Jim Cramer's Real Money - What I've Learned

Dear Blog,

Today I'm going to do a special blog where I skim the book one last time, and pick out points I like and put them here for me to remember later. That being said, let's go!

I'm going to start off with the point that stocks are pieces of paper. There's no HOME team! Markets and businesses change. Sometimes good, sometimes bad. Don't HOLD a stock and hope that it comes back. Sometimes HOLDing can be much more dangerous that selling at a loss. Don't get too emotional. It's a stock!

Buying and selling stocks is profession without standards. "Professionals" may be no better than you or me when it comes to this stuff. Here is some conventional wisdom that Cramer said is part of the reason he failed when he started. 1. Buy and hold because that's how you make the most money. Cramer changes this to buy and homework. Do an hour of homework each week per stock to see if it's worth holding. 2. Trading is always wrong, owning is always right. If you really want to make money, you are going to have to lock in those profits sometimes, especially after nice runs. 3. Speculation is the height of evil. However, speculation is what makes investing fun, it makes it exciting and interesting, and overall some of the bigger gains you will receive is by diversifying and investing in speculative stocks.

When evaluating stock's worth, you can't think about how much you bought it for eons ago, the only thing that matters is what is the stock going to do next. The future! Sometimes the past can make you blind, and you get all emotional. Losing X dollars can really blind you on what the potential future can be.

Always you limit orders. I know what it is, since I did it so much lately. It's easy, it's a price you put in when buying or selling stocks that you want or better. So a limit buy is $X or less, and a limit sell is $X or higher. Never use market orders, cause that way, the broker has the right, no, the obligation to rip you off.

The value of the stock is not based off the actual dollar amount. A $40 stock may be more expensive than a $400 stock. First we have to find the price-to-earning (PE) ratio. Take the stock price and divide it by the PE ration and you get x time earnings, or (M)ultiple. M * PE ratio = Price of stock. Easy right? Stocks tend to be more expensive mainly because of a company's past growth. Those that grow faster will have a more expensive M. But the example given by Cramer is the Super Bowl. If you made a friendly wager in the game, you know that people usually bet on the better team. But why do people bet on the underdog sometime? It's cheaper and the rewards are much higher. Get my drift? Just make sure that the stock you choose is growing at a rate that is consistent with the price, because if it's not maybe one of those could be a steal! Oh, and other ways to value a stock is by how much dividend is paid. Don't get bound by the math however, there are many more brighter minds out there that can do this as well, but we're here to exploit the anomalies in the stocks.

Jim Cramer tells his experience about AT&T. AT&T was plumetting due partly to bad management. However, as it was falling, Cramer started to love this stock. Because not only is the stock a piece of paper, but it's also a living company. Just because it's price and growth are bad, check out what the company is doing, how much infrastructure they have, will they survive? If yes, buy buy buy that damaged stock! It'll be nice for you once it comes back to life on paper!

Divesification is th only free lunch. 5 is the minimum to be divesified according to Cramer, and 10 may be the max, otherwise you are a mutual fund (and will have a lot of homework!).

So what's homework? Quick summary, every report from the SEC (quarterly and annually), important articles, conference calls, and analysts' reports. Listen to conference calls before you buy a stock. OK, I'm guilty, I haven't done this yet! But I will! What are you looking for? Growing sales, high gross margins, basically see how the company is doing and get a feel for where it's at.

Businesses that do well in a booming economy are "cyclical". Ex. farming, road building, military, aircraft. Those that do well regardless are called "secular". Ex. medicine, food, hygiene, etc. Another important thing to look for is their metric or series of metric. Like revenue per room, revenue per seat, gross margin per product, etc. So you can compare apples-to-apples.

Remember, buy companies that grow faster than competitors, and grow faster than the S&P but still have a (M)ultiple that is as low as possible. Also, Cramer likes companies without a lot of debt. Too much debt can be bad for the companies, because they may not be able to pay their bills, and may be headed in a downward spiral. It takes one really bad investment to screw up your portfolio!

