Mad Money w/ Jim Cramer 9/23/26

Mad Money w/ Jim Cramer

Jim Cramer presents a comprehensive guide to fundamental investing principles designed to protect investors from emotional pitfalls and mark

Key takeaways

• Avoid 'piggish' behavior by taking profits during market peaks to prevent giving back gains during sudden sell-offs.
• Do not let capital gains tax aversion prevent you from exiting positions, as seen in the decline of Macy's.

Main topics

• Investing Discipline
• Market Volatility Management

Notable quotes

Bulls make money. Bears make money. Pigs get slaughtered.

Conclusion

The episode serves as a cautionary manual for both amateur and profess

Transcript preview

Speaker 6 (0:00) From gas prices to housing prices, from government spending to consumer spending, from the AI boom to the data center backlash, how will this election hit your pocketbook and your portfolio? Continuing coverage, the Economy Election, CNBC. My mission is simple, to make you money. Speaker 5 (0:19) I'm here to level the playing field for all investors. There's always a bone working somewhere, and I promise to help you find it. Mad Money starts now. Speaker 5 (0:32) Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica. If you want to make friends, I'm just trying to make you a little money. My job is not just to entertain, but to put it all in context. So call me at 1-800-743-CMEC or tweet me at Jim Kramer. I am constantly on this show telling you that discipline always trumps conviction. I tell it to you over and over and over again. In other words, no matter how much you may love a stock, no matter how enthralled you are with the underlying story, if the rules say sell, you sell it. One thing I've learned from my investing career, no matter how much you might believe in something, you violate the rules of the road at your own peril. Speaker 5 (1:08) That's why we obey them religiously with the Channel Trust. And they become our core guide for the CMEC Investing Club, which I want you to be it. But where the heck do these rules come from? It's not like they were handed down from on high and carved into stone tablets. Hey, they're not the lowest five commands for the history of the world, part one. They're not like the laws of physics. You can't just deduce them from observing the way markets works that you can do, say, gravity. No, the rules come from my experience. That's right, from my experience. I've spent over 40 years in this business, and in that time, you better believe I've learned some powerful lessons. In many cases, I did have to learn them the hard way. And because I don't want you to repeat my mistakes, because I want you to have the benefit of my whole career, tonight I'm going to lay out some of the most important rules for investing, and they are indeed timeless. Some of this stuff may seem basic, but again, you forget the rules in your own peril. Back in my old hedge fund, I occasionally convinced myself that it was okay to make an exception, to have a cheat day, so to speak, to ignore my discipline just this once. For some reason, this seemed compelling at the time. And whenever I broke my own rules, I almost always got burned. It's like that old joke about the doctor, the guy who goes to the doctor and he says, Hey, doc, doc, listen to me. It hurts when I stretch out and shake my hand around. To which the doctor replies, then don't do that anymore. So... Speaker 5 (2:31) So what exactly should you be doing or not doing, as the case may be? All right, let's tick down my most important rules for investing. We're going to start with the first one, which is bulls make money. Bears make money. Pigs. Well, they get slaughtered. Look, I say this all the time because that's because so often in my business I've seen moments where stocks went up and up and up so much that people were intoxicated with their gains. They don't know Jesus. However, it's precisely at that point of intoxication that you need to remind yourself that you don't want to act like a pig. I first heard this phrase in the old trading desk. Legendary Steiner Partners, an amazing old hedge fund. I've been having a big run in some stock and the brilliant Michael Starnert would tell me that I've made a lot of money. perhaps too much money. And maybe I was being a pig. I had no idea what he was talking about. How do you make too much money? I was just grateful I caught a major gain. Of course, not that long after, we got a vicious sell-off. And I gave back everything I made and then some. And that's when I enshrined the bulls make money, bears make money, pigs get slaughtered thesis as one of my own rules. And it's now so deeply ingrained that I got a barnyard full of sound effect buttons to tell the whole story. The bull, the bear, the pig, and of course, the gig. Just to be clear, bulls don't have a monopoly on piggishness. The same idea applies to investors who press their bets too aggressively on the short side. We've had some major declines over the years, but other than the dot-com bust in 2000 and the financial crisis of 2008-2009, most stocks bounced back pretty darn quickly. Even in the Fed-induced meltdown that started at the end of 2021, you had to turn positive by the fall of 2022 because if you pushed your luck by staying short too long, you got sent to the slaughterhouse. So the question is, how do you know when you yourself are being a pig? Look, Leslie, there's no such thing as stupid questions, only stupid answers. But honestly, you really don't need me to tell when you're being a pig. The Nasdaq more than doubled from March of 2020 to November of 2021. If you didn't feel greedy up there, you didn't need an investment foster. You need a psychiatrist. If you took profits, you sidestepped a huge decline. If you let your winners ride, well, you gave a lot, if not all the money back. The financial crisis was even more stark. If you were walking around owning a huge amount of stock in 2008 as the banks started dropping like flies, well, you were beyond piggish. Speaker 5 (5:02) Why is this rule so important? Simple. One of my chief goals is to help you stay in the game. That's the hardest part of investing. It's holding on through the difficult periods, taking short-term pains so you can have long-term gains, which is what's happened to stock market for a century. The people got wiped out in 2022 or the dot-com collapse before they tended to be the ones who never took anything off the table. They never felt greedy. And their piggishness, well, they never felt it. And so they got slaughtered. Being cautious and ringing the register. near the top, ended up keeping you in the dream. Notice I said near, because catching the ultimate top is just so