Cramer offers specific advice on how to make the best moves to position yourself and your investments for an economic recovery. With twenty new rules for investing in the current economic climate, Jim Cramer’s Getting Back to Even includes advice on rebuilding your portfolio and putting your financial life back on track. According to Cramer, before we make money we need to get back to even, setting aside fear and panic and taking control of our money. Whether you’re twenty-five and investing to build wealth or sixty-five and hoping to restore your retirement savings, you’ll need Cramer’s proven wealth-building advice in Jim Cramer’s Getting Back to Even.
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James J. Cramer is host of CNBC's Mad Money; cofounder of TheStreet.com, where he is also an online columnist; and "Bottom Line" columnist for New York magazine.Excerpt. © Reprinted by permission. All rights reserved.:
Don't Give Up!
Getting back to even? What happened to making yourself and your family filthy rich? Could I possibly be aiming any lower? Have things really gotten so bad that you should drop all your hopes and dreams and just struggle to stay solvent?
Absolutely not. But before you can get ahead, you have to get back to even, and in difficult times that's the hardest and most important goal of all. For the last eighteen months we've watched in excruciating horror as first our homes and then our stocks have plummeted in value. Make no mistake, the stock market crashed in the second half of 2008, and this was a crash to rival anything we've seen since the Great Depression. It was the worst year for stocks since 1931. In 2008, Americans lost more than a quarter of their retirement savings in 401(k) and IRA plans, and millions more saw their retirement funds cut in half. For many of you, it's as though your money simply vanished into thin air. I'm here to show you how to get it back, one dollar at a time.
Ever since the housing bubble went bust and the stock market fell apart like a wet paper bag, we've been deluged with books that promise to help you weather the downturn and get back on your feet. But most of them either offer up the same old tired and often discredited teachings wrapped in a new, panic-filled package -- sell all stocks now and cut up those nasty credit cards -- or are full of advice that could have saved you a lot of pain if the books had been written two years ago. Wonderful timing. That's not what you'll find in this book. Hindsight is twenty-twenty, but you need foresight if you're trying to rebuild your savings, and especially if you're trying to claw your way back from the ground up.
I can teach you how to protect your money in a downturn. I know how to avoid a stock market crash and even how to take advantage of one. I was entirely in cash for the crash of 1987, and in fact that's actually what put me on the map professionally in the early days of running my hedge fund and allowed me to pulverize the market in the fastest decline from peak to trough in history. I also hope that if you read and followed the advice in my earlier books Real Money, Mad Money, and Stay Mad For Life, you were able to escape the worst of the carnage. But the sad truth is that other than gold, which does well in chaotic times, and U.S. Treasurys, the safest of securities, every single asset class from stocks to corporate municipal and mortgage bonds to commodities has just been hammered. Stocks took an especially severe beating that they've only just begun to recover from. In 2008, the two most important bellwether indices that track the health of the overall market, the Dow Jones Industrial Average and the much broader Standard and Poor's 500, fell by 33.8 percent and 38.49 percent, respectively. The damage has already been done, the money's been lost, and none of these new books filled with old boilerplate bromides about investing will help you get it back. Most of what you'll find on the personal finance and investing shelves is authors giving you an ounce of prevention, when what you really need is a pound of cure. But then again, they are just writers who have never managed money, not even in a bull market, let alone the vicious bear that romped through Wall Street, eating up and crushing the defenseless eggs that you thought were safe in your nest.
Anyone can see that these aren't ordinary times. This is still a moment of financial crisis, and I'm not just talking about the mess that Wall Street got itself into or the near collapse of our banking system. I mean the individual financial crises that millions of Americans are dealing with every single day: how to keep your home, how to pay for college when the college fund's gone dry, how to retire when your retirement money's been wiped out. This is the cash you were counting on, and rebuilding it is our first priority.
This book is your financial first-aid kit, an emergency room for your portfolio complete with epinephrine shots and paddles -- think "Clear!" -- to bring your pocketbook back to life. I can help you stop the bleeding and start putting your financial life back together. The new strategies, rules, and disciplines in this book will help you hang on to what you have and rebuild everything you've lost.