Charts! Never enough to buy a stock from! Anyway, make sure you know what your M is, how fast your earning are growing, and also give a guess how much the stock may decline (such as 25% M), and check out your risk reward for both. The example Cramer gave was Rite Aid vs Walgreens. Walgreen grows earnings 15%, $30 trade, and 25 M. Rite Aid grows at 12.5%, $5 trade, and 40 M (times earnings). If Walgreens earns $1.30 more, reached upper limit of 40 M, then Walgreens will go to $52 a trade (or +$22). Rite Aid probably has no gain since the M is the upper limit. Now check out the down side or 75% M. If Walgreen earns 1.30, you can say $30 [Price/share] / ($1.30) [Earnings/share] ~ 23 (M) and $23 * 75% = 17 M or $22/share. Rite Aid with $.26 earnings would yield 14 M or $3.64. The differences there would be WAG $8 and RAD $1.5. So WAG is 22 up and 8 down where RAD is 0 up and 1.5 down. WAG is a better deal! But there are many more factors that go into this, but here is a good arithmetic start! Make sure to find these calculations on the S&P as well to have a benchmark to test this on.

Ugh, I though I could cover this all in one post, but I may need to come back and hit the other half of the book. IT's long, but lots of useful info. Please take a read of this book, because it helped me a lot, and I hope it can help you. I'm looking forward to his Getting Back to Even book coming out October 13th. I'll add more tomorrow (and then I have to return the book).

What was your suffering today?

Dear Blog,

I went over to a district study meeting today, and we studied how the Spring always follows the Winter. Obvious, I know, but apply this in your daily lives. Do not think the Autumn is coming when you are in the dead of winter. Or do not think that things are going to go back to bad, when you are already suffering. Spring is coming, and things are looking up. But not only that, but suffering is part of life. Instead of thinking about how nothing good happens to you, think about what suffering you get to overcome, which will lead to your happiness. If the hardest thing you had to do was get out of bed, life wouldn't be very fulfilling. Similarly, you can never be courageous when you don't fear anything. Use your practice, your faith, whatever you have as your weapon in life, and find yourself, your goals, your life,... your happiness.

OK!

Personally I don't like the covered calls... so I'm going to stick with plain stocks and maybe some options if I could ever trade them. Can't wait to try that. I know they are risky, but they can really add some bang to a stock. Come on SoGoTrade.... why won't you take me as a customer. They said they're revamping their site so that me and other investors can reapply for options, and actually buy them.

I know I just gone completely crazy for stocks, but I freaking love it! I am reading books by Jim Cramer. I got like 20 pages left of Stay Mad for Life, and can't wait for Getting Back to Even. One of these posts will be what I have learned from each book. Real Money was more technical, and I think I liked that one more. I hear this 3rd book is going to be the hardest, and I just can't wait.

Well my game that I'm making has been made, somewhat. I'm going to add some new features, and maybe multi platform support. We'll see! I'll give you a hint though, it will be facebook dependent.

- E.T.

Cover Calls? Yeah, I don't know!

Dear Blog,

Covered calls have been what I've been wondering about all day today. Should I do them or not? If anyone ever reads this blog now or in the future, tell me what you think in the comments section. I'll do my best to explain it in a few steps.

Regular Stock I pay $5 for a stock.
It goes up to $6. I get $1 profit! YAY!
It stays at $5. I don't gain or lose anything. OK.
It goes down to $4. I lose $1! BOO!

Options I pay $0.25 for an option with Strike Price $5.
Note: Option is right but not obligation to buy at Strike Price
Stock goes up to $6. I get $0.75 profit! YAY!
Stock stays at $5. I lost $0.25! BOO!
Stock goes down to $4. I lost $0.25! BOO! (But not too bad)

Covered Call I pay $5 for stock and sell option with stike $6 for $.15.
Buy a stock, and sell an option to someone else
Stock goes up to $6. I get $1.15 profit! YAY!
Stock stays at $5. I get $.15 profit! YAY!
Stock goes down to $4. I lose $.85. BOO! (But better than straight stocks).

