Mad Money: Watch TV, Get Rich is a follow up to Jim Cramer’s first book entitled Real Money. On the inside cover of his book, he states “Investing well isn’t easy, but it is possible. My goal is to make it easier for you to make money.” I feel that his first book laid out much of the foundation for the average investor to learn Cramer’s mindset and methods of investing. Real Money focuses again on some of Jim Cramer’s rules on how to go about trading stocks and investing but with an emphasis based around his CNBC Mad Money TV show. For those who aren’t aware of his TV show won’t get much benefit from chapters 5-7 and 10-11. That emcompasses almost half the book.
On the Bright Side
In chapter 10 “How Do I Pick Stocks for the Show?”, Cramer does provide a comprehensive but reasonable list of publications that he uses to choose stocks (which includes the Wall Street Journal, Investor’s Business Daily, and the Financial Times). Most of his stock recommendations and ideas are straight from the same magazines and publications that any average Joe has access too.
The chapter I found the most useful was chapter 2 “Buying a Stock Mad Money Style, Step Two: Do Your Homework.” In this chapter, he really does emphasize how to compare and contrast stocks with one another and makes sure the investor is comparing apples to apples. He demonstrates the importance to compare ratios like PEG, forward P/E, and growth rate instead of stock price or hot stock “tips” from friends or third parties. In the end of the chapter, he gives a summary of how to analyze balance sheets and cash flow statements. Everyone has the ability to examine balance sheets which are provided free of charge online, but few take the time to understand how to read them properly. Cramer gives you a good start on this front.
Improvements from the Previous Book
As the investment world evolves, Jim Cramer has to adjust his investment strategy and one major development since Real Money was written was the impact of the international community of developing countries like India and China. Cramer took this into consideration and updated his cyclical investing and trading chart. This details what industries you should be investing based on GDP growth and state the Fed is currently in with increasing or decreasing interest rates. This chart includes economic benefits from what Cramer calls the BRIC (Brazil, Russia, India, China) effect.
Release Date: December, 2006
Target Audience: Everyone (with additional benefit for those who watch his show)
Overall Grade: B
Bottom Line: Make sure you read Real Money before you tackle Mad Money. It will make a lot more sense if you start from Cramer’s initial investment mindset and see how it involves in a short 1.5 years. Also, if you are able to catch a few of his Mad Money shows on TV, a lot of the chapters will make more sense. I’ve always like the way Cramer presents himself to his audience and he doesn’t try to sugarcoat his investment strategies. Someone who is able to highlight his or her accomplishments and failures is someone who you want to be able to learn from so you can benefit from what works for them and not to fall into traps that other have previously succumbed to.