MAD MONEY FEATURES
PODCASTSWatch the Lightning Round whenever and wherever you want.
OFFICIAL MAD MONEY WIDGETGrab this all-in-one application and get recaps of the show sent right to your desktop or blog.
CRAMERS SOUNDBOARDAdmit it: You've always wanted to hit the "They
know nothing!" button. Here’s your chance.
CHECK OUT OUR PHOTOSCheck out Cramer on set, back to school, behind the scenes and more.
SHOP FOR MAD MERCHANDISEBuy Cramer books, bobbleheads and other Mad Money merchandise.
RING TONESPick up the phone! It's Cramer! New Mad Money sounds for your cell phone.
TEXT MESSAGE ALERTMad Money's mobile. Get show highlights sent to your phone.
Text Size 
Cramer told a story Friday about some loudmouth touting his buy of Washington Mutual at $3 a share. Apparently this guy thought WaMu was ripe for a takeover.
Too bad he never reviewed this failed bank’s balance sheet. If he had, he would have noticed the massive debt on WaMu’s [WM
Loading...
()
] books. Plus, this would-be speculator actually thought all the bank’s credit downgrades were a good thing, instead of realizing, as Cramer did, that such downgrades usually sound the death knell for most financial institutions.
Any potential buyers of WaMu would be taking that along with any deposits the bank had. And the debt holders – bond bullies, as Cramer likes to call them, would get their money long before any holders of common stock. And what if the FDIC seized the bank? Not even the bond bullies would get paid then.
Any single-digit stock that holds a significant amount of debt is a sucker’s bet, Cramer said. Lehman, AIG, and now Ford [F
Loading...
()
] all fit into this category. Shareholders are last in line to get paid if an institution in circumstances such as these fails. And if the government takes over, no one but it sees a return.
Cramer himself learned this lesson the hard way, buying both Memorex, an old computer storage firm, and Charter Communications [CHTR
Loading...
()
] before they went to zero or close to it.
And that’s the key here. Remember something important about these cheap-looking stocks: No matter how small your initial investment, it can still be wiped out.
So if you’re going to speculate, take a look at the company’s debt first. If it’s as big as Washington Mutual’s, find another stock.
Questions for Cramer?
Questions, comments, suggestions for the Mad Money website?
Del.icio.us
Digg It
Data is a real-time snapshot *Data is delayed at least 15 minutes