OK, this all sounds good, and somehow the Covered call looks like it has a pretty good advantage. I thought so too when I first looked at this. You gain more if you can guess the strike price, and when you lose money, you don't lose as much. Win, win, right? Well.... what you are doing is capping your gains. So let's suppose this last situation...

Stock goes up to $10
Stock: Profit of $5
Option: Profit of $4.25
Covered Call: Profit of $1.15

Kind of limiting right? Oh, and you ask why are options good if these other two exists? Well, you only have to pay $.25 in my example. So you can but 20x more stock with the same amount of money in this example, hence 20x your profits! Not bad... but a dangerous game!

Well besides investing. I started to learn some facebook PHP API. Pretty cool stuff! Got my friend list to print out. And got my game board all traced out in vector graphics ready for FLASH. Now just to make the game, and maybe use a combination of PHP and flash to make this first game.

And finally on top of that, got all my camera stuff settled. I'm now getting ready to get my first SLR camera. The body came in today, and I just won a bid on the lens. I paid a total of $225 for the body, lens, extra battery, charger, and 2GB compact flash. Yeah, it's an older camera... but still ready to take some crazy pix! And joining the SLR group under $250 is pretty amazing to me! Textures make 3D, and I will make 3D now with my amazing camera!

Phew.... well onto some reading, sleeping, game making, and winning in my life!

- E.T.

Saints 2-0 and I'm up!

Dear blog,

I'm feeling good today. I got some volleyballing in and feeling all worked out. I really need some stress relief. I'm worried what will happen this week. I have a few things to do this week that I "volunteered" for, and always seem to be regretting what I volunteered for until the last minute. It's never that bad... but why do I have this regret...

Again, like last post, I want to be selfish. Just in this next few years. I need to set MYSELF up, before I try and save the world... which I won't at the pace I'm going. I say I'll do this job, I'll do that job when in fact, I'm not in dire need of money. However, in the situation I am, people ask me what I do... and I tell them I'm writing a video game... which is true! Sigh, anxiety, anxiety....

I really just need the love of that special person. I need understanding.

Anyway, quick recap of my day. Woke up around 12pm. Went over to Matt's house and watched the Saints. We did great after sometime. But Reggie needs to run better, and not stutter, not run backwards, and not try too hard. I hope Bell is OK, because he gives us at least some type of run game. Then I played some volleyball. I beat myself up alot on the court. I want to be perfect. No mistakes. But some happened. I will improve. And then home! Ahh, a very lite dinner, a quick shower, and now I'm laying in bed and blogging. Maybe more days should be like this for me. I'll at least get skinner quickly if I could keep this up every other day!

- E.T.

Andy and Jordan are Wedded!

Dear Blog,

It's been a crazy couple of days these past two days. I have so much to talk about, but not much to say. But, I don't want this entry to be about what happened, but about how I felt as things were happening. So let's go:

I feel selfish. That's it! The only thing I felt today is selfishness. I feel like I deserve to have what I want, to accomplish my dreams, and to be anyone I want to be. I feel much of my life I live for others, and now I want to live for myself. Even as the night winded down, I accept what others want, but I never fight for what I want. Have I laid down and die? I hope not! It's near impossible for me to say "no" to many people about many things, especially if they had a certain relationship with me in the past. I ask myself "Why can I not do what I want? Why do I programatically say 'yes' to the desires of everyone? I'm not Jesus. I'm not in an enlightened state (yet). I'm not the most compassionate person in the world. But I say 'yes'".

