Guest: Jim Cramer
TIM RUSSERT, HOST: Welcome again. You watch him every night on CNBC’s “Mad Money,” you read his column on TheStreet.com and in “New York” magazine. Well, now he has a new book, “Stay Mad for Life: Get Rich, Stay Rich, Make Your Kids Even Richer.”
The one, the only, Jim Cramer.
JIM CRAMER, HOST, AUTHOR, “STAY MAD FOR LIFE”: Thank you for having me, Tim.
RUSSERT: What’s the purpose of this book?
CRAMER: This is actually the book I should have written first. I’ve written a bunch of books. I think they were about how to become a great trader, a great investor.
I never mentioned 401(k) before, IRA. I had never done retirement, and I’ve never talked about putting away money for your kids.
This is what Americans have to do. They’re not going to go be hedge fund managers. This is about day-to-day management so you are rich when you’re finished.
RUSSERT: You talk about getting started. How does someone get started?
CRAMER: I am adamant that they get started—any age, it doesn’t matter. They have to own stock, they have to own some stock.
I prefer to have them do homework. But the reason why you have to is no other asset class comes near stocks. Bonds, real estate, gold, they never, ever touch them over a 200-year period. So people can’t just say, you know what? I’m going to buy a house. That doesn’t work anymore. I’m going to buy bonds—those don’t work.
RUSSERT: So I think a lot about my dad, god bless him, “Big Russ,” 84. He doesn’t have any stock. He doesn’t know what it’s all about. How do you say to policemen, firemen, carpenter, teacher, you’ve got to get in the stock market, this is how, don’t be afraid?
CRAMER: Well, you’re absolutely right, first of all, that there’s a whole generation that missed out. What I’m saying is people living longer, don’t stop trying to make money with your money in your 50s and 60s.
The book is split, Tim. I candidly admit most people, your dad, may not have time. My dad may not have time. So here are mutual funds that have done well in bad times, and I have that list. But most importantly, I want people to handle their finances themselves.
This is about not being scared with your money. I go around all the country, Tim. Everybody’s scared. They don’t understand. They’re afraid of handling their money.
Do you think that someone else is going to handle it with the same level of interest that you do? No.
RUSSERT: But how do they break that barrier, Jim Cramer? How do they sit down and say, you know what? I’m gong to buy stock today. What do I do?
CRAMER: You can buy things you know. You do need to go and take a look at—every single company has a Web site. Take an hour off and look at it. Decide whether it pays a dividend that they can afford. That is easy to tell from looking at the Web site.
But most importantly, buy a share. Buy one share. Get comfortable with the process.
I tell people to buy one share at every—when I was at BC, I very specifically said, I want one share, one share of Goldman or Google. Anybody who did it did great, but more importantly, they’re not scared anymore.
RUSSERT: Buy a share of Google—now it’s at $400.
CRAMER: I know. We picked up a quick $300, and I don’t mind saying that I bet you everybody in that hall at BC is now thinking, I can do this myself. I don’t have to give the ball to someone else.
RUSSERT: You actually are high on some stocks.
CRAMER: Yes I am.
RUSSERT: And you’re not afraid to talk about it.
CRAMER: I like companies that are not connected with the U.S. economy or are going to be used regardless, diagnostic companies, because the future of healthcare is to try to stop disease early on. And then I’ve got a lot of mineral and oil companies.
Tim, we’re not as important as we used to be. It’s painful for Americans to admit it. China is a bigger user of minerals and oils than now, but 30 years from now they will be the market. So I provide stocks that I think you can own for 20 or 30 years that are levered to China or to healthcare, not to us.
RUSSERT: You like natural gas.
CRAMER: This is something we have in this country. How this came about to be not our fuel choice, how so much is coal, is ridiculous. Natural gas is something that the Democrats and the Republicans like. We’ve got a ton of it. Why aren’t we supporting it?
RUSSERT: So if someone wanted to invest in natural gas, what would they do?
CRAMER: I recommend a stock called XTO. I picked that one because it’s most impressive, but Anadarko is a fabulous company, Apache.
We are a fabulous producer and driller and explorer. We’re great wildcatters for natural gas. You just don’t hear about it. Natural gas, by the way, same price as it was when oil was at $50 and went to $90.
RUSSERT: You also mention a country—Canada.
CRAMER: These are...
RUSSERT: Buy Canada.
CRAMER: These are always hard for Americans to admit. Canada was a stepchild for a long time. The dollar used to be king.
The loonie, as they call it in Canada, is king. Any Canadian mineral stock, oil stock or bank stock is—I hate to say this, Tim—better than American.
RUSSERT: Why?
CRAMER: More fiscally conservative country, a country that has very little inflation versus its tremendous resource base, and a country that is very supportive of the stock market. Everybody’s invested up there, and their stocks are assessable, they look like ours, but they’re—most of the companies are better run. The Canadians finally are being recognized for what they are, fabulous capitalists.
RUSSERT: Why? It’s right across the border. How could they be so much better?
CRAMER: Well, they’ve got a government that is much more prudent than our government. They are a country that is not addicted to debt. They are not letting others pay their bills for the government. We do all these things.
They don’t have a big deficit. They’re us in 1955.
RUSSERT: Prudent.
