Jim Cramer Master Class 28 comments
May 21, 2009
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Some people really have a lot of free time on their hands. In this case Paul Bolster and Emery Trahan of Northeastern, who have done a full blown academic paper on the effectiveness of Cramer's stockpicking.
For those who would prefer not waste their time (with either Mad Money or the paper), here is the punchline: "Cramer's stockpicking was in line with the market. One could replicate Cramer's performance by constructing an index composed of 18% Russell 1000 Growth, 29% Russell 1000 Value, and 53% Russell 2000 Growth."
In other words, for all his histrionics, Cramer is about as effective as your standard, two-sided coin.
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How many investors (individuals or pros) construct a portflio with the sort of allocations you suggest: "18% Russell 1000 Growth, 29% Russell 1000 Value, and 53% Russell 2000 Growth."
Look, I'm not a Cramer groupie. But come on. I think you;re straining way way too hard to bash the guy. In fact, your point comes across more like a sucker punch.
But Cramer will make you rich! BUYBUYBUY
Now Jeff Macke- he's got it right (see his blow up last night simply fantastic!)
CNBC is enough to make anyone crazy.
The crazy thing is I think I know what Macke is talking about...
"Cramer obtained employment in 1984 as a stock broker in Goldman Sachs' Sales & Trading department. Cramer's success in this position led him to found his own hedge fund, Cramer & Co. (later Cramer, Berkowitz, & Co.) in 1987. The fund operated out of the offices of hedge fund pioneer Michael Steinhardt's Steinhardt, Fine, Berkowitz & Co., and early investors included Eliot Spitzer (a Harvard classmate and one of his oldest friends) [6], Steven Brill, and Martin Peretz.[7]
A year later, Cramer married Karen Backfisch-Olufsen, who was a trader with Steinhardt's firm.[citation needed] Cramer retired from his hedge fund in 2001, after finishing with a self reported 29% return in 2000. Cramer's fund had one down year from 1988-2000 while he ran it, in 1998, a year that was disastrous for many in the industry. Cramer, Berkowitz finished down 2-3% and they did not charge a management fee that year to their clients. The fund was taken over by his former partner Jeff Berkowitz after Cramer's retirement. (Quoted from Wikipedia)
Jim Cramer educates the public about the markets better than anyone I know. he has also provided some outstanding picks, and as a general rule is accurate highlighting the best sectors (Energy, tech and Agriculture come to mind). Is he always right no, can you learn from him, yes. The fact that he did not charge his investors a fee, the year he did make money, shows you he has more class than the majority of the vultures running money.
I am taking his advice and staying on the sidelines of this crazy and fundamentally incorrect market.
Lu Galasso says, with those odds you may as well play Blackjack or poker at a casino in Las Vegas or Monte Carlo.
At least you'll have some entertainment memories.
Enjoy the tables gents, they are more fun.
By Johnathan Vrozos
johnathanvrozos.com
johnathanvrozos.ca
Have to believe it is the same for Mr. Cramer.
We should also keep in mind the numbers/results that Madoff was reporting. Had a couple college kids done a paper on Madoff, circa 2005, I bet it would have blown our socks away with his "results".
When it comes to Mr. Cramer's trading history--either pre or post being hired as an entertainer--we should always remember.
Figures lie, and liars figure.
since you have obviously some insights, would you mind to elaborate what Jeff Macke really meant to say during his fallout to enlighten a pedestrian mind like mine?
A scan of it pretty much sad the same thing. Half his picks made money, half lost money, and you had to trade like crazy and pay fees and taxes to achieve that.
When the market is up he betters it slightly, but when the market is down he underperforms significantly.
On May 21 10:13 AM Brooke wrote:
> Cramer in fact beat the street so dont belittle what "actually" happened.
It's funny you should say though, one time I researched the numbers on a stock and determined it was a good pick and I was ready to buy, so I did some more research looking at the press articles and saw that Cramer recommended it as a BUY too. I was in a real quandry thien.
On May 21 10:04 AM yellowhoard wrote:
> Cramer seems to be "more right" when the market is in bull phase.
>
>
> His advice has been pretty sketchy since the market rolled over.
>
>
> Lately, he's become one of my favorite indicators for selling. <br/>
>
> If he likes something, I stop what I'm doing and think seriously
> about selling it if I own it.
On May 21 10:04 AM yellowhoard wrote:
> Cramer seems to be "more right" when the market is in bull phase.
>
>
> His advice has been pretty sketchy since the market rolled over.
>
>
> Lately, he's become one of my favorite indicators for selling. <br/>
>
> If he likes something, I stop what I'm doing and think seriously
> about selling it if I own it.
Cramer's calls did not cost you any money. You made a decision to buy and you were wrong. Grow a pair.
And you can still make money even if you are right only 50% of the time, if you follow Bill O'Neill's advice and cut your losses at 8% and let your winners run.
The non-std index that replicated Cramer's results seems to favor LgCap (with dividends) and SmCpGrw.
Historical data shows both most of the S&P 500's long term gains have been from dividends and that the Russell 2000 has outperforms other market indices.
It seems to me the data proves that during the study's period, Cramer was advising viewers to invest in the portions of the market that historically outperforms over time.
That fact he makes so many daily recommendations to buy/sell is a turnover issue for me. Everyone knows you should pick a fund or manage your portfolio with 20-25% turnover or your just churning and unlikely to succeed long term - small, very speculative issues aside.
I have only taken Cramer's advise once. He advise to buy a company I knew well. Earnings had been halved in the latest debacle. It would have to pay 77% out to meet the 5.4% dividend. I researched the historical data and found it had payed out 75% in the last downturn in 2000/02. I gambled that it would do the same. The company had cash. I bought the stock @ $21.85 on 03/31. It announced the full dividend would be payed. I sold it @$34.79 on 05/13, before receiving any dividend. A nice profit. It sells for around $32.50 now. It was the only time I used his information to investigate further and then buy.
The point here being his advice only leads to a point of further investigation. If you take his advice blindly and do not do further research - you are then just gambling, likely with less than a 50/50 chance.
The study tells me if you could have mirrored ALL of his recommendations in your portfolio, you would not have matched the market due to commissions paid on so many trades. If you evaluated his recommendations thoroughly, and decided for yourself if it is truly a buy/sell situation, I would think your odds would greatly improved.
I agree with the previous comments. YOU lose your money. You bought it and you sold it. Cramer doesn't force anyone to click the BUY/SELL button with their mouse. If you cannot perform the research with due diligence yourself, you should buy mutual funds or stocks via a knowledgeable broker or shouldn't be in equities at all.
Ques: Did that 18/29/53 index beat the S&P500 for the same period? The Russell 2000? That would have been the obvious comparison to make. I do not believe it was stated in the article.