So, how can that be bad? Well, selfishness is what makes my compassion bad. After I say yes, I don't do it. I ignore calls. I avoid the problem at all cost. I do this continuously in life. Over and over and over again. I hate it! I'm happy keeping to myself much of the time, and I'm happy trying to create wonderful things in my life. I'm unhappy when I feel forced to do things, not because others are forcing me to do them necessarily, but because I make myself want to do them. I want everyone to be happy, but I'm simply one person... and a loner at that. I conflict myself, I oppose myself, I set myself up and knock myself down.

"Man up!" says my consciousness of 26 years. "Don't commit to things you know you won't do."

But at the same time, this sounds like "don't make everyone happy." But don't I live to make everyone happy?

I get frustrated sometimes.... maybe money can buy happiness for all? Don't you think so?

I don't know why I get these crazy feelings, even on such momentous days like this. I am happy for my little brother, but unhappy with myself. I can do better, and I know it. I have set goals (shallow as they may be) since 2000 or earlier. I want to be lean, I want to create (a videogame), I want to explore my unexplored life. Simple as it might sounds, it has been a mountain I've been scaling for the last 9 years. I want to be on the peak for the 10th.

- E.T.

Buy and Homework

Dear Blog,

Buy and Homework is the title of this blog because I'm ready, thanks to Cramer! I'm ready to invest... and I'm ready to do some smart investing. Since I'm in my 20's, I'll go ahead and use 20% of my money to make speculative, more risky investments.

I was up all night finishing up the Real Money book. I may decide to summarize the book in my next blog entry to help me remember.

Here's step 145, but I managed to reach step 150 of 173... which means, I'm done modeling! I'm soo happy! I just have to do some texturing, and I'm done with this model. I totally started to understand how to model objects. Maybe I need to do the last section, which may take some more time. But I think I have enough knowledge to make a simple game.

- E.T.

Phew... glad a new day comes.

Dear Blog,

Man... I don't know if you ever felt this way, but it's been one of those days where I feel like I disappointed a loved one today. I really try to make everything happy, and "cush", but somehow I fail. I don't know where I go wrong, something I say, something I do. I have trouble tracing my steps back. But all I know, when tomorrow comes, I get to repair the cracks, and build on my foundation. :P

Well I'm making some progress on 3DS Max. I made it to step 122 this morning:

Then tonight I made it to step 145:

Besides 3Ding, my mom was in town today (and a little yesterday). Well, we stopped by Emilio's (my dad's) grave. We chanted for him a bit, and hoped he can help us with our problems. I was skeptical when I was in the moment, but right now, I'm not sure what to think, and maybe feeling a little more open minded. Maybe he can help me. If not directly, indirectly... like motivating me when I'm completely unmotivated. So afterwards, we stopped by a restaurant that my dad and mom used to own. My mom said it still has the same chandeliers and same wall paper.

It's nice to know about my past, but I have such a memory problems. Some things stick, but some things never do. That's why I write here. Hopefully, I can read some entries here someday in the future, and the past will come rushing back to me. All the lessons, the feelings, the good, the bad, and the things that make life, life.

During lunch today, we went to Mother's World's Best Baked Ham Restaurant. It was pretty good. I little pricey for a "Po-boy", but still pretty good. But in a city full of Po-boy's, I think you can get better for cheaper. But still, all-in-all, good po boy.

Well off to read some book, and go to bed.

- E.T.

LSU wins again

Dear Blog,

Game 2, and LSU wins against Vanderbilt with a score of 23-9, but the game was a lot closer than the score implies. I was over at a friend's house watching the game. He has the big green egg, and we grilled up some delicious burgers, and some crazy baby back ribs. I've never grilled up BBQ ribs before. I know this Big Green Egg, is very expensive, so I want to look up some alternatives for a ceramic grill. Anyway, good times!

I hurt myself today... I dropped a heavy metal spatula on my toe. Ouch! And then I cut my finger cutting tomato. Been a clumsy, clumsy day.

I worked on some 3d today, like a good boy! And I'm on step 100! Man! Progress. I sometimes look back and wonder what I do this for? But then again, my skills in 3ds Max are getting better and better. I can almost as well as I can model in Caligari trueSpace. Maybe better? My renders:

Well, good night!