It won't be simple or quick or easy. I'm not making any false promises here. But the good news is that it can be done, that you can exercise some control over your financial future. Whenever we're in dire economic straits it's all too easy to fall prey to the belief that nothing can be done to make things better. Millions of Americans are losing their homes, their jobs, and their savings, not because of anything they did but because a relatively small number of people in the financial industry made bad decisions while the government was asleep at the wheel or worse, promoting the reckless driving that got us into this mess. We're all at the mercy of forces beyond our control, to some extent or another, but that's no reason to throw up your hands and stop trying. The absolute worst thing you can do is get caught like a deer in headlights and turn yourself into a pure victim of circumstance.
On the other hand, you have to recognize that this isn't business as usual. If you've lost lots of money that you need, then the stakes have never been higher, both for you and for your family. So how the heck do you deal with that kind of crisis? I can tell you the specifics, new investing strategies that incorporate everything we've learned about what works and what doesn't from the crash and its aftermath, and how you should vary your approach depending on your age. But first you need to make sure you're on an even keel.
Everyone remembers that famous quotation from Franklin Roosevelt's first inaugural address, "the only thing we have to fear is fear itself," but you hardly ever hear the rest of that sentence, the most important part, expanding on this fear: "nameless, unreasoning, unjustified terror, which paralyzes needed efforts to convert retreat into advance." Now, obviously, if you've just had your retirement fund shredded or are in danger of losing your house, you have more to fear than fear itself. Fear is a great motivator but not when it paralyzes needed efforts to convert retreat into advance. We've been through nasty recessions before, and believe it or not, it's possible to overcome the problems they create for you personally, and even to profit from the broader crisis and come out wealthier than ever. But to do that, you have to recognize that in extraordinarily difficult times, the stock market doesn't always operate according to ordinary rules. However, there are new rules, and rules I have pioneered to help you navigate your way through these brutal times. I can teach you how to learn from and play by these new rules and win while everyone else is trying to show you how to avoid a crash that already happened.
Why should you listen to me, and what makes this book so different from the standard fare? I'm a stock guy after all, and aren't stocks what got us into this mess in the first place? Look, I have been at this for thirty years. Unlike the usual peddlers of financial advice, I actually made myself rich by investing in the stock market and managing the money of my wealthy clients at my old hedge fund, Cramer Berkowitz & Company, including cleaning up during the devastating crash of 2000, when my fund was up 36 percent, while the Dow Jones Industrial Average took a 6.18 percent hit, the S&P 500 fell by 9.1 percent, and the NASDAQ plummeted 39.29 percent. I know how to make money in bear markets and during recessions. But beyond that, I've also been where you are right now. I know what it's like to lose a vast amount of money in a short period of time. I know how it feels to have my very future on the line. I understand the stress and the fear, but I also understand how to come back.
I still keep a memento of one of the lowest points in my life tucked into my wallet, and carry it with me wherever I go. It's a little piece of paper, a cutout from my daily portfolio run on the single worst day my hedge fund ever had, October 8, 1998, a date that, at least for me, will live in infamy. With less than three months left until the end of the year, my hedge fund, which was supposed to be managing $281 million, at the time was down $90,915,674 or 32 percent, because I'd made a series of boneheaded bets in the market. That's the kind of loss that would destroy most hedge funds, like the hundreds of funds that were brought low by 2008. It wasn't just my money that was at risk, it was my job and my entire career, too, not to mention my reputation, as virtually everyone I knew had written me off as a failure. Even The New York Times had written my premature financial obituary.
I was in the very same position that most of you are probably in right now. My investments had cratered and my future was in jeopardy. Practically everyone around me urged me to quit and head for the hills, wherever the hills might be, since I live in a Jersey suburb of New York City. So you see, I know exactly how you feel. But I'm not telling you this to show that I feel your pain. Empathy is great, but it won't make you money. You need concrete solutions and this book is filled with them.
Between October 8, that dark day when I was down almost $91 million, and the end of the year, I did what I'm going to teach you to do in this book. I got back to even, and actually finished the year with a small profit of 2 percent. I buckled down and in less than three months I made back $110 million, averaging $1.4 million in profits every single day. Not only is it possible to come back from devastating losses, but also, if you're lucky, you can even do it quickly. Now, in one respect you're in a much better position than I was in 1998: you don't have to worry about arbitrary time constraints the way a hedge fund manager does. No clients are trying to pull out money while you try to rebui...
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