Cramer's 'Mad Money' Recap: One on One With Hillary Clinton

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In a special episode of "Mad Money," Jim Cramer welcomed New York Sen. Hillary Clinton to the show to discuss a variety of economic issues that have come up during the hard-fought Democratic presidential primary campaign.

When Cramer asked her about the subprime mortgage crisis, she said the current administration hasn't done enough to deal with the problem. "This is the kind of problem that demands urgent action," she said. "Homeowners were often misled by abusive and fraudulent lending practices."

Clinton reiterated her proposal for an immediate 90-day moratorium on all foreclosures to afford homeowners and lenders the opportunity to work out new financing terms. She also advocates freezing adjustable mortgage rates as another way to give homeowners time to explore their options.

When Cramer asked about using the Federal Housing Administration (FHA) to bail out homeowners who have no other options available to them, Clinton said she felt that was an excellent idea. "We need to act now and act boldly to both save the homeowners and save the economy from recession," she said.

On other issues, Clinton said the government needs to take a "hard look" at the 14-year-old North American Free Trade Agreement (NAFTA), saying the agreement needs to be "fixed" so that there's "balanced growth" and "shared prosperity."

Regarding the country's energy policy, Clinton agreed with Cramer that the rising cost of corn and soybeans used for ethanol production has contributed to the rising cost of food around the world.

But she described the current state of energy in this country as a "transition period." She said the country needs a broad set of home-grown energy alternatives that not only includes ethanol, but also bio fuels, wind and solar energy, as well as completely new forms of energy production.

And finally, when asked about possible increases in the dividend tax rate, Clinton indicated that she would increase dividend taxes, but said the increases would be "nothing significant."

She also indicated that income taxes rates under a Clinton administration would increase for those earning over $250,000 per year, and that those proceeds would be used to help fund a universal health care system.

(Editor's note: The remainder of Wednesday's program was taken from a Dec. 28, 2007, broadcast.)

Investing Like a Pro

"Tonight's show is all about teaching you to invest like a pro," Jim Cramer told viewers of his "Mad Money" TV show. "There are all of these money-losing mistakes that people, who don't invest for a living, make when they try to manage their money and I want to help you avoid them."

Individual investors, "amateurs who run their own money in their spare time," can make more money in the market than the professionals, who run money as their full-time job and have trained for years to be better investors, Cramer said. But most of these individual investors will never come close to that achievement mostly because of mistakes professional investors don't make and ordinary investors make constantly.

"Tonight I'll tell you how to avoid making five mistakes amateurs make and pros don't, because learning how to invest well is much more important than getting advice about individual stocks or even groups of stocks," he said.

First, from what Cramer's seen, amateurs are almost always fully invested, "meaning that all the money in their portfolios is invested in stocks and no cash is left on the side." Professional money managers, on the other hand, always have cash in their portfolios, he said.

Market players should always want to have cash and if they don't, they need to sell something, Cramer said. "This is one of the most alien and difficult concepts for most ordinary investors to understand," he said. "Nonprofessionals think it's right to be fully invested. I'm a champion of stocks, but that's totally, 100% wrong."