Also by James J Cramer You Got Screwed!: Why Wall Street Tanked and How You Can Prosper Confessions of a Street Addict SIMON & SCHUSTER Rockefeller Center 1230 Avenue of the Americas New York, NY 10020 Copyright © 2005 by J.J Cramer & Co All rights reserved, including the right of reproduction in whole or in part in any form SIM ON & SCHUSTER and colophon are registered trademarks of Simon & Schuster, Inc Designed by Elliott Beard Library of Congress Control Number: 2005042499 eISBN-13: 978-0-7432-7178-3 eISBN-10: 0-7432-7178-5 Visit us on the World Wide Web: http://www.SimonandSchuster.com Acknowledgments Really rich That’s my goal I don’t want you to just better And I don’t want you to try to make ends meet I know I can help you get there I’ve made too many other people rich for me to think that I won’t it with you I got rich using commonsense principles, not elite precepts and training, and I know you can, too The arithmetic you need to know to navigate the stock market is fifth-grade math I know it because I help a fifth grader every night with her numbers When I wrote Confessions of a Street Addict, I used to go into Amazon to read the reviews until my wife decided they were driving me nuts What I found were people who loved the story of my life but were disappointed that I didn’t tell how I made my money That’s what this book is for I tell everything In fact, I’m debating, as I write this, whether to go back to managing money using the same rules and principles I outline here, because I am so certain that they work But before you get to it, I want you to know who was instrumental in helping me explain how I really made those millions of dollars First, my wife, Karen, who figured so prominently in Confessions, has to again take center stage here She is a testament to the non–Ivy League nature of what I am about to write, as she spent more time breaking me of Harvard habits than celebrating them when we worked together at Cramer & Company My father, Ken, is instrumental in my analysis as he spent countless days when I was growing up and then long after explaining the power of the business and inventory cycles He understood it intuitively I had to learn it I would be remiss in not thanking his late mother and father, two fabulous businesspeople, long since passed, who instilled an ethic that was both indelible and hardwired by the time it got to me My late mom, Louise, never got to see me reemerge as a writer Since she cared about the “soul” more than the money, she’d be happy how things turned out While I am celebrating family, I have learned a tremendous amount about business and winning in the markets from my brother-in-law, Todd Mason, who may be the smartest man on the planet, aside from his obvious intelligence in marrying my sister Nan In my work life, I have so many to thank, so many who have taught me the right way to things, but let’s start with Bill Gruver and Richard Menschel, two deacons who once ruled Goldman Sachs’s equity side I’ll add Marty Peretz, who first gave me money to manage and then insisted that I make it grow at a pace that exceeded everybody else’s Thanks, Marty! Of late, I want to send kudos to Will Gabrielski and David Peltier of TheStreet.com as well as David Morrow, the editor-in-chief of TheStreet.com, for helping along the manuscript, and, of course, the larger-than-life Tom Clarke, the CEO of TheStreet.com, who must next run money because he has the patience and the fortitude to so I can’t go without a thanks to my friends at CNBC, the fabulous Susan Krakower, Larry Kudlow, Matt Quayle, Linda Sittenfeld, Donna Vislocky, Andrew Conti, Christine Dooley, and, of course, Bob Fas-bender, who helped turn me into an alleged TV star My friends at WOR deserve equal gratz: Mike Figliola, my producer, and the great folks who work with Rick Buckley there, including Joe I want you to be rich Billota, Bob Bruno, and Maurice Tunick I want to thank Cheryl Winer, too, as I would never have discovered radio without her persistence that I belong in that great medium I want to thank all of those professionals who keep me out of trouble—my agents Suzanne Gluck and Henry Reisch and my lawyers Eric Seiler and Bruce Birenboim The last guy deserves my undying love because I would have long since given up any public life without his counsel And of course to David Rosenthal and Bob Bender, my publisher and editor, who really get me and whom I love very much and would die before I’d disappoint Lastly, I want to thank Cece and Emma, who put up with countless weekends without me as I toiled over this book, and who remind me, constantly, of what really matters: family No matter how rich you get, it can’t come near the joys of fatherhood and a loving family To my fabulous daughters, Emma and Cece Cramer, two little savers whom I love so much Contents Introduction: The Art of Investing Chapter 1: Staying in the Game Chapter 2: Getting Started the Right Way Chapter 3: How Stocks Are Meant to Be Traded Chapter 4: Some Investing Basics Chapter 5: Spotting Stock Moves Before They Happen Chapter 6: Stock-Picking Rules to Live By Chapter 7: Creating Your Discretionary Portfolio Chapter 8: Spotting Bottoms in Stocks Chapter 9: Spotting Tops Chapter 10: Advanced Strategies for Speculators Epilogue Index ... pick Yahoo! in its infancy, or eBay, but in doing that you might also buy a CMGI or a Webvan, to name a walking zombie and a deceased piece of business But nowhere in the canons of investing does... Index Introduction The Art of Investing to slog through how-to books about investing and trading, hoping to glean some wisdom that can make them wealthy For years, writers have churned out these investment... taught me the difference between investing and trading, and how not to confuse them Karen was—and I remain? ?an opportunist, one who is not bound by any particular investing philosophy beyond the need