Why I Turned My Back On Jim Cramer

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 |  Includes: AAPL, CSCO, GMCR, ORCL, RVBD, ZSL
by: George Acs

I tend to be someone with a short attention span and I tend to move from interest to interest and project to project. Yet for so many years in my investing life I knew nothing but "buy and hold" and never really questioned its validity.

I've had blogs before, each running for precisely one year. The first was in honor of my father who was a Holocaust survivor and had a unique sense of humor. I got a lot of satisfaction in that year knowing that more people had watched a crude PowerPont presentation about his life than he would have ever met throughout a lifetime.

The second blog was at the insistence of my sons who thought that it would be a good way to promote my book. They also got me to start Tweeting and I did so fairly obsessively in the same pursuit.

To my amazement, somehow, with very little to offer in return, I've had a very loyal Twitter following, particularly since I was a self-described "nobody" who rarely followed back. For about a year, I was an continuing annoyance to anyone that was not discerning enough, including some who were far more credible than I.

I tried to cut the addiction, but one follower, CNBC's Herb Greenberg, scoffed and said that I couldn't, as I was addicted.

So I tried limiting to just one Tweet each day. Then I bent the rules and chose not to count re-Tweets or responses in the count.

Greenberg Tweeted that I should "hold down the fort" while he was on vacation. Pretty cruel, don't you think? He made his prediction a self-fulfilling prophecy by also acting as the enabler.

One thing that I found during my drastic reduction in Tweeting was that my Follower numbers grew. What exactly should that be telling me, besides reinforcing the axiom that "silence is golden."?

CramerSo too was my addiction to Jim Cramer. So much so, that when I was in the insane commuting phase of my life, flying to and from Boston every week for about 7 years, I always made certain to record Mad Money shows that I was likely to miss while en flight.

My DVR seemed to have artificial intelligence as it would get concerned and break out in a cold sweat if I forgot to program it for CNBC at 6 PM.

I actually broke out in a cold sweat when CNBC pared back airings from 3 each day to just two. Sorry, but an addiction is an addiction. They're very tough to break.

I mention my Sugar Momma with some frequency in my blogging and book. We have had very few substantive disagreements over the more than 28 years of marriage. However, one such disagreement was over Jim Cramer. She couldn't stand his voice.

"Why is he always yelling? He gives me a headache." The fact that she preferred to switch the station to watch "Judge Judy" for some reason didn't seem incongruous to her.

Talk about irritating.

Anyway, in the time that I was on Twitter, it would be nearly impossible to not realize how much venom is (mis)directed at Jim Cramer.

One of the great conflicts that I've had in my life is similar to one that I experienced as a child.

Back then, our family used to go away for summers to the "Bungalows" in what used to be considered Upstate New York, but what eventually became a commuting town just outside New York City. During summers, you would actually develop an entirely new circle of friends.

Your summer friends. Because they were in such far flung boroughs as Brooklyn and Queens, there was no possibility of ever seeing them during the rest of the year. In fact, even some portions of The Bronx were just too far away to be conquered.

After a few years, I had developed a great summer relationship with Kenny, and one year I was so happy that he was going to visit me at my non-summer home and get to meet my rest of the year best friend, Sidney.

Long story short, they hated each other.

And so it was when Jim Cramer appeared on Jon Stewart's "The Daily Show." Somehow, I still haven't resolved that conflict, so I stopped watching The Daily Show, as well.

I should be used to slings and arrows being hurled at him. Yet, I will always remember a really disturbing Tweet that was referenced by someone I followed, who described it as the most disgusting Tweet of the day. In essence, without repeating or glorifying that Tweet, the writer, while offering some condolences regarding the sudden passing of Mark Haines made certain to mention that if the same fate were to meet Jim Cramer, the markets would celebrate.

Human nature being what it is, I had to treat this Tweeter as if he was roadkill, in that I had to give into my curiosity and check it out. The author of that Tweet turned out to be a typical Penny Stock idiot filled with hatred. Probably had an unusually small penis, as well.

I've always liked to say that Penny Stock traders are like Gangbangers. Neither tend to survive into adulthood.

But let's get to why I don't watch Cramer anymore. Like an ingrate, I've turned my back on him. That's because Cramer did his job.

He's always said that his goal was to educate and entertain. No one does it better than he does. But no matter how much you respect education, it's time to move on. I did.

After two graduate degrees, coincidentally from the same institutional parent that Cramer attended (and at the same time) and another 20 years in advanced education, I finally moved onto the "dark side". Time to put all of that education to use and make some real money.

As respected and buttoned down as the late Louis Ruykeyser was, he had nowhere near the impact of Jim Cramer on demystifying the world of the markets and educating everyone with access to basic cable. It was more than Brooks Brothers three piece suits versus rolled up sleeves.

