Defending Cramer's 'Madness'

The financial landscape is full of plenty of polarizing figures with radical views delivered in egocentric nuggets. Nevertheless, ex-hedge fund manager, CNBC host and Thestreet.com founder Jim Cramer is in a league of his own.

Such is the raw emotion that Jim Cramer elicits in so many, The Motley Fool’s Rick Munarriz recently suggested an amusing experiment:

The next time you find yourself in a dwindling social situation, where it seems as if the conversation is running on fumes, just fling the following question into the mix:

“What do you think about Jim Cramer?”

It’s as easy as that. Cramer is a polarizing figure. Some people love him. Some people hate him. Either way, everybody has an opinion on financial journalism’s reigning rock star.

My Moneywatch colleague, Alan Roth, is evidently not one who finds much value in Cramer’s bite-sized stock picks. In a recent post titled “In Defense of Jim Cramer — Why We Need CNBC’s Mad Money,” Roth writes:

Sure, CNBC’s Mad Money host Jim Cramer encourages investors to treat their nest eggs like poker chips, but that just means we need him now more than ever.

I’m admittedly not his biggest fan

… In my opinion, by encouraging his viewers to buy hot stocks and move in and out of the market, Jim Cramer does more than anyone on Wall Street to keep markets efficient. That trading volume keeps the market going and is critical to allowing the market to function. Unintentional though it may be, Cramer creates the market mechanism that allows long-term investors to profit from the foolishness of those who think they know what the near term future holds or what the next hot stock will be. Without that mechanism, the landscape of investing would be a pretty barren place.

In other words, Roth likes Cramer because he thinks the Mad Money host attracts numerous “sucker’s rallies” in stocks (on both the buy side and the sell side), which ultimately allow him to buy or sell stocks outside their fair valuations.

In Defense of Jim Cramer — seriously, this time

That’s quite a clever argument, and indeed irrational market behavior is the key to much successful stock-picking. But more than anything, it’s sad to see yet another piece pooh-poohing Jim Cramer.

Here’s why: imagine hosting a nightly show, five times a week, fielding calls from across the country from concerned investors, all while having to constantly provide fresh and entertaining content. You probably can’t. It’s unthinkable.

For what Jim Cramer does, he does it very, very well, with crystal-clear reasoning underlying his assumptions. If you asked the average investor to trade as frequently as Jim Cramer makes stock recommendations, they’d probably be out of 100 percent of their capital in a couple weeks.

Of course no one is going to invest in a stock purely because Jim Cramer says so. In fact, take Cramer’s own advice and you’ll be doing a little homework first. But at least his show is full of original, thought-provoking, and fresh ideas on a daily basis.

When it comes to investing, you can’t really ask for much more than that. Especially when it’s free.

Comments

[spald_fr:]

I used to post at a number of sites on the Yahoo business board in the mid to late nineties. One Cramer post had something like 36,000 negative comments about Cramer.

Jun 12 11:04 AM

[DB2776:]

" Of course no one is going to invest in a stock purely because Jim Cramer says so."

Sadly, I believe a large portion of his viewers do in fact purchase the stocks (s) that he recommends the moment the ticker symbol slips from his lips. Heck, watch the ticker while he is speaking about any particular stock and watch it rise or decline immediately.

Of course he say's do your own homework, but if you did "do your own homework" you would have discontinued watching / listening to what Cramer says a LONG time ago.

Those truly immersed in this profession, professional and semi pro know how much time it takes to get even a vague idea of what in the hell is going on. Hence, those who work full time and have a precious few hours after work have two choices, doing their own research OR listening to Cramer, Fast Money etc. THIS IS their research.

I find it interesting that many of his viewers are confused and frustrated as to why Cramer "flip flops" on his stock picks. This goes to show that most are totally oblivious to the difference between an investor and a trader. And they should be confused because Cramer portrayed himself (in the early days of his show) as a reformed trader now investor and he was giving advise as such - an investor. However, that has clearly changed as he gives "trader" like advice.

Sadly, I believe these types of shows do more harm than good for the average unaware Joe.

Jun 12 11:29 AM

[Living4Divi...:]

Cramer is nothing but hype. He has led many an investor to ruin.

Jun 12 12:49 PM

[sticktoitiv...:]

"The Motley Fool’s Rick Munarriz recently suggested an amusing experiment"

You are using a Motley Fool guy to support your case? Ya, they were okay until they started spamming yahoo finance with stock screens. 5 reasons why X will happen. As for Cramer, read his books. His tv show is based on sector analysis, and how do I say this politely, it does not provide the in depth analysis needed to invest in individual stocks.