CRAMER: They’re prudent. We’re not.
RUSSERT: Why aren’t we?
CRAMER: We are unwilling to raise taxes. They raise taxes all the time. No one gets fired or gets unelected because they raise taxes.
They are not afraid to pay for their own bills. They have courage. Their politicians have courage. They are not afraid to stand up and say, we’ve got to pay for it ourselves.
RUSSERT: You’re not going across the border are you?
CRAMER: No, no. But I think people should recognize there’s a reason why the Canadian dollar is worth more than ours. They have politicians who bite the bullet. We don’t.
No one is willing to take any sort of responsibility here. Up there, it’s responsibility, prudence and a notion that we’re reckless. And I’ve got to tell you, they’re pretty right.
RUSSERT: You know what’s going on in my hometown of Buffalo? The Canadians come over the Peace Bridge, go to all the shopping malls, buy all brand-new clothes, take off their old clothes and leave them in the parking lot. They’re gathered up by Salvation Army, so it’s a twofer.
CRAMER: Well, isn’t it true? I mean, we call this an arbitrage in my world. Canada is just much better off than we are.
Now, you know, what I’m going to wow you, it’s not long before Mexico is better off than we are.
RUSSERT: Whoa. On that we’re going to take a break.
Jim Cramer, “Stay Mad for Life.” A lot more coming up from the mad from “Mad Money.”
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, “MAD MONEY”)
CRAMER: A world where just last week the market goes up huge and then goes down today, nothing happening. First of all, no sane man can tackle this problem. Tackling this market is a job for a lunatic.
It’s a good thing you’ve got me. Right? Lunatic.
(END VIDEO CLIP, “MAD MONEY”)
RUSSERT: Lunatic?
CRAMER: Look, the market’s crazy. We all know it’s crazy. Don’t you need someone who has a little bit more of a irrational approach to things to translate it into some rationality?
RUSSERT: Have you always been like this?
CRAMER: Yes. Yes I have, when I was at Goldman Sachs, when I ran my hedge fund. I was always able to make sense of things that people told me were nonsensical.
I think it’s because whatever is in my brain does not process it and think that it’s so nutty. So I have to conclude that I’m as nutty as the market.
RUSSERT: But it’s hyperkinetic, isn’t it?
CRAMER: Yes, it is. It’s very non-linear. That’s what’s really important. Things don’t make sense unless you’re listening, and I translate it. I hear it.
RUSSERT: You don’t like chairs and you don’t like meetings.
CRAMER: No. I always—I got rid of all the chairs at my old firm. People sleep in chairs.
You get people standing, the meeting ends in seven minutes no matter what. I used to throw chairs in my show until I threw my back out. And I’m trying—I know this sounds weird, but I’m trying to be a little bit more of a statesman.
(CROSSTALK)
RUSSERT: It’s not working.
CRAMER: It’s just—a little bit more of a vocular type? No, not yet? Not yet?
RUSSERT: All right. Uncle Jim, help America on credit card debt. A lot of people I talk to across the country, they’ll see us talking on a program like this and they’ll say, next time you see Cramer, I’ve got all this credit card debt. I want to go in the market, but I’ve got to pay off that debt.
CRAMER: Look, I can’t make you any money when you’re losing money in those credit card companies. Now, one—there’s two things you need to know. The credit card companies don’t want you to be a deadbeat. Then they have to show it to the bank examiners, they have to show it to their shareholders.
You can make deals with the credit card companies, but you need to put all your debt on one credit card.
RUSSERT: Wait a minute. You can make a deal with the credit card companies.
CRAMER: Oh, yes. Oh, the last thing they want, Tim, is to find out that you’re not paying. You call them and you negotiate with them.
People don’t think you can do that. They’re scared to death that you might not pay.
RUSSERT: But they keep raising the rates. Suddenly, a card that you thought was 12 percent, you’re paying 23 percent.
CRAMER: No loan shark in this country would ever attempt to do what these credit card companies do.
RUSSERT: How do they get away with it?
CRAMER: We’re a free country, we’re a capitalist country. There is no—there is no regulation on mortgages, there’s really no regulation on (INAUDIBLE).
We’ve got some states that apply to it, but these companies know that there are a lot of people do default. So they make all the others pay.
My advice, get on the phone to them and say, listen, I’m having trouble. Stretch out my payments or I won’t pay. And you’ll see how they just fold like a cheap suit.
RUSSERT: Is there a company that you can go to to say I need to consolidate my five different credit card debts?
CRAMER: Well, most of them are willing to do it. So I don’t want to say any...
RUSSERT: Individually?
CRAMER: Yes. Most of the mare willing to do it. Any one of them will do it.
I don’t think people realize how tenuous these companies are right now in a tough environment. The last thing—they can’t repossess. They don’t have any choice.
Go to them. I’m not saying that they’re Donald Trump, too big to fail. We don’t have that kind of situation, but what we do have is a situation where they are afraid of an uptick in their defaults.
You own them right now, Tim. You really do. But you have to be willing to be tough.
RUSSERT: How big a problem is credit card debt in the United States?
CRAMER: It’s just becoming a much worse problem. The last two quarters in America has seen a very big spike up in people not paying their credit cards. It’s not been like that in a long time.
