constantly to the CBC investing club, I try to teach you how to know yourself to know what you can handle and what you can. Finally, this is when I learned the value of diversification. When I first got the Goldman Sachs, the oils were hot as a pistol. I mean, you understand those were different days. You could have an oil company's double and then double again a short time as they fit struck oil. If you're like, wow, how big those fines must be. So everyone got caught up in the oils. The families I work for wanted oils. I wanted oils for my personal get. Every day seemed like another great day in the oil patch. Services drillers, you name it. Then one day, oil plummeted. The story started pumping like bad and some global tensions that had jacked up the prices were settled. Next thing you know, the bull morphed into a bear. Those who own nothing but oil stocks, including yours truly were crushed. I learned firsthand the concept of diversification. While vacationing violated some of my rules, I never again intentionally avoided diversification. So here's the bottom line. From my early days at Goldman Sachs, I learned the core principles of investing, finding solid ideas to build a diversified portfolio to create long-term wealth in a way that suits the customer. Consider yourself the customer of this show. Stay prepared. Coming up, Wall Street's most reliable tag team squares off to answer your questions. Keep in touch. Mad money will be right back. Through this entire show tonight, you've heard me pound the table on how investing in the stock market is a long-term contest emphasis long-term. So you're never too young to start investing just like you're never too old to learn me things about the market. I love to teach my viewers and also learn from them, which is why I always say my favorite part of the show is answering questions directly from you. So tonight, I have Jeff Marks here, my portfolio analyst, partner in crime at the CBC investing club. We're going to answer some of your most burning questions, which are always amazing. Frankly, I learned so much. I'll just give you an inside look at what we do in the club. By the way, if you're not a member of the club, you can scan the code behind me or go to cnbc.com/investingclub to sign up. I sure hope you will. All right, let's take our first question. First up, we have a question from Sandy, who asks, "My husband and I are at retirement age. He likes dividend stocks, but I don't like holding them when they lose value. And my original investment is in the negative. I prefer solid gross stocks to continue to build our portfolio. Keep or sell these losers. Now, I'm going to start by telling you right here, retirement age. That's the eye of the beholder. I have been a big believer contrary to the entire industry in saying there may not be a retirement age when it comes to stocks. I think that people should always be investing for growth and some for dividend and then some for bonds. So my answer to this one is that you have to kind of at times take the risk, but you just use smaller amounts of your cap. Yeah, I think that there's always a balance to everything, right? One thing I would point out is without knowing the stock, if the dividend investment is in the red, well, maybe they're not growing their cash flow, their earnings, maybe they're not growing their dividends. And that could be a red flag that something's wrong about the company. I mean, for instance, you know that we got involved with Foot Locker and their cash flow decline and what looked like a good dividend stock became a non-dividend stock. So Sandy, I think that we unfortunately, you have to do a level of homework. Of course, during the club, and we will point them out to these who listen, we missed Foot Locker, you're going to miss things. But what matters is I want you to have more exposure to the stocks than people expect, because retirement age may be something that turns out to be 20 years before you need to go capital for that 20 years. Next up is Bruce in eastern Michigan. And he says, how do you set price targets? I'm going to defer to my colleague who does a lot of the price target setting. Well, I think it's an art and a science, right? There's no one standard rule of thumb to apply. But what I will say though, when looking for price targets, what you can do is look at some historical multiples of where stocks trade at and try and figure out how much you think the stock will earn out in the future and apply that. But another key considerations too is that if the company is improving its margins, maybe taking share, then it would deserve to trade at a premium versus its historical levels, or maybe at least catch up, so to speak, the multiple re-rate closer to some peers in this space. During the great runs that were Lily and Nvidia, how did you go about setting price targets? Well, I mean, look, those are also some of the great momentum stocks in the last couple years too. So that, I would say, is a little bit of an art. But again, stocks like that, you also have to look out years out in advance, so especially in the case of Eli Lilly, where it's more towards the end of the decade is where it's GLP1 sales will really be big. So people know, we take the very shares. Now, let's go to Lindsay in Oregon, where my daughter had her formative years, who asked, "How do you trip a position? Do you sell shares with the lowest cost basis or the highest cost basis?" Well, this is actually, this is an accounting issue. There are rules on what you can and what you can't do. We are, just people know, we send everything out. All our capital gains out and all our dividends out. And we often want to try to get rid of the ones that has the worst basis that's been our kind of stocky trade. Yeah, I mean, look, this is always a question of tax considerations, right? Because if you're taking a profit and you're selling a lower tax basis, you'll trigger a higher realized gain. And on the other hand, if it's for a loss and you sell that lower basis, it's a smaller loss, so it's tax considerations. Now, just so you know, my accountances, Jim, just take it as they come. Last and first out, why is that? Don't ever get in trouble. There's my lesson for the IRS and you. I'd like to say there's always a bull market somewhere. I promise, try to find it, just bring you right here, old man bunny. I'm Jim Kramer. See you next time. 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