When the Chiefs Retreat, So Should You

Editor's note: As a special bonus to TheStreet.com readers, we will be running an updated version of Jim Cramer's "Twenty-Five Rules of Investing," from his latest book, Real Money: Sane Investing in an Insane World. Here's Rule 19.

Lots of guys had lots of reasons to sell Enron. I only needed one of them: The CEO quit for personal reasons.

CEOs don't quit for personal reasons. CFOs don't quit for personal reasons. These are fabulous jobs. You get them after giving up much of what people enjoy about life, such as family, friends and nights out. Competition is so fierce for these positions that when you finally land one, you don't up and leave. You leave because something's wrong at the company. Hence, my rule:

When high-level people quit a company, something is wrong.

"Aha!" you say, "I know a CEO who quit because he had an epiphany about climbing K2." Or, "I know a CFO who left because she wanted to spend more time with her family."

Fine. There are exceptions.

This is a game about the rule, not the exception. There will always be some situation in which it is a mistake to sell when a high-level person leaves. I don't care.

As you can tell, if you have read the rules to date, I am giving you the stuff that has kept me in the game all these years, that literally has kept me from losing more money than I have made.

In the midst of its scandal, AIG ( AIG) felt like Enron to me. We have no idea what kind of reserves AIG really has at all, and the high-level departures are unnerving. This one seems like Fannie Mae ( FNM) at best, Enron at worst.

This is why on some sleepy August night with Enron at $47 a share, I told everyone and anyone that I would sell it nine ways to Sunday because Jeffrey Skilling, the man who would have given his eye teeth to get his CEO job, suddenly quit. Of course, there were those who said, "Cramer, if you had done more homework, you could have gotten out at $90." Yeah, maybe. I didn't.

I didn't keep you in till zero, though, either.

1. Pigs Get Slaughtered 2. It's OK to Pay the Taxes
3. Don't Buy All at Once 4. Buy Damaged Stocks
5. Diversify to Control Risk 6. Do Your Homework
7. Don't Panic 8. Buy Best-of-Breed
9. Defend Some Stocks 10. Don't Bet on Bad Stocks
11. Own Fewer Names 12. Cash Is for Winners
13. No Regrets 14. Expect Corrections
15. Know Bonds 16. Don't Subsidize Losers
17. No Room for Hope 18. Be Flexible
19. Quit When Execs Do 20. Patience Is a Virtue
21. Be a TV Critic 22. When to Wait 30 Days
23. Beware the Hype 24. Explain Your Picks
25. Find the Bull Market

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.

More from Investing

Markets Look Confused After Latest Beating

Markets Look Confused After Latest Beating

Jim Cramer's Investing Rule #2: It's OK to Pay Taxes

Jim Cramer's Investing Rule #2: It's OK to Pay Taxes

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

3 Best Investing Opportunities Right Now in Closed-End Funds

3 Best Investing Opportunities Right Now in Closed-End Funds

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War