Sneak Preview: You Can't Always Act

Editor's note: This is a special sneak preview of Jim Cramer's just-released book, Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer). Look for more sneak previews every day, and get your free copy with your annual subscription to Action Alerts PLUS; click here for details. Catch Cramer in person at his last book signing event: Saturday, Jan. 12, at 1 p.m. in Westbury, Long Island's Costco.

Missed the first sneak previews? Read the book intro and the rules of getting and staying rich: Rule 1, Rule 2, Rule 3, Rule 4 and Rule 5. Know what pros do right and amateurs do wrong: Part 1, Part 2, Part 3, Part 4 and Part 5. Learn the five mini-bull markets that will stampede for years, starting with aerospace and defense, agriculture, oil and oil service, minerals and mining and infrastructure.

4. Pros recognize that not everything is analyzable. Amateurs think that everything can be explained, graded, and traded.

Not that long ago, a persistent questioner on Stockpickr.com kept asking me about a company called Clean Energy(CLNE Quote). He would not let up. Finally I told him it was not analyzable. That wasn't enough.

He said that the legendary oilman T. Boone Pickens owned a big piece and he wouldn't do that if he couldn't analyze it. I told him I didn't know anything about why T. Boone Pickens liked anything but I did know that the company didn't file financials and it based its so-called earnings on the amount of natural gas it pumped into gas tanks. I kid you not! That was the metric. You couldn't even tell what the darned revenues were, let alone the earnings.

Sorry, I think it's irresponsible to invest in something like that. This lesson is quite different from knowing your own limitations. There isn't anyone in the world, including T. Boone Pickens, who can make sense of that stock.

Tons of people call in to my show and ask me about Chinese stocks. Again, the financials are not only often opaque, they are often nonexistent. I can't tell a thing about them. I also am a firm believer that if you can't figure out what a particular bond is, such as a collateralized debt obligation that batches mortgages into a bond, you should never even be invested in a fund that has this junk.