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Cramer was wrong on BSC last week

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As you may know, the Bear Sterns (BSC) was bought by JP Morgan for $2 a share as of this afternoon March 16 US time (Reuter News). And here was Cramer’s take on Bear Sterns on Mad Money just last Tuesday (March 11).

Dear Jim: Should I be worried about Bear Stearns in terms of liquidity and get my money out of there? –Peter

Cramer says: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”

Yeah, the Bear IS in trouble and they are taken over, but at $2 (it may go slightly higher if another buyer emerges), it is virtually go under as far as shareholder concerned.

The following is a list of Investment services companies:

Investment services companies pic
(Source:Google Finance, Mar 14, 2008, full size pic is here)

Bottom line: if you have BSC stocks and listened to Cramer’s advice and hold it through last week. I felt very sorry for you 🙁

On the other hand, I found the following Cramer’s advice kinda useful.

Jim Cramer on Newbie strategy
From Jim Cramer’s Mad Money show last month.

* Rule 1- Amateurs have the tendency to fully invest their money in
stocks, leaving no cash in reserve.
So when the market takes a dip, putting
the best stocks on sale, Wall Street goes shopping, while Home Gamers are
left wanting. Cramer recommended having about 10% of a portfolio in cash for
just such an occasion.

* Rule 2- Another difference between professional investors and amateurs
is the focus on downside versus upside.
Beginners are only concerned about
how much money a stock can earn for them. They usually disregard the fact
that all stocks go down eventually. Pros know this inevitability, so they
buy companies with huge stock-repurchasing plans and healthy dividends,
which protect their investments when that decline comes. Home Gamers need to
do the same, Cramer said. Plenty of stocks have upside potential, but far
fewer have great downside protection.

* Rule 3- Rule number three couldn’t be any simpler: If you don’t know
it, don’t buy it.
Pros pass up investing in companies they don’t
understand all the time because they’d rather hold on to their money. But
Cramer said amateurs are quick to snatch up a hot stock, even if they have
no idea what the company does. Cramer knows his limitations, so Home Gamers
should too.

* Rule 4- Cramer’s last maxim there is such a thing as making too much
money might be a bit harder for amateurs to understand.
But the bottom line
is that making to much money is usually a sign that a portfolio is
overexposed to one stock or sector. Think dot-com era, 1999-2000. Everyone
was in tech. Everyone was making money hand-over-fist. Then everything
collapsed. As Cramer said, it never costs any money to take profits, so do
it before it’s too late.

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