RUSSERT: Why?
CRAMER: Because of home equity loans coming due, raising rates. A genuine belief that your house is worth less, and so you’re kind of in a funk about it. And I think also—I mean, people have to recognize that there’s a sense in the country right now of—and I don’t want to use a Jimmy Carter term, malaise, but there’s a sense that things aren’t getting better. And people are afraid and people are cutting back and people are unable to afford both home equity increase and credit card increase.
RUSSERT: How many credit cards should an American have?
CRAMER: None.
RUSSERT: None?
CRAMER: None.
RUSSERT: Well, how do you travel?
CRAMER: Well, OK. If you pay off your credit card, then you’re in good shape.
RUSSERT: Do you pay them every month?
CRAMER: Yes, I do. I never, ever have a balance on a credit card—ever. And I didn’t have it even when I was living in my car, although that was hard to get a credit card then.
RUSSERT: We actually talked about that.
CRAMER: Yes, we did.
RUSSERT: In your last interview, you lived in an automobile in California.
CRAMER: I was broken into, I had everything stolen, I was covering a sniper in San Diego. When I got back, my whole place, every single thing, including my checkbook—I didn’t have money for the rent. So—but I wasn’t going to give up.
So I lived in my Fairmont, typically on Interstate 5, which is very well lit with truckers who will protect you. And I know it sounds odd, but you can come back from anything in this great country—anything.
RUSSERT: How long were you in a car?
CRAMER: Six months.
RUSSERT: And then you went to live with your sister.
CRAMER: Yes. She took me in on a studio apartment in Greenwich Village. I would say saved my life. I’m eternally grateful for her.
I hated giving up. I did not want to leave California, but I got sick and I had no HMO.
RUSSERT: Did you sell the Fairmont?
CRAMER: I kept the Fairmont for another five years. I had a great parking spot I found in Brooklyn. You could just park it there. It was like a lifetime spot, which any New Yorker knows is great to find.
RUSSERT: Whatever happened to it?
CRAMER: My Fairmont just broke down right on—it broke down actually on 95, not a great place to break down.
RUSSERT: And you left it?
CRAMER: No. I towed it, and then I paid the tow guy to just never have—never see it again. It was one of the great investments I ever had, because it’s very hard to get rid of a car in this country.
RUSSERT: One credit card will get you through life, says Cramer.
CRAMER: Yes. I don’t want people on credit cards. That’s why this book is different, Tim. Most of mine are about how to become rich, immediately. And I can’t make you rich if you’re paying them.
RUSSERT: We’re going to take another break. “Stay Mad For Life: Get Rich, Stay Rich, and Make Your Kids Even Richer,” advice from the “Mad Money” man, Jim Cramer.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, “MAD MONEY”)
CRAMER: I’m calling this the Giselle-Cuomo sell-off. Yeah, you heard me right. These two people, a supermodel and Andrew Cuomo, the current New York attorney general, and the poor man’s (ph) Eliot Spitzer perfectly encapsulate what went wrong with today’s market.
Think of it—Giselle! She suddenly demands to be paid only in euros, no dollars. And Cuomo? This man doesn’t want you to be able to get a loan to buy a house.
It’s the sagging dollar and subprime writ large. And I don’t think the problems of either have ever been better illustrated than by these two people.
(END VIDEO CLIP, “MAD MONEY”)
RUSSERT: I don’t think any man has yelled at Victoria’s Secret’s Giselle the way you just did.
What is that about?
CRAMER: She made a statement—now, later retracted—that the dollar is too weak as a worldwide currency and she doesn’t want a part of it. I will tell you, the dollar fell substantially in the period since she made that statement. And now she’s right, she has a good handle on finance.
RUSSERT: She moved the market?
CRAMER: Well, I think that when you recognize that there are people who are not considered savvy, who see the value of the dollar declining, it’s a statement to the world. If she won’t take it, why should I?
RUSSERT: How do we change that?
CRAMER: We’ve got to stop spending. We have to put some growth in this country. We have to raise taxes, and no one will do it.
RUSSERT: Former President Clinton said the other day that we can’t talk tough to China because that’s not the way you talk to your banker.
CRAMER: China...
RUSSERT: In so many words.
CRAMER: You could say China owns us. You could say that we really don’t have a lot of suasion with them because they’ve been financing all the recklessness here.
And, you know, I don’t mean—look, Congress has been as reckless as the president. Both parties are at fault. But the Chinese have been taking all the money that they get from us and reinvesting to keep our interest rates low. They are actually a friend of ours even as they—as they wreck a lot of great American industry.
RUSSERT: But, Jim, explain this to people—China owns us. What does that mean? What do they do? They buy our debt?
CRAMER: Right. When you read—I mean, there are actually auctions pretty much every week, but when you see that the federal government has a deficit, we’re not paying for it. We couldn’t even have our own mortgage market if the Chinese didn’t come in and buy. They are a huge funder of all of the projects that we basically don’t pay for with our taxes.
RUSSERT: The Chinese...
CRAMER: Yes.
RUSSERT: ... will buy them? Buy the debt?
CRAMER: They buy our debt.
RUSSERT: Give banks here the money?
