I may play a lunatic on TV and at home for that matter… but not when it comes to moolah… money is too important… when it comes to your cash I believe in rigor… look, I did not make all of money on Wall Street because I am super smart or some kind of idiot stock savant… I did it because I worked really hard, and I was rigorous, and disciplined… in order to be rigorous, you need to understand what rigor is… what good judgment is when it comes to stocks.

So let’s start from the ground up… when you invest in a stock you need to be totally sure that you are investing in the stock of a viable company… not some piece of garbage… okay, I said a viable company, isn’t that kind of a subjective judgment… how can we ever tell what is viable and what is not viable unless we know the future… no, save that discussion for philosophy class not Mad Money… viable companies are companies that make money and don’t have a lot of debt… it seems intuitive, dull even, but it is true… and you need to pay attention to it… when a company is burdened with debt… it can’t pay its bills if its business gets into trouble… and when you can’t pay the bills… the creditors, the bond holders, the banks, they take over your equity… you do not want to own a stock when the bond bullies take over… it goes from bull to bear very quickly… they have first dibs if the companies you own stock goes under, in other words, if a company goes belly up, you don’t own it… the bond holders do… not the common stock holders.

Understand, you can’t look at share price if you want to understand how a company should be valued… you need to look at the debt too… a Ford or a GM have prudently my whole career looked really cheap… if you just look at their stock prices… but when you factor in all the bonds that they have, all the debt that they have… you will see that they are a whole lot more expensive… and we have seen all too many banks go under even though they looked very cheap, because of their bad balance sheet… see debt, debt, matters… lots of debt can strangle a healthy business.

I know that for some people this balance sheet stuff can be very intimidating… I mean it all looks like accounting mumbo jumbo… but it is really not that hard… look, just bring it down to a human level, if you make $40,000 a year and you owe $50,000 in interest a year on your mortgage… you know that you are going to be foreclosed… you are going to lose your house… the same is true for companies… and every quarter they give you a balance sheet that shows whether they are taking in more or less than they are paying out… when they hold their conference calls they also post their balance sheets on the web… or make them otherwise available so that you can make the kind of judgments that I am talking about.

Do not misunderstand me and go overboard in the other direction… there are plenty of times where debt is good for a company… a retailer has to have debt, they take in inventory for Christmas right… retailers take down a lot of debt in the 4th quarter so that they have a lot of things to sell for the holidays… that is fine… so long as they make a lot of money at Christmas and don’t get stuck with that inventory… airlines take down a lot of debt to buy planes… I mean that is excusable debt, right… I mean they are in the plane business… but you should never, never own an airline stock… because the business is just too hard to make money in… cable companies, on the other hand, take down lots of debt to lay cable… again, that is okay… as long as they are making back more than enough to pay down the debt.

When you are going over a companies balance sheet I want you to make Ebenezer Scrooge look like a spend thrift… the credit crunch, mortgage meltdown, whatever you want to call it… with multiple bank failures should be enough to convince anyone that balance sheets are important… if you can’t understand what is going on when you look at a companies balance sheet… don’t own it… Lehman Brothers had some of the most opaque, difficult to understand financial that I have ever seen… and you know… they went under.

Here is the bottom line…