- E.T.

The Weekend is here!

Dear Blog,

I take some games too seriously. Why? It's just a game! Anyway, I did some 3d, had like 5 hours of sleep, and ready to get to bed now!

Well the 3d I did, I got to step 72. Here it is:

I want to ZIP right past the rest of the lesson, but I really want to learn this right... so I will. I will succeed!

- E.T.

The weekend comes!

Dear Blog,

Happy Thursday Night! It's getting close to the weekend. I can't wait for another day, learn more 3D, learn more about stocks, and get closer to making my game!

Well, Big Brother is getting way too exciting. I won't spoil anything, but the last episode is going to be exciting. Can't wait! I wish I could go on Big Brother one day. I think it'd be fun!

Well, I've been working on Chapter 6 for the last 2 days. I got up to step 26 sometime this morning, and up to step 49 tonight. This is all out of 173 steps. But I'm getting faster and faster thanks to this tutorial from 3ds Max Modeling for Gaming.

Step 26:

Haha, when we watched BB11 at Colleen's house, we also had some Gummy Pizza from Big Lots (50 cents). It was interesting to say the least! Here's a picture of it.

Stocks did well today. I made some money, and can't wait to learn more about investing from Jim Cramer. Once I get this posted, I'm going straight to reading. So good night, I'll blog more manana.

- E.T.

Dear Blog,

It's been a pretty good day and just trying to think about what to say. I've told Mr. Kovacs that I'm leaving the house in about a month or so. Trying to decide what to leave behind seems to be more of a challenge than I thought. I know which TV he wants, but I'm not sure which one I want. I'll look up prices, and just take a look at both TV's and see how I feel.

Anyway, I was up late last night, and was Striker of the Day before I went to sleep. Yay for me! Shouldn't do that anymore, cause past 3AM is way too late to stay up.

It's around 11PM now, and I think it'll be a good time to go to sleep. Sorry, not much to say... but it's been a pretty blah day. I read more of Jim Cramer's Real Money, and last thing I read was Market Orders are a rip off. The margin is just more commission going to the broker (or something like that). Limit orders are the answer. So today, I didn't but any stocks, but I decided to limit my selling to crazy prices that I desire (not recommended by Cramer [as of yet in my reading]). I'll read some more, and learn much more, I hope! Good night blog!

- E.T.

Back to it

Dear Blog,

Alright, day after labor day, and everyone's back to it. I did my EA Sports Active for today, and I want to finish the 30-day challenge they have setup for me... I will!

Anyway, I went to the post office, and shipped my phone to a buyer, and had a subway fresh value meal for $4.50. It was Meatball Marinara today... my favorite!

I also did some 3ds Maxing today, and got to learn a lot about photoshop and textures. I'm getting better and better at blending pictures of different angles into one nice texture that wraps! I'm very excited! Here's some renders of the textures I made:

Overall, this 3ds Max Modeling for Games is good if you are actually going to use these models in a game. But I'm looking to make some cool looking stuff, no matter how complicated... but maybe that's what the next chapter will be about!

Plus, making textures gave me a reason to pull out my tablet which is very exciting! Well, it's uberlate, and I want to catch some Zzzz's. Later!

- E.T.