CRAMER: They give the—well, they basically buy the debt directly from the federal government. They don’t mess with the middleman.
We would love to be able to go to China and say put plants up here, stop being a rapacious—the Chinese, of course, are the most rapacious capitalists in the world. I feel like what happens is, when we get in a meeting with them, they say, listen, we’re doing everything we can. The reason why you have four percent interest rates is because of all the money we’re sending to you.
RUSSERT: What happens if they call in the debt?
CRAMER: If they call in the debt, our interest rates go dramatically higher very quickly. And that would be the cause for a recession instantly.
RUSSERT: Andrew Cuomo, the attorney general of New York, why—why would you say those kinds of things about him?
CRAMER: We are in a market right now where the vast majority of people can no longer get a mortgage. You know, the affordability of a mortgage in California, any homebuilder would tell you, probably close to 25 to 40 percent—some guys use the higher number—could have gotten a mortgage loan a year and a half ago. Now only five percent of the people can afford a mortgage loan, and that’s because banks are afraid to make them because the politicians are all over them.
Andrew Cuomo takes Washington Mutual, the largest thrift in this country, the biggest thrift savings and loan lender, and basically puts them right in his crosshairs saying, look, these guys are dirty. Now, you’ve got to negotiate with them after we get through this crisis. Don’t put Washington Mutual out of business.
It reminded me of what the federal government did to Arthur Andersen. These banks are fragile right now, Tim. This is not the time to go after them.
RUSSERT: Even if they broke the law?
CRAMER: You can come up with regulations that make it so going forward they don’t, or you can go after the CEO. When you go after the institution, the institution gets gun shy, doesn’t want to lend, and then we never get through this housing crisis.
RUSSERT: Have you ever met Andrew Cuomo?
CRAMER: Yes, I have.
RUSSERT: And? Have you talked to him about this?
CRAMER: No. He asked me for money. I worked for GE, so I didn’t have to.
RUSSERT: But there’s a tradition here of attorney generals, Eliot Spitzer, Andrew Cuomo, going after companies that break the law or are not good for the people of New York. Isn’t that their job?
CRAMER: I would like to think that at a national level we could coordinate this and coordinate it in a way that does not make it so major lenders are afraid to lend at a time when we need mortgage money to get that housing inventory off. Yes, they should do their job. Do they have to do it publicly? Do they have to make a big, big stink about it and, therefore, make everybody gun shy?
If I worked for Washington Mutual, after I saw Cuomo’s press conference, I would just—you know what? I’m not going to lend to anybody. If they stop lending to people, we’re not going to get any homes sold.
RUSSERT: How bad is the housing crisis?
CRAMER: It’s the—I’m going to quote Wells Fargo, the best lender in the country. John Stumpf, their CEO. “The worst since the Great Depression.” He said it several times.
No one’s listening to that man. He’s a great lender. He’s calling it “The worst since the Great Depression.”
RUSSERT: How many people have defaulted on their mortgages?
CRAMER: To date, we have not had a huge amount. We’ve had—you could argue that we’ve had about a half a million that have done it in the last—in not that many in the last months. It’s two million people that—the numbers that we think are going to default within the next year.
RUSSERT: And how many people are having a difficult time now getting a mortgage?
CRAMER: If you read the transcripts and talk to the homebuilders, they would tell you that in the—because of problems with various lenders, 30 percent of the people after they put a down payment are walking away because they can’t get financing. It’s a 30 percent figure. Never seen anything like that.
RUSSERT: If the housing market does not improve, will we head for a recession?
CRAMER: Yes, unequivocally. We must get that inventory off. We need interest rates to go lower.
Housing is 15 percent of the economy, but it has a psychological effect that is up to about 30 percent because it includes retail and autos. It’s all domestic and it’s killing us.
RUSSERT: Cut rates how much?
CRAMER: We need to cut rates to three percent. That’s not—yes, a percent and a half. That’s not wrong.
The treasuries that are trading at two-year—two-year treasuries, which is the benchmark, are at three percent. That’s signaling that the Federal Reserve has to cut rates fast, really fast. December 11th we need a half-point cut.
RUSSERT: Will they?
CRAMER: I don’t know if they sense the urgency. I don’t know if they’re (INAUDIBLE), I don’t know if they’re engaged.
RUSSERT: Jim Cramer—we’ll be right back with more. “Stay Mad for Life” is his new book. We’ll be right back.
(COMMERCIAL BREAK)
RUSSERT: And we’re back.
You read his column on TheStreet.com and “New York” magazine. You watch him every night on CNBC’s “Mad Money.” And now even more Jim Cramer. His new book, “Stay Mad for Life: Get Rich, Stay Rich, Make Your Kids Even Richer.”
When you were in fifth grade you started a rotisserie league for stock.
CRAMER: Yes. Well, my dad used to bring home “The Philadelphia Bulletin,” Tim, and it had the five-star edition with the closing prices. Other guys were looking at the Phillies failing. Not me. I was looking at my stocks going higher.
It was all made up in terms of just the game. I made everybody pick certain stocks in fifth grade.
I go to my reunions, and people saying, “Why didn’t I listen? Why didn’t I listen?” But I got people involved.
RUSSERT: In “Stay Mad for Life,” you recommend buying stock for kids.
