Mad Money Machine

Jim Cautioned Against After-Hours Trading

On last Thursday’s Mad Money, Jim Cramer warned investors not to do after-hours trading. Wow, that show really was fantastic. But in a way, it was weird. He talked about after-hours trading in the context of Bristol-Myers (BMY). When it announced it had settled its Plavix litigation the stock traded up immediately in after-hours trading. Jim gave a second-by-second recap of the trades and the pricing. Jim cautioned against after-hours trading because the professionals are faster than us.

Weird Thing #1: While Jim said that people who bought after-hours lose money, the actual fact here was that anyone that bought BMY up until 7:00PM that day MADE MONEY at any time the rest of the week. Yes, it turns out that even the highest price paid that evening of $25.04 was lower than the lowest price all the rest of the week!

Weird Thing #2: Here’s what was really curious about the segment: He warned against doing after-hours trading in the context of a company news announcement. He DID NOT and NEVER DID talk about it in the context of HIM mentioning a stock on his show! Very subtle, perhaps humble. Perhaps legalistic? The closest he came to saying, “Don’t buy after-hours the stocks I am recommending” was, “If you want to buy anything that is up on good after-hours news, you be patient! Hey, maybe even wait a week or two for some weakness and then buy. Otherwise the professionals will eat you alive.” [Referring perhaps to that paper by the NorthWestern students who said to wait 12 days.] But look, we all know some people need to be hit over the head with commands not subtleties.

Weird Thing #3: Jim said, “Very very few people have what it takes to buy stock after-hours and make money. They are professionals. Please, please, please do not try to beat them!” The problem is that Jim is confusing people by saying that it is the “fastest guys beating you to the punch” or that the “professionals will eat you alive.” I think the simple fact is that there are no sellers of the stock at the closing price at 4:30 or 6:30 or whenever. So when speculators buy in after-hours, the not-so-sharp ones put in market orders that are filled at previously-high set sell prices. It doesn’t really have anything to do with being fast or slow. Just ask vs. bid price. I don’t believe it is professionals buying the stock. I believe it is amateurs doing market orders. Or heck, they could be doing limit orders but only the highest limits are going to get filled.

Compare BMY with an otherwise non-news stock like PFE. In after-hours trading of PFE on that same day, the volume of trading was light and there was no imbalance of buyers over sellers. And an occasional seller would show up and want to get rid of their PFE at near the closing price. PFE stock traded in after-hours near its closing price.

In fact, the same exact opposite thing to BMY happened to MSFT that same day: On the announcement of the Vista delay, the after-hours price fell sharply because there weren’t any buyers lined up to accomodate all the head-for-the-exits sellers.

Just simple market dynamics. Isn’t there some rule about when there are too many buyers and not enough sellers, the prices tend to go up? Instead of confusing things by talking about fast, professional traders, Jim should describe the fundamental truth about what is really going on: It is a stock market. More buyers than sellers equals higher prices.

On my show “MMM-007: The Free Lunch” from January 27th and in this posting, I went through almost exactly the same second-by-second analysis of the after-hours trading in a stock Jim pumped heavily: Rediff.com (REDF).

On every show just before he features a stock, Jim should reiterate this quote: “Be fearful when others are greedy, and greedy when others are fearful.” Don’t buy when everyone else wants to buy. Don’t sell when everyone else wants to sell.

Happy investing,
Paul

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The music

Here’s the list of songs played on MMM-015 from the Podsafe Music Network at music.podshow.com:

Runaway Train by Uncle Feather
Echo Mover by Black Adam
Cheese Grater by Chub Creek Music
Race Car by EL84
Dip by Chub Creek Music
Money by Theory in Motion
Groove IT by Denis Kitchen

MMM-015: Rule #3 Is Get Rule #1

Enter the MadMoneyMachineCOM Portfolio Challenge. Want the oil services companies that Jim Cramer is BULLISH on? Get them in a basket. Who did a disservice to Jim? Our Guru sounds very familiar. Rule #1 book is reviewed. Did you buy on the secondary?

