Annabelle Lunt

Mr. Francis OGrady

Economics: XI
September 29, 2014

Author: James J. Cramer

Title: Real Money: Sane Investing In An Insane World
Publisher: Simon and Schuster Paperbacks
Location of Publication: New York, NY 10020
Date of Publication: 2005
Number of Pages: 300

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James Cramer states this book is the distillation of everything I have learned, every
important rule, every smart move, every edge I have ever been able to garner to make huge amount
of money in the market [] [and] I tell you everything that made me rich and everything that could
have made me poor (back page). Real Money explains the importance of investing and the positive
effect it can have on ones life. Personal investment strategy cannot exist in isolation and one must
understand that there are no such things as universal rules or insider secrets that will apply to
everyone at all times. Ones investment strategy should vary in sync with ones individual goals
which will change and evolve throughout ones life.
As stated by publishers weekly [Cramers] enthusiasm should prove inspiring, and even
investors on the wrong side of Wall Streets recent shakeups may find the courage to get back in the
game (back page). James J. Cramer was born on February 10, 1955 in Wyndmoor, Pennsylvania.
Cramer currently lives in Summit, New Jersey and is the star of CNBCs Mad Money, the cofounder
of TheStreet.com, and columnist of Bottom Line for the New York magazine. Cramer attended
Harvard College graduating as magna cum laude with a bachelor in government; he then attended
Harvard Law School earning a Juris Doctor degree. Cramer began investing in the stock market
during his time at law school and impressed The New Republic owner, Martin Peretz. Cramer was
given $500,000 to invest and earned Peretz $150,000 in two years. His outstanding track record
helped Cramer obtain his first opportunity to become a stockbroker with the Goldman Sachs Private
Wealth Management division. Cramers success in this position led him to found his own hedge
found, Cramer & Co. which eventually became Cramer, Berkowitz & Co. in 1987. Cramer was
claimed to be worth $50 to $100 million dollars in October 2005 (Farzad 2014). Cramer is the star of
CNBCs television program Mad Money with Jim Cramer which first aired on CNBC in 2005. The
shows mission statement and Cramers Job is not to tell [one] what to think, but to teach [one]
how to think about the market like a pro. This show is not about picking stock. ITs not about giving
[one] tips that will make [one] money overnight- tips are for waiters. [Cramers] mission is

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educational, to teach [one] how to analyze stocks and the market through the prism of events
(Farzad 2014). Mad Money features many segments, including: The Lightning Round, Game plan,
Execution Decision, Off the Charts, Sell Block, Market Marshmallows, Outrage of the Day, Mad Bull
Disease, Am I Diversified, and Mad Mail, which all help to provide views with the knowledge and
the tools that will empower [one] to be a better investor (Farzad 2014).
As stated by Cramer in this book I give [one] the secrets of how great wealth stays wealthy,
secrets I have been taught by thirty-eight of the wealthiest families in the world-the families for
whom I managed money for twenty years (back page). Cramer explains in this book how to
allocate ones portfolio so one can manage risk wisely. He justifies why the buy and hold model
has been replaced and has become the the buy and homework model (back page). The Ten
Commandments of Trading are a critical strategy which he identifies:
1. Never turn a trade into an investment
2. Your first loss is your best loss
3. Its okay to take a loss when you already have one
4. Never turn a trading gain into an investment loss
5. Tips are for waiters
6. You dont have a profit until you sell
7. Control losses; winners take care of themselves
8. Dont fear missing anything
9. Dont trade headlines
10. Dont trade flow (Cramer 153-158).
The Twenty-Five investment rules to live by are found to be very pertinent to his strategy and are:
1. Bulls and bears make money: pigs get slaughtered
2. Its okay to pay the taxes
3. Dont buy all at once; arrogance is a sin

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4. Look for broken stocks, not broken companies