CRAMER: Yes. One share. It would be a fabulous holiday present.
You know what I got when I was born? I got bonds. I got a savings bond. Well, 15 years later it’s worth $100.
Had someone bought be a share of something that we—McDonald’s, for heaven’s sake, Hasbro, something that would have made me—I’d say, oh, I like toys—I think I would have been comfortable with the process instead of having to wait until I get people in college to do it.
I know it’s boring. I know that it’s no Nintendo Wii. I don’t care. Nintendo Wii will be worth less five years from now. A share of stock will be worth more.
RUSSERT: You mentioned Disney, Viacom, Hasbro, others. Kids—name brands for kids.
CRAMER: Well, I mean, you’ll be given—you’ll be going to Disney World, you’ll be watching Disney movies. You’ll be buying their videos. Why the heck can’t you buy one share for the kids?
They’ll say, I have a piece of that. And then by the time they get into fifth grade it won’t be so far. And then by the time they get to high school, they will understand a stock.
I taught a class at a really good high school, Tim, not that long ago. And not a single person understood why a stock goes up or down.
RUSSERT: Explain why it does.
CRAMER: Well, because of the business underneath. If the business is good, they’ll be paying dividends, those will accrue.
A stock like Procter & Gamble, it’s the number one dividend booster in America. Take a look at how much money you would have made just buying Head & Shoulders.
RUSSERT: GE, our parent company, pays a big dividend, but the stock seems flat.
CRAMER: Difficult always for me to comment, because I, too, work for GE and I do have stock. But I will tell you that if you consistently do well over time, your stock does eventually go higher.
RUSSERT: What’s the first stock you bought?
CRAMER: My first stock was a company called American Agronomics. I bought it in November of 1979. There was—it’s the largest orange grove company in the country, it had a frost. I was wiped out in the next month.
(LAUGHTER)
RUSSERT: And you’re here giving advice.
CRAMER: Nine to one. Then I realized I’ve got to do more. I picked it out of a magazine.
I had read “Forbes.” It said it was going to be terrific. The darn frost came and that was it. I never bought a weather-related stock again.
RUSSERT: What’s the best stock you’ve ever had?
CRAMER: Google! My best pick ever is Google.
RUSSERT: You bought it...
CRAMER: I recommended in—well, I can’t own stocks now other than GE. But I recommended it at $80. I said it would triple.
I remember being called in after by the lawyers, how reckless was that? Of course, by the time they were finished investigating me—well, it was informal. This is GE. This is CNBC. This stock had tripled.
I mean, but it was—it did sound absurd to say this one is going to triple. It did. But it’s tripled again.
RUSSERT: So what is it now?
CRAMER: $690, $700. And I still like it.
RUSSERT: Why? How could one company have such dramatic increase in value?
CRAMER: Because—for the same reason that every newspaper, every radio station, every TV station is worth less. It is a pirate. It has pirated all the good from every other media entry.
And, I’ve got to tell you, it’s one of those things like Kleenex. I mean, when you get that homework assignment in America now in fourth grade, it says you may not—you must not Google.
This is a universal principle. Fifty percent of the revenues come from overseas. Google is as powerful in South Korea and in east—in central Europe, as it is in America.
RUSSERT: And we never even heard of the word a few years ago.
CRAMER: No. And now the company has a market capitalization bigger than almost every company in the world. It is still taking share online.
It is a remarkable company, incredibly well run, and I think we’ll have 10 percent of the ad market share in five years, which would make it so that it could go up fivefold without being too expensive.
RUSSERT: What’s the next step for Google? What do they do? How do they keep growing and expanding?
CRAMER: They will be your phone company. They will also—they have designs on being your electric company.
They are the most forward-looking company in the world right now on alternative energy. They will be your—I’d say that they will be your one-stop device that will be—do everything for you—it will be powered by Google.
RUSSERT: Is that healthy?
CRAMER: Try to stop them. I don’t know. The only company that’s even close to trying to stop them is Apple Computer. They’re the other forward-looking company in this country.
RUSSERT: And you can’t invest in either of these companies?
CRAMER: No, but that’s OK. That’s OK.
I—look, I am in a situation with “Mad Money” where, if I recommend a stock in can have an impact. I don’t want anyone to think that I would personally take advantage of that, so I own no stock. I’m in cash.
RUSSERT: In your book you talk about risks with 401(k)s, big mistakes you can make. What’s the biggest mistake people make with a 401(k)?
CRAMER: You work at a major company, you’re making a bet on that company. Now you go and buy additional stock in that company and your 401(k)? You’re a gambler, for heaven’s sake.
I don’t want people gambling. I want diversification. Don’t buy more of your company’s stock.
Take that and put it in a S&P 500 index fund. I see so many people and they say, look, all I have is my company stock. Tribune Corp., all they have is Tribune Corp. Well, they have lost money for years and years and years, versus where it was.
It’s reckless to keep buying your own stock. Don’t make that bet.
RUSSERT: So diversify?
CRAMER: That’s the key. It’s the only free lunch in the business.
RUSSERT: Just stock, or should you go in to money markets?
CRAMER: No. No, not until much later in life.
So many people feel like that they should cash out, that in their 50s they should own bonds. You’ve got to be making money in this country for years. Continue to own stocks even when you get to 50, 60. Even 70 you should own some stocks.
