Jim Cramer's Mad Money: Watch TV, Get Rich

I own both Real Money and Mad Money. I am also a faithful watcher of Mad Money the show. First off the guys who like to bash him because they lost money on one of his recommendations are naive lemmings. No person on this earth can bat 1000 picking stocks. As he states if your correct 60% of the time your as good as most money managers. What Jim does is give you ideas as well as insights on what moves the market. Its not all fundamentals. Much of its market psychology. Anyone who would ever doubt his ability to manage a portfolio need only research his history as a hedge fund manager. A 24% year over year gain for more than 10 years speaks for itself. If your a lemming your gonna lose your money. If you follow his rules of homework, diversification, and you understand the relationship between GDP growth, interest rates and cyclical cycles you can easily beat the S & P 500 year over year. I don't agree with every pick Jim makes (as some are to risky for my style) but when he points out a best of breed play I give it ample homework time. I exit quickly if the play doesn't go my way and ride the upside as far as possible when it does. Limit your loss on the downside and the statistics will carry you through. If you really want to understand the market, Real money and Mad Money are excellent references.

If you are a fan of Jim Cramer and Mad Money this book is an absolute must have. Jim goes into more detail in this book about how to invest than he has time for on his TV show.

You will learn the following from this book:
Chapter 1:You must know yourself and your goals to decide whether you should buy a stock. Do you like to take risks with aggressive growth stocks with P/E ratios of 30+ or do you fell more comfortable buying Dow components at a value price and low p/e? Only buy stocks that fit your personality type that you feel comfortable with.
Chapter 2:Only own between 5-10 stocks at a time, and only if you are willing to do one hour of homework on each, every week. Buy and Homework instead of Buy and Hold.
Chapter 3:ONLY use limit orders to buy stocks, so you use your price, you will be gouged by brokers if you use market orders. If at first you miss your buy price try again.
Chapter 4: When your stock rises 20%-50% take some profit, do not give your gains back to the market. Bulls make money, Bears make money, Pigs get slaughtered.
Chapter 5:The secrets of how Jim does the lightning round are revealed. The main indicator of whether he will give a buy or sell is determined by what sector the stock is in and where the economy is in the business cycle. This determines his decisions 50% of the time.
Chapter 6:How to play the lightning round yourself.
Chapter 7:He explains how to listen for clues during CEO interviews on whether to buy or sell their companies stock. Can they explain in great detail why their stock will rise?
Chapter 8:Here he explains all the new lessons he has learned from all his recent bad calls he has made on Mad Money.
Chapter 9:Here you will find all the lessons he learned from all of his successful calls on Mad money.
Chapter 10: Explains how Cramer gets his ideas for the show buy reading the WSJ, IBD, NY Times, the Economist, his local paper, 12 trade journals and by watching Oprah.(The Oprah effect)
Chapter 11: Here is where you learn why he throws chairs (He thinks they are for the lazy), where booyah came from (a caller from New Orleans) and what every buttons sound effect means.

You will also get two useful appendixes with this book a great stock worksheet that gives you all the questions to ask before you buy a stock and the best chart I have seen for what cyclical sector stocks to buy during each stage of the business cycle determined by interest rates.

I have returned over 20% in my investments over the past 4 years and Cramer is one of my greatest teachers. I highly recommend buying this book and watching Mad Money, let Cramer keep you up to date in the market.

This book follows the same path as his last book, Real Money, but actually gives you more investing basics, including a very useful worksheet to use in evaluating a company you may want to invest in. Many people who watch his TV show expect "tips," but as Jim says, tips are for waiters. The TV show is entertainment, but his radio show, unfortunately not on the air anymore, replaced now by online videos, and his books are serious about HOW to invest. They teach you a method. Cramer's is just one of many, but all have the basic same rules: if you want to buy a stock you need to know how to evaluate the financials of a company and how it fits into its sector. Cramer also shows you how to think about the real world of market cycles, consumer behavior, product differentiation and most importantly, how the big players in mutual funds and hedge funds work and affect the market. He's done it all, made all the mistakes, but also made some great calls. He called Enron and he called the top of the Nasdaq bubble in 2000. If you read carefully, you can make money. But don't expect miracles. Do your homework. My portfolio is up 20% this year, much of it through following his method, not necessarily buying the stocks he recommends.

If people think that Jim Cramer is all about entertaining people with sound effects and jokes, you really shouldn't watch his show or read his books. Truth by told, I love Cramer. He tells you the secrets of how the big boys do things on The Street. While it is true this book seems to be written to help promote...er..explain the goings-on with his TV show, there are still many great investing lessons provided. I have read a dozen investing books and now after reading this, I finally understand things like EBITDA, P/E and PEG ratios. I think many people who question and complain about the man are still from the old school of 'stocks are dangerous' and 'mutual funds are the only safe way to invest'. You really are missing the point if you feel this way, because you are leaving more money on the table for us. This is a great book. Entertaining, easy to read and a must-have if you have any money invested anywhere. This and his earlier book "Real Money" should be required reading in "B" schools across the country.

Forget all the craziness, and loud shrieking voice coming at you. This man is the real thing. He was a hedge fund manager for years, and made BIG MONEY doing it. He simply prefers to cultivate a national image by being in the media. This in no way negates the wealth of fabulous information that he imparts to people on a daily basis. Cramer is a TEACHER too, and that's what you need to know.

If you listen to him, and then take the time to study what he is saying, it is the same as pursuing an MBA in stock picking. The difference is that in this case, the professor is giving it away for FREE. As you know, very few people ever appreciate that which is given away. If you charge for it, people's ears will perk up. They will strain to hear what you are saying, but give it away for free, and what happens? They just sit back, and say ENTERTAIN ME.