Jun 12 12:52 PM

[utilitus:]

This posting has as shabby a feel as Cramers' product. Thing is, Cramer is a smart, creatively fluent guy who has quite candidly copped on air to his psychological motivation on at least one memorable occasion. He's playing to the groundlings, which is noble in principle, but he ends up as what Mark Haines calls the Rev. Jim-Bob of the Church of What's Happening Now. From a northern Californian perspective, such money grubbing just seems vulgar. Go invent something real.

Jun 12 01:36 PM

[BerkeleyBob:]

A few comments. I could do without Cramer's antics, sound effects, etc . After having read his books and watched his show, I am persuaded he is worth paying attention to but not blindly following. He provides some insight into what institutional investors (mutuals, hedge funds, etc.) are thinking. His discussion of sectors and sector rotation is useful. On balance, I am a better investor as a result of exposure to his thinking. He does not walk on water and on individual stocks, he has been wrong and admitted it. His experience and background is as a hedge fund manager and trader, but he intends to educate as well as amuse the small retail investor. The insatiable demands for filling air time and coming up with new ideas make his job difficult and explain the high noise to signal ratio. Pay attention to the signal, ignore the noise.

Jun 12 01:47 PM

[veryold:]

I don't believe many investors slavishly follow Cramer's recommendations, though the :Cramer Factor" surely does exist. I find it very useful to have his take on stocks as a basis for due diligence. He deserves much credit for promoting financial literacy, something the educational system slights. He is very knowledgeable and well abreast at how individual stocks are doing - his lightening round proves that to me. I subscribe to many newsletters and mostly I feel analysts are self-promoting and self-serving.

Jun 12 01:57 PM

[six:]

Go to YouTube and search Cramer... Listen to him tell you to buy buy buy tech back in 1999. The guy is a busted watch- right twice every day and wrong the rest of the time. He is one more guy from the Street that worked hard, had some luck and hit it big. Here are 2 nuggets of knowledge that will trump anything Cramer will tell you. No one can consistently beat the market (ask ol' Bill Miller and yes Buffets day will come) and every trade is a gamble, bet accordingly.

Jun 12 02:42 PM

[Homo econom...:]

The man is the epitome of what is wrong with investing culture in America. It is purely and simply momentum and more often than not momentum at the end of the cycle to ensure the average investor is burned.

Cramer, and CNBC in general, are a shame; take it with a pound of salt and a liter of skepticism.

Jun 12 03:22 PM

[RogerOD:]

cramer is best revealed in his book "confessions of a street addict" and best elucidated (maybe unintentionally) in the book "trading with the enemy" by his former employee nick maier. he is slightly more than a wall street guy who worked hard and got lucky. as these books make clear, cramer's wealth is the product of a vanished era on wall street where it was possible to make a fortune by sheer force of will and being a bigger bully than everyone else in the market. cramer was one of the worst bastards on wall street in his day, with multiple examples of him browbeating trading desks at lehman and goldman (not places given to passivity) into turning over every last sixteenth of every trade while engaging in a dozen or so venal forms of insiderish trading and stock manipulation. this was his alpha. it's almost heroic the extent he would go to squeeze the other side of buys and sells, gaining like carl icahn a reputation for never being "done" a trade no matter what he'd said or what anyone heard.

i say all of this with complete admiration for the guy -- it is true that nobody playing on a level playing field will consistently beat the market (a far more likely product of professional investing is gaining a talent for convincing people you can). but cramer figured out how to make himself rich anyway. he is doing the exact same thing on TV every night.



On Jun 12 02:42 PM six wrote:

> Go to YouTube and search Cramer... Listen to him tell you to buy
> buy buy tech back in 1999. The guy is a busted watch- right twice
> every day and wrong the rest of the time. He is one more guy from
> the Street that worked hard, had some luck and hit it big. Here are
> 2 nuggets of knowledge that will trump anything Cramer will tell
> you. No one can consistently beat the market (ask ol' Bill Miller
> and yes Buffets day will come) and every trade is a gamble, bet accordingly.

Jun 12 03:38 PM

[Fighting Yoda:]

Cramer is a trouble maker. He has a large dedicated cult following - who trade on his advice, tragically to their detriment. But at the end of the day Cramer is able to move market sentiment at least in specific stocks. Stay away from likes of Cramer - only trouble and losses will follow.