RUSSERT: Not cash out?
CRAMER: You can cash out on some. And, look, no doubt in my mind if you cash out, I’m saying continue to own some stocks. Do not own just bonds.
You will not be able to afford retirement, you will not be able to afford assisted living. You won’t be able to afford one of those beautiful places that people go to when they’re in their ‘60s that have—it’s kind of like a resort place. You need to keep making money.
RUSSERT: What’s the average growth rate in the stock market over the last 10 years?
CRAMER: We’ve had—well, we had a couple of down years there, but you can make eight percent in the stock market pretty regularly.
RUSSERT: Jim Cramer, “Stay Mad for Life.”
We’ll be back with a lot more with the mad from “Mad Money” after this.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, “MAD MONEY”)
CRAMER: He has no idea!
UNIDENTIFIED FEMALE: Cramer...
CRAMER: I have talked to the heads of almost every single one of these firms in the last 72 hours, and he has no idea what it’s like out there. None! And Bill Poole has no idea what it’s like out there.
My people have been in this game for 25 years, and they are losing their jobs and these firms are going to go out of business, and he’s nuts! They’re nuts! They no nothing!
(END VIDEO CLIP)
RUSSERT: I’ve seen you in a lot of settings, but never like that.
CRAMER: No, because that was the beginning of the crisis. “The New York Times” did a piece about the timeline of when the Federal Reserve got engaged, and I was right there with that. Two million people watched that on YouTube. I know there’s some people who felt, Jim, how could you do that?
I am predicting that will be the finest moment—when my kids ask me, dad, why didn’t you get involved? Why didn’t you—you knew about this housing crisis, I will point to that and I’ll say I did my best.
I had tried for four months. No one listened. I tried to be calmer about it.
This is a real crisis. The Federal Reserve was late in lowering rates. They’re beginning now. They’re way behind the curve. There will be lots of layoffs.
I predicted two million people will lose their homes ultimately in this country if nothing is done within the next six months. That’s a big foreclosure.
RUSSERT: Was that premeditated or did you just lose it?
CRAMER: I lost it. I was supposed to be talking about Procter & Gamble and Colgate. And I was on a Bear Stearns conference call where they were basically—they were firing the head guy.
I had had an appeal from the largest mortgage company in the country on my cell phone before I went out there. The fourth largest company called me at the same time, too.
Major people at major banks that we all know were saying, “Jim, why do you say nothing? Why do you go out there every day and talk about why you like Google? Why don’t you stand up for something?”
And, well, I did. The network completely backed me. The market did sell off.
My friend Erin Burnett I think was a little bit taken aback. No one expected me to do this, but it had impact. And I’m proud of that.
RUSSERT: Hedge funds—explain to our viewers how a hedge fund works.
CRAMER: A hedge fund is a big pool of capital typically of rich people, though they will deny that. They’ll say that they’re working for firefighters, they’re working for schoolteachers, but mostly rich people. I ran a hedge fund.
And they make bets. They make big bets against your house. They make big bets against companies. They make some bets in favor.
They try to—they literally are—they are like Vegas, OK? You go to Vegas, you go to a hedge fund, you make giant bets for or against different things in order to profit from them for your investors.
RUSSERT: Do most hedge funds work, make money?
CRAMER: No. And this year has been a devastating year for hedge funds. There’ll be probably 40 percent of the hedge funds will have gotten out, close, I think, at year end.
A lot of the hedge funds got this whole year wrong, they didn’t understand that these mortgages would erupt. And I’ve got to tell you, as a former hedge fund manager, I never once thought that we should be paid as little as—taxed as little as these hedge funds want.
RUSSERT: I want to ask you about that. It’s a big debate in Washington. If you manage a hedge fund, you pay a different level of taxation than people pay ordinary income.
CRAMER: It’s ridiculous. I paid ordinary income.
Every time I interview a presidential candidate I ask it. They always duck it. I know hedge funds are huge contributors to different candidates.
It is outrageous that the richest people—I’m not saying that the rich people should be taxed much higher. I’m not saying that they should be in the 70 percent bracket. But I do think the people that are making $50,000, $40,000, $30,000 shouldn’t as a percentage have to pay more of their taxes than the people who are making $50 million, $60 million, $70 million, but they do.
They pay much more than those people.
RUSSERT: A manager of a hedge fund, Jim Cramer, will say, well, if you raise our tax rates—taxation rate, then you’re going to stifle investment.
CRAMER: Totally a bunch of lies. Completely lies.
When you’re making big money, you are thrilled to make big money. And if you’re making $60 million and you’re paying $15 million, you will still make $60 million if you’re paying $30 million.
The outrageousness of that is shocking. There is no shame when it comes to people who make more than $50 million in this country.
RUSSERT: And any attempt legislatively to change this and have them pay the same taxation rate seems to be pushed back by Congress because they’re receiving contributions from these same people.
CRAMER: These people donate millions. They are funding a lot of campaigns.
If the American public knew how outrageous it is about how—how little these people pay in taxes, they would rise up. I don’t want class warfare in this country, I’m just asking that ordinary income be taxed ordinarily.