I listened and watched intently for years as Cramer taught an investing thought process and dissected market psychology. I still can't understand why he gets so much blame for his opinions. He always warns people to do their own due diligence and to not plow forward. Watch the ticker as he speaks and you'll realize that greed overtales common sense as the rules of the game are ignored.

Interestingly, although I rarely followed his recommendations, perhaps because he always advised "doing your homework" before making purchases, and I was a very lazy guy, it was one recommendation that I did follow that actually became my first recurring covered call venture.

That was in 2008 and the stock was Riverbed Technology (NASDAQ:RVBD). Nearly 4 years after having purchased the stock and having owned shares in the interim many, many times, I still have no clue what the company does. Something to do with technology, I think.

But what I do know is that its shares are very responsive to a number of things and that its option premiums are also very attractive, as a result.

Although I may not be very good at doing homework, I am very good at making observations and identifying correlations, maybe sometimes even causality.

In the case of Riverbed Technology it was always very good at meeting analysts' earnings predictions. It was also very predictable in offering disappointing guidance. The impact on its share price after earnings announcement was related to how the market had been treating others when they reported earnings. If they punished companies during that particular earnings season, RIverbed would be slammed. If there was forgiveness, the Riverhead would soar.

Simple.

Beyond that, Riverhead would always move in response to earnings from Oracle (NYSE:ORCL) and Cisco (NASDAQ:CSCO), as well, so I guess they may be in something like the same business.

The point is that I purchased shares after Cramer's presentation and fairly quickly saw a drastic fall in share price. Fortunately, RIverbed Technology became the second of my holdings upon which I sold covered calls, the first having been Apple (NASDAQ:AAPL). At least I knew what Apple's business had been. That covered call strategy grew out of a deep seated hatred of accepting losses and grew into the strategy that I would come to call "Option to Profit."

Although its a bit meaningless to lay out the scope of the option premiums since January 2008 without giving detailed information, such as the number of shares, I don't care.

Over the years, I've generated $43,077 in premiums, but only $2,348 in profits on the underlying shares. The fact that I'm currently holding shares that were assigned to me at $20 following a nearly 30% earnings related drop, is therefore not much reason to worry, as I've seen that scenario play itself out on a number of occasions and it has always had a happy ending (not that kind.)

In this case, unlike a couple of previous articles on Green Mountain Coffee Roasters (NASDAQ:GMCR) and ProShares UltraShort Silver ETF (NYSEARCA:ZSL) where I had detailed each and every trade, I thought at this point you would take my word for it.

Seriously, you won't? OK. Here you go.

One of the things I learned from Cramer was the need to wean and break dependence.

Cramer himself is not an advocate of covered calls in general, because it caps upside potential. It certainly does. However, I know my limitations and one of those is not knowing how to pick stocks. I am completely humbled by my inability to recognize a good stock and to know the right time to buy. I don't have the confidence that Cramer does, who rightfully is justified in believing that his picks will appreciate in value in the near term. When you have the confidence and the track record, there really is relatively little value in using covered calls on a routine basis.

In my case, however, I lack that confidence and I'll never have the track record, so I protect everything, if I can get the right price and achieve a good reward to risk ratio.

Having run a subscription service offering covered call plays I routinely make it clear that if I was really doing my job properly, subscribers should be able to go out on their own after just a few months, because the strategies were intended to be non-proprietary and transparent. That's entirely consistent with a career largely spent in educating others. Either that or I realized that subscribers would either hate me or realize that the strategy was devised by a cognitively challenged mullet.

Like a Momma bird, I was proud to see them go and even more proud when a number of the past subscribers from the very earliest such venture suggested that I codify the Option to Profit strategies in a book, aptly named Option to Profit. My oldest son, however, claims that it was he that convinced me to do so.

So thank you Jim Cramer. Momma Bird. You gave me an education and set me off to learn to fly on my own.

Although I no longer watch Cramer's Mad Money, I listen raptly to his other on-air appearances throughout the day. I think he was an excellent addition to the latest iteration of Squawk on the Street. I think Mark Haines would be pleased, as well.

Sidney and Kenny? Lost track of each of them. Sidney moved to Vermont and Kenny to Florida. Talk about opposites. Sigh.

Mad Money recently celebrated its 7th Anniversary. I was able to watch, since Sugar Momma was in California for a few days.

I was also able to uncover from the CNBC archives my audition tapes for the original Mad Money show.

In hindsight, I think my gimmick of throwing dixie cups was a little under the top. Besides, Cramer deserved it much more than me.

Happy Anniversary and thanks for the gift that keeps giving, Riverbed Technology.

Disclosure: I am long RVBD, ZSL, GMCR.