5. Diversification is the only free lunch
6. Buy and homework, not buy and hold
7. No one ever made a dime by panicking
8. Own the best of breed; it is worth it
9. He who defends everything defends nothing, or why discipline trumps conviction
10. The fundamentals must be good in takeovers
11. Dont own too many stocks
12. Cash and sitting on the sidelines are fine alternatives
13. No woulda shoulda coulda
14. Expect corrections; dont be afraid of them
15. Dont forget bonds
16. Never subsidize losers with winners
17. Hope is not a part of the equation
18. Be flexible
19. When high-level people quit a company, something is wrong
20. Patience is a virtue- giving up on a value is a sin
21. Just because someone says it on TV doesnt make it so
22. Always wait thirty days after an earning preannouncement before you buy
23. Never underestimate the Wall Street promotion machine
24. Be able to explain your stock picks to someone else
25. There is always a bull market somewhere (158-179).
These two sets of rules are the most important pieces of advice throughout the entire book. Cramer
also explains how to compare stock prices in a way that many can easily understand. He also
explains how to spot market tops and bottoms, how to know when to sell, how to rotate among

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cyclical stocks to catch the big moves, and other very important information on how to study and
understand stocks. Real Money is filled with insider advice that many have found to work very well
and also includes information that Cramer himself used to make millions of dollars during his
fourteen-year career on Wall Street.
The Ten Commandments of Trading are some of the most important pieces of advice Cramer
has given. Commandment number 5 tips are for waiters is a commandment that one often finds
striking. It is so striking because in the words of Cramer the only reason someone really gives a tip
is so he can get out of what would otherwise be a terrible position that hes stuck in and will
definitely lose money on if he doesnt get [one] to take him out of it (156). Cramer believes that he
should not give tips to those seeking information about stock trading, but instead should state facts
that will allow one to see trends and understand fully how to successfully trade stocks. This is found
so shocking by many because the majority of people are looking for a list of tips saying do or dont
do this but in fact this is the way many get in trouble according to Cramer. Another commandment
that is found very interesting is commandment number 3 its okay to take a loss when you already
have one (155). This commandment is extremely important because many deny the position of their
stock, and fail to admit their stock is no longer profitable. As Cramer states no one can come back
from the chronic loss position; no one is good enough or has enough ammo to stay in the game. Cut
your losses now; let your winners do the running (155). Many do not understand this extremely
important concept because they rationalize that they are in the money until they take it off the table
which is nonsense in the eyes of Cramer. He believes that one should trade the stock before it
decreases the amount of profit one can make and allow ones winners [to] do the running (155).
When one realizes this, Cramer believes the stock buyers will be more successful and have less of a
loss caused by one stock.
The twenty-five investment rules to live by are some of the most important rules regarding
stocks that have ever been created (159). The most important rule is rule number 4 look for broken

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stocks, not broken companies because of its ability to explain many peoples arrogance when
buying stocks. Many do not understand the difference between a broken company and a broken
stock, and a good company and a broken stock. The difference is vital for one to understand as it
allows one to buy cheap and sell high, which is the goal of stock buying. According to Cramer, the
only way to know if a company is broken or is only associated with a bad stock is to simply do ones
homework regarding stocks. Cramer suggests looking for companies that are becoming stronger and
are just suffering a hiccup masking the companies increase (163). The other rule that is found very
shocking is rule 17 hope is not part of the equation. This is a very important rule because many do
not understand that this is not a sporting event; this is money and that one has no room for rooting
or hoping (173). According to Cramer one should buy stocks because they believe the stock should
go up because of fundamentals, and one should avoid buying stocks where the underlying business is
bad and getting worse. People also often pray those things will work out treating this business at
times like a religion (173). The only way to succeed at buying stocks is hard work, research and
being realistic about the prospects (173).
Stock buying is one of the hardest businesses to succeed in due to stocks constantly changing
and the intense amount of homework one must do to be successful. James J. Cramers book Real
Money is a very well written book that would be recommended by this author. This book gives great
insight on the importance of stock buying and trading and how to do it successfully. The Ten
Commandments and Twenty-Five rules to live by are some of the most important pieces of advice
Cramer gave throughout the book. By reading this book one can understand how to be profitable by
properly buying, selling and trading stocks.

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Bibliography
Farzad, Roben. The Mad Man of Wall Street. 2014. http://www.businessweek.com/stories/2005-1030/the-mad-man-of-wall-street (accessed September 23, 2014).