RUSSERT: You’ve mentioned the word “gambling” a few times. Your quite a blackjack player, aren’t you?
CRAMER: I’m pretty good, yes. I like to play undisturbed at a table. I like to play for hours. And I think there’s a great whispering—yes, I don’t like to -- my kids see me at the table, but I like to play for hours and use that—the little edge, the 50.5 percent that you get in that game as a customer.
You drink water. You never take their liquor. You try to be at a table where people don’t bother you.
And I—well, I can’t guarantee you anything, but if you play by the rules, you will make money. And I make money consistently playing blackjack.
RUSSERT: What we talk about at this table stays at this table.
CRAMER: Oh, yes, great. Yes, that’s what—we’re off the record and no one is going to see this in America.
I like blackjack. I admit it.
I like playing with my dad.
RUSSERT: You do?
CRAMER: Yes, I do.
RUSSERT: Is there an art to it? Is there a science to it? How do you win playing that—how do you beat the house?
CRAMER: Well, it’s very easy. There are moments—the goal of a great blackjack player is to have as much money out when you have good cards.
So when the dealer has what looks like a 16, a 6 showing, you’ve got to be creative with your cards. You’ve got to see whether you can split, whether you can double down.
These are time-honored rules that every great blackjack book would tell you. But when you sit at the tables you see people go bust and you see people hit on 18. People do silly things with their money. People do silly things with their money at a blackjack table.
RUSSERT: What should you hit on?
CRAMER: Well, it depends what the dealer has, of course. That’s the great advantage. The dealer goes bust all the time.
When the dealer has that 15, a 5 showing, a 6 showing, you don’t do anything. You just sit there. Let him bust.
RUSSERT: Do you memorize the cards?
CRAMER: I like to—Tim, I want to continue to be able to play.
(LAUGHTER)
RUSSERT: Have they ever come to you and said, “Mr. Cramer, game’s over”?
CRAMER: No. I’ve had a lot of people stand over me. And that’s very intimidating. When they stand over you, and see that I’m not doing anything that’s illegal, they throw you off your game.
Sometimes they like to say, “Ooh, it’s the guy from ‘Mad Money.’” But they don’t really care about that.
RUSSERT: But they’ve never shut you down?
CRAMER: No. But they’ll come to the table and they’ll watch, and then I am thrown off. I have to admit, the scrutiny throws me off.
RUSSERT: But you do have a technique?
CRAMER: I’m good. I’m good. But I play by the rules. And I try to—it’s a six-deck situation, so it’s very hard. But I have the same kind of recollection that I do for stocks with cards.
The important thing is, never take a drink. They want you to drink so badly. You—just ask for that bottle of water. Constantly ask for the water. Never take anything else.
RUSSERT: Is there a higher rate of return from the blackjack table or the stock market?
CRAMER: Oh, the stock market’s much easier. The stock market is much—though I’ve got to tell you, blackjack is fair. I’ve never seen anyone rig blackjack.
RUSSERT: And you’ve seen someone rig the market?
CRAMER: Oh, all the time.
RUSSERT: Give me a name.
CRAMER: Well, look, Enron rigged it. WorldComm rigged it. We see rigging fairly regularly.
RUSSERT: We’re going to take a break.
“Stay Mad for Life” is his new book. Jim Cramer is our guest.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, “MAD MONEY”)
CRAMER: Tonight, in Times Square, in the heart of the world’s financial capital, was Mayor Rudy Giuliani. Now, before we start, I’ve got to say something.
I want to thank you, Mayor, because 23 years ago, fresh out of Harvard Law School, when all my hopes and dreams were to be a federal prosecutor, I applied to get a job with you. You flat-out rejected me. Didn’t have the grades.
So I went to Goldman Sachs, and in a way your utter rejection sent me on the path to wherever I am now. But it was a terrific, terrific course. And things worked out best for the both of us.
RUDY GIULIANI ®, PRESIDENTIAL CANDIDATE: I told you if I had interviewed you I’d have hired you because you got the personality of a trial lawyer. And that’s what I was looking for. Who knows where you’d be now.
CRAMER: Who knows...
GIULIANI: You might be struggling somewhere.
(END VIDEO CLIP, “MAD MONEY”)
RUSSERT: Jim Cramer, the reject. Couldn’t become a prosecutor.
CRAMER: That’s the only rejection I got the whole shooting match. I got turned down by Rudy. Every major law firm took me. The investment banks all wanted me. And he said no to me because that office, the southern district of New York for federal prosecution, is the hardest job in the world to get. And that’s good for our country.
RUSSERT: You were quite a student in high school.
CRAMER: Yes, I was good.
RUSSERT: Full scholarship to Harvard.
CRAMER: Yes.
RUSSERT: And at Harvard you excelled.
CRAMER: Yes. I did—well, I’m lucky. This is a great country. There’s money to be had for kids who are struggling to get in.
And I cared tremendously about academics. I’m obviously a driven guy. I don’t need to pretend that. Some people say that I’ve mellowed. They’re wrong. But I care tremendously about academics.
RUSSERT: And the English SAT, 800 out of 800.
CRAMER: Yes. It’s good—I had good numbers. I’m a good student. I got the magna and the summa, you know.