Labor Day... Labor Day

Dear Blog, I've been calling this Memorial Day weekend, when it's been Labor Day Weekend! D'oh! Anyway, I've been on the 3D today since I got my 3d book this weekend, 3ds Max Modeling for Gaming. The modelling has been pretty easy, but the texturing has been a learning experience to me. Anyway, I figured I'd post my results here on the blog for where I'm at. Chapter 1 (Cardboard Box): Chapter 2 (Barrel): After a little bit of working, I went over to Colleen's house. She got that entertainment book with all the coupons for restaurants and entertainment. It's cool, and it's the first time they are selling here in Metaire/New Orleans since Hurricane Katrina (2005). Then we went over to big lots, where I picked up a few things, including Arizona Green Tea. I remember in high school my mom and I would go to MacFrugal's/Big Lots to pick up stuff, and I would always get a Green Tea! I loved it then, and I love it now. Good stuff. Then we watched a few movies at Colleen's house. Everything You Always Wanted to Know About Sex * But Were Afraid to Ask, El Dorado, and Roman Holiday. They were good, and El Dorado has been like the second or third Western I've watched. They're not too bad if you take the time. I never took the time, so I thought I always hated westerns... but now that I seen a few... I like it! Anyway, watching some King of the Hill which is ending very soon (very sad!) and going to read some more books.

Sunday won, Sunday fun!

Dear Blog, Only got one picture for the blog tonight, but had a nice day today. I had some pancakes in the morning (like 1pm, hah). And had some tilapia, veggies, and starwberry water. Yum! But the kitchen is a bit of a mess, my fault. I was over at Coconut Beach today, and Rebecca had a lot of people over there! We had a 6-on-6 game going a few times, even though it was drizzling, then rain. I really like volleyball because it's exercise, and I'm OK at it with room to improve. I like improving my skills in everything that I do. Isn't life a quest to become the best you can be and help as many people as you can? I played some Mario Stikers Charged today, and got matched up with Rank 1 player, Rod. today. I won! I never beat a superior ranked players! So I'm all excited tonight. I am trying to sleep early tonight so I can wake up at a decent hour. So, on that note, good night! - E.T.

Memorial Day Weekend... good times

Dear Blog, Another strange feeling day, but all in all, another success for me. So I went to sleep ultra late again, but woke up around 9 - 10am. So, that being said, I was soo sleepy most of the day. But around 2PM today, I decided to head over to the library. Often times, I forget that I have ultimate resources just blocks away, where I can learn about anything and everything. I checked two of Jim Cramar's books because I want to get more serious in investing. I feel like that will be the only way I can find true wealth that will last for me and my future family. Then I got a 3ds Max Bible so I can find myself if I lose myself in the interface. And then I got a Spanish Lesson book so we can start Spanish lessons again every Sunday. I started to flip through the 3Ds Max Bible, and caught a few Zzz's. Maybe about 1.5 hours. Then I woke up to a doorbell, where my 3ds Max Modeling for Games book came in (highly recommended from the internet). So now I have soo many books to read, and I'm ready to tackle them all! I made some bread dough a few days ago, and I used it again today for lunch and dinner. I had a small half for lunch, and a bigger half for dinner. So, you ask what do I drink? Well I try to fill up a Bubba Keg full of water. Haha, I was really just drawn to having a big 72oz cup, but a Bubba Keg, I can take anywhere. And it keeps my water pretty cold for a long time. I was sold! Colleen came to my place, and we went over to Jonathan's house to watch the LSU game. It was fun. I was really looking forward to grilling on his big green egg, but too many factors kept him for starting it up for the first time today. Maybe another day. His house is really nice, but I didn't get to tour it, and didn't ask since I know he and Brandi are still unpacking. Colleen came back to my place, and we played some Backgammon. It was cool, and came in a really cool case. I wish more games would come in this case. You are supposed to get all your pieces from your enemy's corner to your corner, and then fill up your "base". It's fun! Anyway, great times, and I'm going to read and get to bed. I'm starting with Jim Cramer's Real Money. So far, he's been saying that he is going to teach me how to be a better investor with his "secrets". He says you should invest for yourself, or at least know what you want when you buy someone else's services in investing. I really think he wants people to succeed, so I'll give him a chance by reading both his books. Well I'll end this with a picture of Colleen trying to hide from the camera, LOL. She's beautiful, so I never really see the need to hide, so I try to snap pics when I can. And the other one of my glasses. The frame broke on the top, so I solder to whole edge. They've worked for the past month. I just love that solder could hold it together! Well, good night! - E.T.