impossible. Just catching near the top, that's great. That's why I remind people every day, have you taken any profits? Have you booked anything? Why are you being a pig? Because you never know when the stocks you own are going to crash. You never know when the market could be wiped out. You can't have certainty. Stock market doesn't let you have certainty. If you assume stocks will keep going up forever in a straight line, well, you are in for the house of pain. Everyone would own stocks if that were the case. And we know they don't because it's so risky. Sure, there'll be times when stocks just going up and up and up. They just keep going. When I coined the term FANG over a decade ago for Facebook, which became Meta Platforms, Amazon, Netflix and Google, which became Alphabet, I loved them all. But I did give up on Amazon after an incredible run. I was trying to be disciplined. Yet it did continue to move up another 50%. I did feel, felt like a pig after the stock's extremely proper run. But when I felt like, I felt like a fool after I kept Gallup. You've had the feeling. You know what it's like. That's just the price you have to pay for following the rules. I had been a pig, but the pig kept running. It didn't get slaughtered. Fortunately, we got back in Amazon for the travel trust when then-President Trump kept bashing them for ripping off the post office. You remember that? probably even don't. But it was torture to watch it go up without me, and it was terrific to get back in. Now, you need to recognize, though, that for every huge pile of cash that gets left on the table with a situation like Amazon, you're sidestepping gigantic losses that the kind of which you would have had if you had left everything on the table in 2000, 2008, or late 2021. Experiences that turn two generations of investors against stocks, and hopefully I'm trying to preserve the last one. So, never forget, bulls make money, bears make money, but pigs? No. Pigs? Speaker 5 (7:21) Yeah, you get it. And I'm going to keep repeating that forever. I'm going to use the sound effects because it is just that important. How about rule number two? This is one that people, I see them on the street. Almost everyone says this to me when I ask them if they've made some sales. Rule number two is it's okay to pay the taxes. Look, no one ever likes paying taxes. I don't. You don't. But like death, taxes are inevitable and unavoidable. Yet the aversion to paying taxes on stock market winnings often borders on the pathological. So many times people have gigantic gains, but they simply refuse to take any profits because they don't want to incur taxes that cut into their winnings. Never mind the capital gains rates are pretty darn low versus ordinary income. Wall Street's littered with the broken hearts of investors who made this mistake. Several years ago, for example, I went to a presentation from a prominent hedge fund manager who recommended buying Macy's because of its real estate value. The stock had already run a great deal before the presentation, and it was ripe for some profit taking regardless. But I know people who'd owned it for years with hefty profits, and they did want to bring it back. register because they would have to write a check to Uncle Sam. And of course, they were thinking about how much that real estate was worth. Next thing you know, Macy's saw its Speaker 4 (8:24) stock Speaker 5 (8:25) get Speaker 4 (8:25) cut in half and Speaker 5 (8:27) it wasn't a two for one split. The whole shopping mall space had hit a tipping point courtesy of competition from the Amazon and the darn thing got obliterated. Those who didn't want to share their profits with the IRS ended up with no profits at all instead of hoping the stock would go to 100 because it might have a lot of real estate. So I want you to make your peace with the taxman. Some gains are simply unsustainable. A profit on paper is not the same as a profit in your bank account. Gains can be ephemeral. You haven't made any money until you ring the register. The last thing you need is to be worrying about capital gains tax and taxes. When it's time to sell, sell. In short, stop fearing the taxman. Start fearing the lost man. You won't regret it. The bottom line, remember my first two rules. Bulls make money. Bears make money. But pigs get slaughtered. Don't be greedy. Be disciplined. And don't be afraid to pay the taxman on profits that you've earned. Let's go to Tyler in California. Tyler. Hey, Big Blue. I'm from California. How are you doing, Jim? I am doing well. How about you? Speaker 4 (9:28) I am doing good. Thank you, sir. I don't know how many times that I've sold a position and the next day or two watched it reverse. So I'd like to know, when is a good time to just Speaker 5 (9:39) reevaluate and cut my losses? Okay, I think that this is a terrific question. And don't feel bad because I obsess on losses for the travel trust. And I know, and I bother Jeff Marks endlessly. We're down on this. We're down on this. No, what you do is try to look at it. once a week, okay? Just once, because I don't want you to get down. You're going to miss other opportunities. And what you're looking for is a change at the margin. It's something said on the quarterly conference call. You don't want to just get up in the morning and say, you know what? I don't like the way that acts. I'm taking the loss. Wait for something definitive. And if there is a bump up, don't be afraid to trim the position no matter what. How about Robert in Minnesota? Robert. Speaker 1 (10:20) Hey, Jim. Thanks for taking the call. My Speaker 5 (10:22) pleasure. Speaker 1 (10:24) Yeah, when I retired, my company let me keep my 401, which is in a time-dated fund, at the corporate rate, which is very cheap, but it has limited choices. My question is, should I switch it over to a managed fund with another company like Fidelity or et cetera at a higher standard rate but has more options? Speaker 5 (10:44) Look, I'm big in favor of the S &P 500 as an index fund. I think that'll be terrific. That's what my retirement's in. That's what your retirement should be in. I think that'll be fine. I love diversification. Remember my first two rules. Bulls make money. Bears make money. But pigs, they get slaughtered. Don't be greedy. Be disciplined. And don't be afraid to pay the tax payment on profits you've earned. We love taking profits. Coming up, from portfolio maintenance to learning how to do your homework, I'm hitting my investing rules that I think are the key to mastering this market. You don't want to miss them. So stay with Kramer. Speaker 6 (11:27) Don't miss a second of Mad Money. Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email