Cramer is loud, and frankly has gone Hollywood. He probably feels compelled to act in this manner in order to draw a big crowd to his television show. By doing this however, he may be taken less seriously. It probably also ensures however that he will gather a larger and larger audience, although there will be a lot of people watching that can not appreciate the contribution this man is making to improving the stock picking abilities of hundreds of thousands of people.

The truth of the matter is that anyone who is a real stock investor should be paying money to sit in a room with this man, and listen to what he has to say. If you listen to any great thinker for a long enough period of time, something becomes quite evident. People always have to reveal themselves, and reveal the truth in the process. A person can only put on a false front for so long. The façade has to come off, given enough time.

This is why Jim Cramer is so worthwhile, with a great show, and a fabulous book. Cramer is the REAL THING, and don't you ever doubt it. I run an enormous amount of money, both as the Founder , and the Senior Managing Partner of Rockefeller Capital Partners, LLC. I talk to some of the smartest people in the world. If necessary, I write checks in order to be able to consult with them. I have probably absorbed the contents of over 1000 different books on finance, investments, and money. Cramer's book is the work of a man who has paid the price in money, stress, and brainpower to learn what he has to teach. I know because I have been there.

When all is said and done, I find Cramer to be an absolute joy to listen to. This book Mad Money is even better than listening to him. In this book whether Cramer intended to or not, you have some pearls of investing wisdom that are individually worth a 100 times the price of this book. Here are several of them:

· A stock is only worth what the big institutions are willing to pay for it (p3).

· You can't be sure about research from this or that brokerage house. They've all been tarnished... for colluding with their clients (p3).

· Tips are for waiters (p23).

· Learn in very precise terms how a company makes its money (p25).

· Nothing is more important than the sector a stock lives in...half of what a stock does is totally dependent on the its sector (p27).

· The actual stock price means nothing without context (p32).

· You can't make money until you sell (p55)

· If the stock is growing faster than its competitors but has a lower P/E, then it's a slam-dunk. I'd give it a triple buy - we're done, next caller. (p69)

· I don't like inside information, both because it's illegal, and because it makes you sloppy (p75)

· Almost all analysts have been trained exactly the same way, so they think in lockstep (p75).

· We don't love stocks -they're just pieces of paper (p81).

· Whenever a CFO is cautious, I'm cautious. If a CFO is negative, I'm negative. You can take that as gospel (p114).

· It's these institutions that set prices, because they do most of the buying and selling (p121).

· Resisting the business cycle is futile.... if you buy a secular growth stock when we're in a cyclical upturn, or a supposedly cyclical stock when we're in an economic slowdown, you will lose (p121)

· You can't trust companies that are coming out of a leveraged buyout. The investment banks favor the LBO firms because they do a lot more business with them than with the average investor (p127).

· Latin America is always a trade. If you hold onto Latin American stocks for long enough, your gains will evaporate (p130).

· Not everything is worth betting on. Don't be afraid to say it's too hard (p133).
· When a stock is cheap, it's usually cheap for a reason (p137).

· Past performance is not an indicator of future success.... it's like black jack; the cards have no memory, especially when shuffled. (p139).

· Never invest on borrowed convictions. Make your own mistakes. You never want to lose money because you borrowed someone else's convictions (p143).

· Usually people have decent reasons for buying and selling stocks, and you should understand those reasons thoroughly before you try to game the supposed "stupidity" of your fellow investors (p150).


You need to read this book because the biggest problem an investor encounters today in the BATTLE for PROFITS is TOO MUCH NOISE. We have too much information coming at us, and we have to be able to sift through that which is pertinent, and that which is extraneous. It can take a lifetime to develop the ability to do this - many never do, and they pay a dear price for it.

You also have to realize that you will never, ever have all the information you want, prior to making the investment decision to buy or to sell. You will always be dealing with an imperfect decision. What you need to know is, that's OKAY. If you have 80% of what you need to know, you are going to more than probably be calling it right.

If you are using Cramer's approach than more than likely, you are a MOMENTUM player. You can make big money very quickly with this approach, and lose it just as quickly. You have to be ahead of the crowd both on the buy side, and sell side to handle this technique correctly. The best I have seen at this approach is Michael Steinberg who founded, and ran Steinberg Partners, the hedge fund for years.

At the time, Steinberg once mentioned to me that he was giving away $50 million a year in commissions to Wall Street. This meant that he was getting everyone's best idea, and his results showed it. Steinberg was the ultimate momentum player, and he always looked 10 or 15 years older than his age whenever I would run into him. In this business the stress ages you.

As an individual investor, you can do very well in the market. I believe you can blow away professional manager results if you are up to it. It takes time. It takes intensity. It probably takes what Sigmund Freud had in abundance. That was the ability to be BRUTALLY HONEST with yourself as to your strong points, and your weaknesses. Very few are capable of such honesty. Only in Wall Street do so many talk a good game, show poor performance and then make millions for themselves in the process.

Those who have been successful like Cramer are the rare individuals that LOVE THIS BUSINESS. They wake up in the morning, and think about stocks. They go to bed at night, and think about stocks. Whenever they are in conversation, fairly quickly, you can bet that the conversation is going to turn towards stocks. They never stop talking about them. They never grow tired of the subject. That's what it takes to make a fortune in Wall Street, and I respectfully suggest to you that Jim Cramer is showing you how to do it. Good Luck.

Richard Stoyeck
richardstoyeck@gmail.com