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Editor's note: The following is a recap of a show that originally aired on May 28, 2007.
NEW YORK (
) -- "Tonight's show is devoted entirely to teaching all of you the best way to watch 'Mad Money' and the right and wrong things to take away from different segments -- the most valuable stuff," Jim Cramer told viewers of his TV show Thursday.
"I'm not a genie in a bottle who can grant you instant wealth, but I'm not just a sad clown who sips cheap scotch on his dirty linoleum floor either," he said. "I can't make you rich. I am here to give you advice."
Cramer said he has a lot of experience with the market, and he's not ashamed to say that he's great at picking stocks and understanding the market. "I think I'm a great teacher," he said. "What I'm not is your financial dictator."
In a given week Cramer said he might recommend a dozen stocks, excluding the ones in the "Lightning Round." But just because Cramer says he likes a stock, doesn't mean that viewers should go out and buy it.
Nor does it mean that if people buy that stock they will absolutely, positively make lots of money, Cramer said. "That's not how this game works."
While he'll be right more often than he is wrong, "any decent money manager knows that you're going to have some losers," he said. "This is especially true if you're running a diversified portfolio, which you absolutely must do."
To get the most out of a story where Cramer says he likes some stock, first people must consider the rationale behind the buy, he said. This "is always more important than what you're buying." Usually Cramer said he talks about the sector when he recommends a stock.
"It's more important to know what I think about a sector, than it is to know what I think about a single stock," he said. "You want to listen for that."
For example, when Cramer says he likes cable this is "much more important" than when Cramer says he likes
, "because 50% of where a stock goes is determined entirely by its sector," he explained.
"I'm usually trying to teach a bigger lesson when I single in on a bigger stock -- either something about the market in general, or about the market at a specific time," Cramer said.
For instance, if he recommends a stock with a great big dividend, then it's important for viewers to get the bigger takeaway that he likes stocks with big dividends, than to pick out the one stock he focuses in on.
Similarly if he tells investors to buy a secular stock, the bigger lesson isn't to go buy
Procter & Gamble
but that "at this point in the business cycle, you want to own these kinds of supermarket stocks," Cramer said.
Cramer recently did a series on stocks that he thought were great private equity takeover targets, he said. Those six stocks in the series should not have been the takeaway.
Instead it should've been "that private equity funds like stocks with big cash flows and operations they could easily improve by taking the company private -- so look for those characteristics when you speculate on buyouts," Cramer said.
"None of this is to say that you shouldn't listen to my stock picks, which I have total conviction in. But the bottom line is that there's almost always something more important going on than just 'buy this, sell that,' and the bigger lesson is worth focusing on," he said.
Cramer said he truly believes that he is "the most misunderstood man in show business," and he's never more misunderstood or criticized than when he's doing his "Lightning Round."
The worst, he said, is when people take his recommendations from the Lightning Round and equate them with his recommendations during the rest of the show.
While Cramer's advice in the Lightning Round is "sound," it's not as well developed as the rest of the show, he said. "If I spend 5 or 10 minutes pushing a stock at the very top of the show, that means a lot more than if I give a stock a thumbs up during the Lightning Round and move on."
The substance of the Lightning Round is mostly about sectors, Cramer said. When someone calls in about a stock and he doesn't like it, most of the time it's because Cramer doesn't like the sector.
This should be the important takeaway for viewers. Other times, when Cramer says he likes a stock, usually it's because he likes the sector, and he'll still tell the caller to swap into "some other stock I prefer in the sector, something that's closer to best of breed," he said.
"The Lightning Round is a valuable money-making resource, so long as you approach it from the perspective of Cramer analyzing sectors" and not Cramer telling you to buy something with no rhyme or reason, he said. "Trust me there's always a method to my madness."
Also, Cramer said viewers should expect that he will change his mind often. "If you're going to get the most out of "Mad Money," you have to understand that the market is dynamic, things are constantly changing and my opinions will change, too," he said.
"You can't rely on five hours of television a week to tell you exactly what you should buy, exactly when you should buy it and then exactly when to sell."
After a certain point, people are on their own, which is why he constantly emphasizes homework. "You must do an hour of homework per week per stock on your own," Cramer said.
"I don't say that because I want to reduce my liability. I say it because if you do homework, you'll probably make a whole lot more money."
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Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.