Look, I’m—now you give me the look. Now I’ve revealed I excel in blackjack and I did really in school. And people are going to hate me. They’re going to hate me.
RUSSERT: No, no, no. But after you graduated from college, you didn’t go right to law school.
CRAMER: No. I worked as a reporter for the “Tallahassee Democrat.” I covered FSU, Bobby Bowden’s first year in football. I loved college football.
But I happened to live next door to a sorority house where Ted Bundy killed the girls, Chi Omega. Got a lot of awards for homicide, and then covered everybody who died violently in California for a couple of years.
RUSSERT: Why law school?
CRAMER: I needed to make some money. I needed to get my act together.
My sister, whom I was living on the floor of her apartment, was at NYU law, and I felt like I could put the bad guys away. I had—in my essay I said I want to be a prosecutor. When I went to first year I took all courses that would help me be a prosecutor.
I got all fired up to work for Giuliani. And I worked for Goldman when he said no.
RUSSERT: Once you heard you can’t work for the U.S. attorney, why not work for another district attorney or a different office?
CRAMER: Because that one prosecutes all the big securities law cases. That’s the white collar prosecution capital of the world.
RUSSERT: How did you get involved with Goldman Sachs.
CRAMER: I had a predilection for the stock market. I went to—I crashed a Harvard Business School cocktail party, revealed myself as someone who likes stocks and was able to go through. It took a year to get that job, but there were some terrific people.
Bill Gruber (ph), who was in charge of sales and trading at the time, took an interest in me. I had five interviews and I got the job.
RUSSERT: You made $700,000 in 1984.
CRAMER: Yes. Well, I made more money in my first month as a commission broker than my family made for years. It was—when you got hired by Goldman—when you get hired by Goldman, you will be a multi-millionaire.
RUSSERT: Guaranteed?
CRAMER: Guaranteed.
RUSSERT: And this is from someone who made his first dollars as a vender at Veterans Stadium.
CRAMER: What a great job. I would have worked for free, even though the Phillies were awful then.
I sold cones. And then I realized there’s a big scam. If you can get everybody else to not go up to a level—I owned the 600 level. I paid some guys not to sell ice-cream.
So I’d go up to the 600 level. I was the only—“Hey, ice-cream here, vanilla, chocolate.” I was the only guy selling up there.
That’s why on my show I call people “pal,” “skipper,” “buddy.” That’s what everyone called me. But I owned that area. No one else could sell ice-cream.
Just ka-ching, ka-ching.
RUSSERT: Did you ever get into “Cold beer here”?
CRAMER: I wasn’t old enough. And by the way, that beer that they said was Schlitz, it was Schmidt’s.
RUSSERT: College, how should people plan to pay for their sons or daughters’ education? I’ll give you a case, an example.
Someone has a son or daughter, eighth grade, ninth grade. What should they be doing now?
CRAMER: These 529 plans are unbelievable. I don’t want to over-reference my book, but I have a lot about—these plans are great, but people have to learn them, and they’re very hard to learn.
I have to admit, it’s complicated. But I’ve got a breakdown. That’s how—you’ve got to put money away using 529s.
RUSSERT: How? What do they do?
CRAMER: Well, you can open up an account, you can shelter a lot of money in there. You can shelter a couple of hundred thousand dollars in these accounts. You just keep putting money away, keep putting money away.
I want the parents to pay money for the kids, because I don’t want the kids burdened. But if the kids do have a burden, they should use that debt and invest.
The guy who was in charge at Harvard of poor kids who go was the guy who prevailed upon me. He said, “Will you please tell these kids to invest? They’ll never be able to work their way out of the hole of student loans unless they’re investing at school and investing after school.”
So I feel like I’ve got good empirical evidence that that’s right.
RUSSERT: Should a parent start a 529 for their child at birth?
CRAMER: Yes. Yes. Just get started.
They should be giving the kids a share of stock, immediately start putting in money, 529s. Use all the plans.
I’ve got a bunch of plans in there. They’re all unknown to people. People are not taking advantage of these easy things, Tim. They’re just not.
And they’re confusing 401(k) with IRA. They always think the 401(k) is better. The IRA is better. I’ve got a lot of stuff in there that I think blows the cover off of a lot of personal finance.
RUSSERT: It’s practical advice.
CRAMER: It’s all that it is. This is a book that is about you and me when we’re starters (ph). This is not a book about how to go be a billionaire. This is a book about how to make good money over time and have a lot of money left when you retire.
RUSSERT: What is the single best piece of advice in “Stay Mad for Life”?
CRAMER: That you must diversify from day one. Too many people speculate with all their money. Too many people just buy one stock. You’ve got to—if you can’t do it, just go be in an index fund. I say that 10 times in the book.
I just need people to put some money away and not all in one stock, whether they work there, whether they get a tip. No. Put money away in different stocks.
RUSSERT: “Stay Mad for Life: Get Rich, Stay Rich, Make Your Kids Even Richer.”
The quiet, understated Jim Cramer.
We thank you for joining us for a great hour.
CRAMER: Thank you, Tim.
RUSSERT: And we’ll see you next weekend.
Transcripts
Watch Tim Russert Saturdays, 12 p.m. and 6 p.m. ET and Sundays, 12 p.m. ET