Make Back the Money You Lost

Jim Cramer knows you’re scared. He really does. He just thinks you need to get over it.

Author:
Michael Schreiber
Publish date:
Oct 14, 2009 1:50 PM EDT

Jim Cramer knows you’re scared. He really does. He just thinks you need to get over it.

Jim Cramer knows you’re scared. He really does. He just thinks you need to get over it.I spoke to him at length about his new book, Getting Back to Even (now #1 on the New York Times bestseller list), about where he thinks our economy is heading, and about his own life and how it’s been spent. He says that, soon enough, he’s going to get out of the business of talking about making money, and go back into the business of actually making it.But more on that later. First, the book.

Jim Cramer knows you’re scared. He really does. He just thinks you need to get over it.I spoke to him at length about his new book, Getting Back to Even (now #1 on the New York Times bestseller list), about where he thinks our economy is heading, and about his own life and how it’s been spent. He says that, soon enough, he’s going to get out of the business of talking about making money, and go back into the business of actually making it.But more on that later. First, the book.

In Getting Back to Even, Cramer aims to help readers make back the money they lost in the downturn, and he’s willing to challenge everyone’s assumptions – those of his readers, viewers and critics – in order to get his message across. “Things are getting better but your method of making money is flawed if you’re going to revert to the old ways,” he said (Cramer is a contributor to MainStreet and founder of our sister site, TheStreet.com.) “You need to do it with individual stocks. You need to do it with dividend plays. You need to do it with the ways that Wall Street is giving you money to get back into the casino. You do not do it by being what is called safe.” If what Cramer’s saying here is over your head, don’t fret - the book is designed to be accessible to both the layman and the more experienced investor. If, on the other hand, you understand what he’s saying, but his message really scares you, he’s not particularly surprised: it’s precisely this fear that he seeks to dispel.

The current recession is the worst since the 1930s. Unemployment is still rising. Consumer confidence is low and inflation fears are palpable. But Cramer sees real opportunity… and he sees it in the stock market.“Everyone says the same thing. I’m too scared, Jim. I’m too scared to do this,” he said. “But you’ve got to snap out of that. It doesn’t get you anywhere.”He references the recession of 2000. “After 2000 to 2002, a lot of people put their statements in the drawer and refused to look at them. And those people missed out on one of the most remarkable 7,000 point runs in history. And I think we could be in for a remarkable run again. I don’t want people to miss it.”Photo Credit: Wikiwonka42

Cramer knows that critics will say that this book will be over some people’s heads, and he concedes that this is indeed a possibility. But he also says it’s not as confusing as people make it out to be and, more importantly, he says he knows his audience and they want this information (hundreds of thousands of people watch Cramer every day on his CNBC show Mad Money). The most challenging section of the book, he says, deals with stock options. “The advanced options chapter is for people who have always questioned how I made my money when I was at the hedge fund. I’ve never been willing to talk about it because it’s very complicated. But we’re living in a strange time and I wanted to have a book that wasn’t just good for the layman, but also for the person who stays at home and watches.”Options, which allow people to lock in a stock at a certain price in exchange for paying a premium, provide a mechanism for making more money faster, particularly when you don’t have the cash on hand to buy the stock itself.

In the book, Cramer argues that popular wisdom, which dictates that people buy stocks and hold on to them indefinitely, may indeed be popular, but it isn’t wise. “There are tons of studies out there that say passive investing is the best. I come back in empirical fashion and say, ‘well, how have you done in the last 10 years?’ And the answer is, ‘awful.’ So, maybe you gotta change,” he says. “The resistance is, ‘I don’t know anything about the market and I don’t have time.’ Well, that’s why I wrote the book.”Cramer counsels people to study for at least an hour per week, for each stock in which they are invested. If you own six stocks, that means you’ve got six hours of homework every week. He, himself, spends considerably more time than that studying the market. He often gets up at 3 a.m. to begin working. He’d then works half the day at TheStreet.com, and another half at CNBC filming his show. Then he goes home and works more.“My day is very idiot savant like… my brain should not be focused on this stuff like this,” he says. “I have a very good memory for cards and a very good memory for stocks and I happen to like it. So it becomes a driving force for me. I’m a consumer of data and, for better or for worse, the consumption of the data has destroyed other components of my life. Because to consume it is time consuming. You can’t do what I do part time.”Photo Credit: Jekert Quapo

For those who have neither the time nor the inclination to do the homework, Cramer recommends 12 stocks he says are poised to do well through what he believes is an imminent recovery. Many of the companies he recommends have something to do with the acquisition and transport of minerals. Why minerals? The answer, says Cramer, is China.“China is becoming an industrialized country,” he says. “China, 10 years ago, used 10 percent of the world’s copper and we used 30. Now, China uses 30 and we use 10. They are a high growth economy that was like America in the 20s and 30s.”He’s also very big on mobile Internet, referencing the iPhone I’m using to record our conversation. He points out, “3% of the world has smart phones, and 97% of the world has dumb phones.” There’s nowhere to go but up.Photo Credit: Andrew Turner

Cramer points out that despite the loss of many American production jobs to China, this country still makes great, wealth-generating things.He’s excited about an American company called Tessera, which designs the tiny cameras that are in cell phones. Cramer had the company’s CEO on Mad Money last week and learned about their plans for a new fanless cooling system for computers that is 30% more efficient than current technology. He says that this kind of ingenuity is the result of our schools.“Our schools are the best,” he begins, and then he clarifies: American public schools (grade school, high school) may be sub par, but our collegiate and graduate level engineering and technical programs are the best in the world.” “Second tier engineering schools now have first tier teaching talent. Because of the inability for people to get tenure at the top tier schools, you can go to what formerly would be considered a second tier school and now it’s just not. It’s as good as the other places (M.I.T., Cal Tech) and if you don’t think so it’s just snobbery.”“Our country is filled with smart people and that’s how Tessera works,” he says.Photo Credit: William Hook

“This book wrecked four months of my life,” says Cramer. He started writing in March, after Fed chief Ben Bernanke declared the banks safe, and though he collaborated on the book with his nephew, Cliff Mason, Cramer says that moreso than previous works, this book was very much his baby. It consumed him.“I wanted to do this book a year ago but I couldn’t do it then because I couldn’t get you back to even.”Now he sees an opening. He believes he can help people rebuild wealth, but he is hyper aware of the potential pitfalls of writing this book in the wake of an economic breakdown like we’ve just experienced.“People question my motives on a daily basis,” he says. “There’s no getting around it. I’m viewed as a polarizing figure and many people think I’m just a self-aggrandizing jerk. I’ll have to go back to making money eventually... I have the skin of a rhinoceros but, at some point, the rhinoceros has no skin left.”In a year during which Cramer squared off with Jon Stewart, The White House, and Frank Rich of The New York Times, among others, he also received of a number of “very detailed and scary” death threats, warranting the involvement of the FBI, and leading to arrests. Nevertheless, he hasn’t set a time table for his retirement from the media business.“I like what I do,” he said. “I think that’s important.“

It’s Time

Jim Cramer knows you’re scared. He really does. He just thinks you need to get over it.I spoke to him at length about his new book, Getting Back to Even (now #1 on the New York Times bestseller list), about where he thinks our economy is heading, and about his own life and how it’s been spent. He says that, soon enough, he’s going to get out of the business of talking about making money, and go back into the business of actually making it.But more on that later. First, the book.

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