Mad Money w/ Jim Cramer 10/19/26

SPEAKER_1 (0:00)

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SPEAKER_2 (0:30)

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SPEAKER_3 (1:01)

My mission is simple, to make you money.

I'm here to level the playing field for all investors. There's always a boomerang in somewhere, and I promise to help you find it.

Jim Cramer (1:17)

Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramerica.

A few of my friends, I'm just trying to make you some money. My job is not just to entertain, but to do some teaching.

So call me 1-800-743-CMBC, tweet me at Jim Cramer.

Currents cross, narratives get scuttled, truth gets obscured, all because of hedge fund managers and big mutual fund trigger pullers occasionally getting on the wrong side of the trade.

One of the things I try to teach you on the show is how much stocks can diverge from the underlying value of the companies. Maybe your stocks were only going up today because some hedge fund imploded last week after eight straight days of the Philly semiconductor index being down, and we just didn't know it. With the near-dual hedge fund out of the way, the stocks were free to lift.

Maybe today's rally with the Dow slipping 36.38 points, but the S&P gaining 0.4 percent and the Nasdaq jumping 1.11 percent has more to do with some loser fund being blown out last week, a so-called query event, than it does with how the business is underneath and stocks are really doing. This weekend, I told members of the CMC Investing Club that I thought Friday, last Friday, had all the hallmarks of a hedge fund blowing up. Kind of like what we had happened with situational awareness this summer, but kind of a mini situational awareness. You didn't know situational awareness was falling apart when it happened. You only knew the denouement. But it knocked dozens of stocks off their flight path and caused tremendous havoc. As many analysts thought something had to be wrong with the underlying companies, not just the stocks. Now I bring up this manufactured non-fundamental sell-off because today is the 39th anniversary of the crash of 1987

I know, the 39th, not a big deal, not a round number. Still, it's incredibly instructive right now, and I recall, well, a few months into the year, my great friend Larry Levy and I left Goldman Sachs to form Cramer-Levy, a hedge fund. It was a very novel thing to do. Larry was more of an outside guy, raising money. I was an inside guy with terrific relationship. But I think that once the money was raised, Larry wanted to move on, and I just wanted to settle down and pick some stocks. That was hard enough. I had a playbook of buying stocks in the best companies, so I moved the fund to Steinhardt Partners, where the legendary trader John Lattanzio schooled me, but good. I was hanging on my finger, and I was down almost 10 percent where I would have had to open my fund, and it didn't help that I didn't have Larry to keep things together. I sat down with Lattanzio, who promptly called me a Harvard-trained idiot and a disciple of the research department of Goldman Sachs, which didn't know jack about how the market worked and would recommend a bunch of bonehead blue chips regardless of the tape.

He told me to sell everything, start over, stay attuned to the market. I had no idea what the heck he was talking about, attuned to the market. I thought I was making the most subjective analysis of each position, but he told me that stocks had nothing to do with companies. They were just pieces of paper blowing with the stock market wind. Wouldn't you know it? He was right. At the time, we had a market led by a few stocks that the Japanese would buy every night, and they'd keep those stocks up in the morning. Back then, Japan was on par with us for the biggest and deepest stock markets. They were challenging our wealth, and in many ways, their economy is a lot better than ours. The Japanese loved the waste management stocks. They thought 3M was terrific. They had an appetite for the drug stocks, especially Johnson & Johnson and Merck. They thought Gap was really good. The whole thing was insane because their favorite stocks just seemed to go up every single day. Their buying knew no bounds. In fact, the Japanese were responsible for most of the marginal buying of the whole move upward. They took the indices up to about 29 times earnings by the time October rolled around. The whole time the market was being taken up by Japan, there were these weirdo salespeople selling it. It was basically something called stock market insurance, portfolio insurance. Yes, insurers. You could ride up the indices and be stocked out down 5% for a fee if something bad happened. If you were up big, you were able to lock in the game of portfolio insurance, or at least they told you you could. Most people don't remember that time or weren't alive to know it. Larry mentioned to me this weekend, and it reminded me just how you can't take all the moves seriously. I say that because what happened next, what happened today, 39 years ago, is that the portfolio insurance didn't work. The insurance agents were shorting stock futures to stop you out, but the selling from the futures pits in Chicago, still a relatively young pit, overwhelmed the stocks in New York, and everything cascaded down.