Jun 12 05:27 PM

[RamanVenkat:]

I find Cramer shows and Action Alert Plus very useful. It removes anxiety about the stocks I buy since I know those are safe bets. If the price increase he predicts does not happen soon, it is OK since the stock does not dive either. If anyone follows Action Alert plus in terms of buys and sells after moderating their trades to suit their own pocket, they will surely end up with more money every year with the lowest time spend in stock picking. Given all the volatility of the last year, it is quite clear that there is no faith in buying and holding on to a stock however good it is due to changes in the economy that can bring down any good stock price. We need someone to give us guidance on what to buy and sell reducing the uncertainty involved, of course without removing it completely since no one can completely remove the stock market uncertainties. Cramer has helped me achieve total control on where I want my funds to be invested in. If I lose money I will not blame him since I would have probably lost more if I were to be playing on my own. Show me someone who is willing to do better than what he is doing for the benefit of the retail investors.

Jun 12 06:19 PM

[SHADOW:]

I have followed several of his recommendations..all led to losses. He shoots from the hip too often. He will recommend a stock "buy buy buy" then a few days later after it has cratered he acts like he never heard of it! People think he really likes a stock and they buy it but without constant update they fail to realise that he isn't going to tell them he has suddenly changed his opinion and no longer likes it. For example, a while back "buy Mercadolibre under $53" several weeks later after a substantial drop in price it becomes "an internet stock that fizzled" This is typical!

Jun 12 07:19 PM

[andruomail:]

Maybe if Cramer as a new gimmick committed himself to buying or selling what he says to on the show, it would end all the bad comments. Start a public Google portfolio Jim Cramer!

Jun 12 07:43 PM

[conceptwizard:]

The man is annoying, regardless of anything else. His approach takes prefessionalism and credibility away from what could be an informative program. I tried to watch him all the way through a program once but could not make it.

Jun 12 08:53 PM

[Maxe Paul:]

Seriously, GIVE US A BREAK! The guys an idiot, and although you are not allowed to make personal remarks about people on SA, I am very tempted to break the rule with you. You obviously have an "agenda"...........goo...


On Jun 12 10:00 AM Daniel Harrison wrote:

> No. I once wrote for TheStreet.com, but not anymore.

Jun 13 09:28 AM

[Maxe Paul:]

Goodbye!

Jun 13 09:29 AM

[User 180683:]

As a newly retired Electrical Engineer, I bought my first stock ever about 15 months ago. Following Cramer's advice on fundamentals, avoiding total reliance on charts, his e-mail trading picks, and a host of other indicators, as well as what I've learned along the way, I've made money.

While I was learning, the market went into a once in 70 year mega-decline, so while still being a newby, I lost a lot during the fall because I hadn't learned all of the rules; especially the once in 70 year rules! But, according to Cramer's advice, I didn't panic, I eother held my shares, or bought more during big declines, and traded on the ups and downs at the bouncing bottom, and now I'm in good shape. I'm now only down 20%, and when the market fully rebounds, I'll really be well off. I now have many more shares, and share value, after the patient trading.

I have Jim Cramer largely to thank for my current financial status. Just by reading the other comments, and other commentator's columns and e-mails, you can tell the ones who are jealous, have an axe to grind, or those who just hate and mock others regardless of facts and reality. While I don't agree with Cramer's politics, when it comes to financial advice, I've made the best of it. And with anything, it's our own responsibility to learn, and to sort out the good from the bad, and what will and won't work for us. I don't see it as being Jim Cramer's responsibility. He gives good advice, which, if we use it properly, will serve us well.

Jun 13 12:52 PM

[Seniorman:]

Letterman showed poor taste in his joke - but let's get it straight, he was referring to Palin's older daughter.


On Jun 12 09:18 AM optionsgirl wrote:

> Anyone who invests in stocks based on Cramer's "Buy, buy, buy" and
> "back up the truck" antics deserves the outcome. Anyone who thinks
> Cramer can identify a market bottom or top as it is happening will
> soon learn otherwise. That's not what he's there for- it's entertainment,
> he's interesting, and if small, retail investors follow his "rules"
> - do your homework, diversify, understand what you are investing
> in, to name but a few, they could do a lot worse than follow his
> show. I don't watch him often, but when I do, I always get a good
> laugh. I can't say that of other TV shows, even those hosted by comedians.
> For instance, David Letterman made a joke about Sarah Palin's 14
> year old daughter getting knocked up by ball player Alex Rodriguez.
> I find that more appalling than anything Cramer does or says.

Jun 17 12:19 PM

[GoneFishing_73:]

He has adequately disclosed unlike some of the other posters like Jeff Nielsen who relentlessly flogs gold, china and anti-americanism. How about some disclosure about that.
On Jun 12 10:00 AM Daniel Harrison wrote:

> No. I once wrote for TheStreet.com, but not anymore.

Nov 25 02:42 PM