Click here for an archive of Jim Cramer's MadMoney recaps.Click here to get Jim Cramer's Mad Money Post Game video exclusivelyon TheStreet.com.
NEW YORK (
) -- "The only way to atone for your stock market mistakes is to learn from them," Jim Cramer told the viewers of his "Mad Money" TV show Monday. He said that only by avoiding similar mistakes in the future will investors truly prosper.
Cramer said one of his biggest mistakes this year was predicting that
would triumphantly fly its much anticipated "787 Dreamliner" into this year's Paris Air Show, ushering in a new growth cycle for the entire aerospace industry. In reality, the exact opposite happened. Boeing instead used the event to announce even further delays for the beleaguered aircraft, and its stock tanked as a result.
Cramer said his mistake was focusing on the event, the Paris Air Show, rather than the company, Boeing, which is indeed on the heels of a huge, multi-year growth cycle. He said he broke one of his cardinal rules, he turned an investment into a trade. His atonement, he said, is to make the long-term case for Boeing.
Cramer said his thesis regarding Boeing is correct, despite his timing, which could not have been worse. He said investors need to buy Boeing for the Dreamliner, plain and simple. He said the industry is teeming with pent up demand for new planes and that's great news for Boeing. The 787, when it does eventually fly, will give Boeing strong growth for years to come. "Boeing is still very much a buy," said Cramer, "and if it goes lower, you can buy some more."
"Even if you're right, there are very few situations where you'll stay right," said Cramer. That's why his second rule of atonement is to always be your own worst critic and constantly challenge your own ideas. He said its much better to realize you're
to be wrong, rather than realizing you
Cramer said that today's market is dominated by quick-moving hedge funds, and not the slow-moving mutual funds on yesteryear. He said investors also need to be nimble, and be prepared to change their minds as the fundamentals of their stocks change.
How do you see the end coming for stocks that have been on a tear? Cramer said it helps to compile a list, in advance, of the things that would cause you to turn negative on a stock. That way, when they happen, you'll be prepared and will be ready to throw the switch from bull to bear.
Cramer said this rule played out earlier this year, when the "perma-bears," those convinced the world was ending, failed to change their minds when the possibility of depression turned into recession, and the markets began to recover in early March. Had these bears had a list, they would've been able to check off things like "financial system stabilizing" and "imports from China recovering" and thus would've been able to participate in the rally.
Cramer said his third rule on his day of atonement is to never rely on what a company says to be true, without doing your homework. He said it's entirely possible for a company to be too bullish on itself, and it can cost you a fortune.
Cramer used fertilizer giant
for this example. He said here's a case where a company was simply too promotional about its earnings. After the company said things were fabulous, Cramer said he turned bullish on the stock. Two months later, the company lowered the boom, slashing estimates and crushing its stock price.
Cramer said he believed everything the company was saying, without doing his homework and while ignoring what he knew to be true. Cramer said when business is bad, always invest in companies that pay a dividend. This offers protection against losses, he said. Potash has no dividend.
Next, Cramer said to pay attention to the end markets. He said crop prices were falling, which meant there was no demand for crops, and thus likely no demand for fertilizer.
Third, Cramer said to pay attention to the technicals. He said while no investor is to rely on the chart, they can, as in Potash's case, show what others are likely to be thinking about a stock.
Finally, Cramer said to pay attention to the competition. He said that
, which was a better company than Potash, was still saying things were bad. This too should have been a red flag, he said.
Cramer said his bottom line is to never be too reliant on what a single company says to be true. Look at the markets, the competition, the technicals and when in doubt, stick with the dividend payers.
Cramer said his next rule for atonement is the opposite of the above: It's being too skeptical in the face of bullishness. He said when someone has built up the credibility of being bankable, it's a huge mistake not to stick with them. Such was the case with
, said Cramer, is a stock he "chickened out" on and advised selling amidst a great period for the company.
Cramer said he had been behind Airgas, a provider of industrial, medical and specialty gases, for a long time, right up until he interviewed the company's CEO on Oct. 24, 2008. At that time, his previous recommendation was down 46%, along with the markets overall, and Cramer said he just simply couldn't take the pain. He said that despite believing in Peter McCausland, the company's CEO, and hearing that things were improving, Cramer advised selling anyway.
Cramer said he let fear get in the way of his judgement, and that fear cost investors money, as they not only missed the recovery in the stock, but they also booked the 46% loss from the previous recommendation. Cramer said there's healthly skepticism, and then there's being impossible to persuade, which is what he was.
Not all CEOs are in the business of self-promotion, said Cramer, something he knew to be true with McCaulsand. Just as too much faith is a sin, so too is too little, said Cramer, especially when it blinds you to opportunity.
Not only can your own mistakes hurt you, said Cramer, so too can those made by the
Securities and Exchange Commission
. The SEC has made several blunders, he said, and it too needs to atone for its mistakes.
Cramer said he expected more from the SEC under Mary Schapiro. He said the laissez-faire SEC under Chris Cox did much to destroy the level playing field that investors have come to trust, and its Schapiro's job to make things right.
Cramer said Schapiro needs to bring back the uptick rule, a rule which protects stocks from hoards of short sellers ganging up to drive prices lower, as they did at the heart of the financial crisis.
Cramer said the SEC also needs to ban what he calls "ETFs of mass destruction" or ultra-leveraged ETFs that do not do what investors think they do. Third, Cramer said the SEC needs to crack down on the real law breakers, those who contributed to the financial crisis in the first place by taking on too much risk with zero accountability.
Cramer said the SEC has a lot to atone for. It needs to do its job, level the playing field and actually try and catch the bad guys.
To watch replays of Cramer's video segments, visit the Mad Moneypage on CNBC
Want more Cramer? Check out Jim's rules and commandments forinvesting from his latest book by
At the time of publication, Cramer had no positions in stocks mentioned.
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."
None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
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.