Play Show #15 Right Here, Right Now!
[audio:MMM-015.mp3]

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Action Items:

• Enter the MadMoneyMachineCOM Portfolio Challenge. The fun starts April 3rd!
• Design a new Mad Money Machine Logo!
• Buy the Rule #1 book
• Look at the Tools page to see what Tools in the Crib I’ve covered on the show.
• Watch the Portfolios page to see how well the Portfolio Smackdown is coming
• Take the Survey
• Register to win the BULL
• Click the Subscribe thru iTunes button and write a review of the Mad Money Machine
• Give your feedback either via email to feedback@MadMoneyMachine.com or via voicemail at phone: 20-mp3-4-iPod or Skype at MadMoneyMachine

Paper from NorthWestern students proving the Cramer Crackle.

Buy all 11 of the oil services stocks that Jim is BULLISH on with OIH: the Oil Services HOLDRS ETF.

Some of Jim’s Best of Breed stocks since mid-December. Stocks in BOLD have ROIC greater than 10% for both 5 and 1 years:

Valero Energy Corp.
AngioDynamics, Inc.
QUALCOMM, Inc.
Cummins Inc.
optionsXpress Holdings, Inc.
Vornado Realty Trust
FedEx Corporation
Steven Madden, Ltd.
Walgreen Company
Caterpillar Inc.
Peabody Energy Corporation
ALTRIA GROUP
W.W. Grainger, Inc.
Palm, Inc.
Electronic Arts Inc.
Rediff.com India Limited (ADR)
Varian Medical Systems, Inc.
Cerner Corporation
Palomar Medical Technologies, Inc.
Darden Restaurants, Inc.
Best Buy Co., Inc.
Halliburton Company
Deere & Company
V.F. Corporation
Polo Ralph Lauren Corporation
Blue Nile, Inc.
Franklin Resources, Inc.
Prudential Financial, Inc
MetLife, Inc.

Download the show directly: MMM-015.mp3

Spring Cleaning Time

With the first day of spring here, let’s do some spring cleaning in the Cramer Portfolio. Let’s get rid of the big losers for tax-loss selling. (We can always buy them back in 31 days, right?)
So that means we’ll be pulling up the biggest weeds in the portfolio: CROX, NOV, and IRBT. CROX is down almost 25% since we bought it at its peak :-(. NOV is down and remember we sold NBR at a loss to buy NOV. Maybe we’ll plow it back into King HAL. Then we picked up IRBT from the previous big winner STX.

We’ll sell at the market tomorrow at 10:30.

I’m not pleased with the performance of the Cramer portfolio compared to the ETF portfolio. Folks, the idea was that we were going to beat the indices. It kinda looks funny now, because EVERY ONE of the ETFs is beating EVERY ONE of the Cramer featured stocks. But remember, most of the Cramer stocks were bought more recently since we’ve been making trades in that portfolio.

But the bottom line in this little experiment, ETFs are beating the stock picker. And not only in pure performance, but also in the total fees, in the total taxes, and in the total amount of time to pick the stocks. Hopefully the rest of 2006 will turn things around. We’ll see… Interesting anyway, wouldn’t you say?

MMM-014: Cramer Makes People Crazy?

How to buy ALL of the hot Jim Cramer stocks. Listener feedback. The great BULL giveaway. Play Pick the Cramer Pick. Our Guru winner this time is the newest Guru in Town. Hey Robert Kiyosaki, what is the deal with a 3 minute podcast? Tool looks at ETFs.

Play show #14 Right Here, Right Now!

Subscribe to this show for free thru iTunes!

• Listener feedback suggests getting Cramer off the air before he makes everyone else crazy!
• Register to win the Bull and to be able to comment on posts on this website.
• How to buy Broadcom, Marvell Technology, AMD, Nat Semi, NVIDIA, and ATI all at once with either IGW, XSD, SMH, or PSI. Have a close look at PSI because it dynamically selects 30 semiconductor stocks each quarter.
• Play Pick the Cramer Pick. Which of 4 featured stocks went up the most?
• Our Guru is the newest investment guru in Town!
• Robert Kiyosaki, a 3 minute podcast is not much more than an advertisement.
• Portfolio Smackdown vs. some other indices such as SPY, DIA, QQQQ, and FCNTX.
• The Tool in the Crib helps you discover what is inside the box.
• I like your feedback. Either email me at feedback@MadMoneyMachine.com or phone me at 20-mp3-4-iPod or Skype at MadMoneyMachine.

Learn more about the current state of the ENRON trial.

BONUS: At the bottom of the Portfolios page, I have a table showing SOME of the holdings of four ETFs that focus on the semiconductor company stocks. Jim Cramer’s call on them is included.

Download the show at MMM-014.mp3

This Thursday: IGW and XSD

On my Mad Money Machine show coming up this Thursday, I will talk about the IGW and XSD ETFs. Just thought you may want to know. IGW was hot today after seven straight days of declines. XSD is similar. Who knows what tomorrow will hold, but I have something special to say about these and others on the next show. Stay subscribed!

[Hint: I bought some IGW today.]

Don’t forget tonight’s Anniversary Special

Wow, how time flies when you’re making money having fun. Tonight is the one year anniversary of Jim Cramer’s Mad Money show on CNBC. Tune in at 6, 9, or 12 and find out what he has cooked up. (Probably some Bear Stew based on today’s market!) Then come back here and comment on the show.

Keep up the energy Jim and have a great 2nd year!

[You’ll need to register for this site in order to Add a Comment. Registration is easy, just click register, enter your email address, get the password in the email, then login. I will not sell your email address to anyone and won’t spam you with junk email every week…. maybe just a few times a year.]

When investing fails, make money juggling

Put this one on my list of next possible obsessions: Taking up juggling.

Chris Bliss: Must-See Finale juggling to the Beatles shows what you can accomplish with hours and hours and hours of practice.

How much time have you practiced selecting the right investments? Practice could make the difference between 8% and 7%.

You can hear it now, My name is Paul… and I was a juggler.

Thanks b.m. for the link.

MMM-013: Acapella Recap

How to unsubscribe! Getting new listeners up to speed. Hey faithful: What if we had not made any trades to the Cramer portfolio? Putting all the Tools in the Crib together and what do you get? At the end a special treat: Theory in Motion: Money uncut!

This is a weird, unusual, out-of-cycle show. Do not forget to listen to show #12 also!

Play show #13 Right Here, Right Now! (Whoops, now fixed!)
[audio:MMM-013.mp3]

Or the best value: Subscribe free with iTunes!

• What if we had not made any trades in the Cramer portfolio?
• Two ETFs that Jim Cramer has recommended.
• Pulling all the Tools together: a workshop special.

Podsafe Music Network:
Money by Theory In Motion

Like the Acapella show? Hate it? Lemme know at feedback@MadMoneyMachine.com

Download the show directly: MMM-013.mp3

MMM-012: Electronic Bull

A GIVEAWAY that is all bull! Beautiful Wilshire 5000 chart! Take the MMM Survey. Portfolio Smackdown goes deep: How about putting it in an IRA? The Jim Cramer top ten manufacturing stocks: Buy them with one ETF! Tool in the Crib: Amerivest ETF Advisor.

Play show #12 Right Here, Right Now!

OR better yet, you can listen via free subscription thru iTunes

• Electronic music fills this show.
• Check out this beautiful stock chart. The future looks so bright, you gotta wear shades!
• Podfeed.net says MMM is in the TOP TWENTY of all podcasts with feedburner enabled!
• Take the MMM Survey
• Jim Cramer, is that you on the MMM Map?
• I discuss the impact of short-term capital gains on our Portfolio Smackdown results. And what if we decided to trade in an IRA account instead???
• Why did we sell three stocks this week?
• Mad Money Review looks at the manufacturing companies. Fluor (FLR) and United Technologies are two that are down since Jim mentioned them.
• How about an ETF that owns seven of Jim’s top ten manufacturers? Have a look at the Vanguard VIS.
• The Tool this time helps you pick ETFs for your portfolio.
• The BIG BULL GIVEAWAY! Register here to enter to win a Mad Money Bull and also allow you to add comments to these blog entries.

Music from the Podsafe Music Network:
Stars From Outside Of Spaceship: Alexye Nov
Neversus: Alexye Nov
Rocket Up: Art Hodge
Smile Removal Machine: RoadTrip
and as usual:
Money: Theory In Motion
Groove IT: Denis Kitchen
Runaway Train: Under Feather

Right-click this link to download the show directly: MMM-012.mp3