Rick Santelli Takes Down Jim Cramer

This video is too good to pass up, even if it is a bit over-produced. It is based on the amazingly rare event of someone on CNBC calling out Cramer. In this case it was Rick Santelli, probably the most rational and experienced regular commentator on CNBC.

Although it clearly points out what many already know; that Cramer is mostly a trend follower/extrapolator with very little accountability, it also points out something with bigger implications: nobody but nobody knows what the market is going to do.

The last two days are a prime example of this. Nobody but nobody would have predicted this week's market action after the disasters in overseas markets Monday. Invest based on Cramer's, or anyone else's short-term predictions at your own peril. Sure, Cramer does say some intelligent things, and does have some good educational pieces on his show (I have admittedly only seen it a few times, unable to avert my eyes from the bizarre spectacle). But then he follows it up with market timing, speculative garbage with no regard for valuation (at least he admits his disregard for valuation).

Back in his hedge fund days, Cramer was known as "Cramer from the Church of what's working now". Nothing has changed. "What's working now" is great until it isn't, and even the high priest doesn't know when that'll be - even if he says he does. Even valuation has little bearing on short-term price movements. Long-term though, it is the only thing that matters. Without valuation as a guide, you might as well take your IRA to Vegas. The odds of making money are probably better.

(Thanks to Whitney Tilson for the video link)

Comments

[shamus]

great stuff!! Santelli's the best!!

[VirtualOptics]

I agree with Rick's assessment. Jim's career before CNBC was made by making day-to-day decisions about what to buy and what to sell and when. So it is by his own tradition, a hedge fund mentality. So now Jim adds in the populace metric: so will Bernacki respond to Cramer's tyrades to keep the public happy? This certainly makes financial television much more interesting to watch than studgie old Bloomberg. I really like Santelli, too. He knows his stuff. Maybe there'll be a middle-weight fight between Santelli and Cramer in Las Vegas, or on a new challenge program, "The Last Prognosticator Standing." As far is the financial future, my take is the old Doris Day song, "Que Sera Sera".

[User 138049]

Be fair with Cramer, it was a bull market back then. Everyone was some where between 50 to 80 percent Cramer back then.

[ballsschweaty]

when will people realize that Cramer is snake oil salesman?

[calvino]

Hey Cramer!

Yea, what.

I'm going to make you look stupid, that's what.

[Chungst]

Take the high road ... Mr. Kenyon, did you really need to make this post???

On page 256 of "Seeking Widsom" by Bevelin: Loa-Tsu said "Respond intelligently even to unintelligent treatment." Be nice to people and if they are not nice to you -- don't be nasty -- just avoid them in the future.

[tkenyon]

Seeking Wisdom is a fantastic book - everyone should read it. I have had the opportunity to engage in email exchanges with Mr. Bevelin, and I agree with your passage. However, in this case, it has nothing to do with "being nice to me". As another comment said, the guy is really a snakeoil salesman. He has admitted to doing many unethical (if not illegal) things in his Goldman and fund days (see www.vestopia.com/Blogs... for links). His stock picking is questionable at best, and I fear he will lead many a small investor to ruin. Yet the guy holds himself out like he is the second coming. Here's some more wisdom: "The spouting whale gets harpooned".

[ringy]

Excellent post. Thanks. I was always confused between glimpses of wisdom hidden amongst irrational valuations and thought may be I am viewing Cramer wrong. Thank God I did not trade on his advice.

[borisb]

Crammer's simple objective is to pump up a media presence, public awareness, and internet traffic for the Street.com to which he owns about 40% of the company. self-interest indeed.

[VigilantWarrior]

Everyone puffs out their chest when their guesses happen to take place. But, when their guesses do not happen, they never grab your attention and say with the same authority, that I was wrong. I read decades ago that investing in the stock market is legalized gambling. At the end of the day, week, month, and year going forward, we all hope to have more pluses than minuses.

However, in fairness to all of us, isn't greed for more and more the single biggest driver for most people, otherwise money markets, CDs and savings accounts would have almost all of the money. Some call greed by its alternate name opportunity. The market swings do give one a rush, sometimes good and sometimes bad. The rush is what makes so many people take part in this type of risk taking. It also give many people something to talk about, to feel like a winner when they win and, to boost one's ego and so forth. So, as many before us have said, gamble only the amount that you can afford to lose. And that is my word for as long as you want it to be!

[Mudman]

It is all entertainment. Cramer is a master actor in the play of Wall Street. Having said that, can you really afford to ignore what he says?

[Missinabi]

Too much hipe in his comments...
If he wants tio teach as he claims, he should direct folks to read the spec sheets and learn what they tell you.
Trends are seen on charts that need to be understood. Nothing reverses in a day of news nor does your life so why expect the market?

[chriscql]

Funny, but a cheap shot. Cramer is always saying to DO YOUR OWN HOMEWORK. It's a great show for hearing about stocks you'd never have time to trip over yourself. Nobody forces me to watch the show. I've made a lot more watching him than I ever did before. (Up 20+% last year.) Why not do one of these on Kudlow? Now that would be hysterical.

[surgcare]

Santelli is one of or the best at this business . Cramer is a BOOB .

[Robe]

I watched it "live" and Santelli was right on. Although Cramer does provide many positives, and does sometimes take accountability in several different ways for wrong picks, he leans hard to building an image of being "ahead of the curve". He has tuned me in to some great opportunities, and shown himself to be too "seat of the pants" as well on many, many occasions. He is honest about being an entertainer, and has correctly sounded the alarm about an overly cautious Fed - while he simultaneously also suffers from ego-drive that gets in the way. One has to wonder, though, if the Fed had been ahead of the curve, if we would have turned the year 14,000 plus, rather than whimpering into 2008. Either way, with Jim's bombastic style, he of all people should be supportive of being held accountable for what he did and didn't say. Transparency is good.

[Afthought]

Hmm? Is Cramer behind this confit de canard? It smacks of his masochistic self-promotion. Having said that, I watch his show in the same way I watch Kudlow: Both present challenging exercises in logical analysis and remind me of why Fox and the *NBCs are bigger threats to the future of democracy that anything coming out of the caves of Pakistan/Afghanistan.

[Sandy44]

Mr Cramer is an excellent teacher. I've taped his shows to get the super-speed information that Mr Cramer gives without a commission.
He also admits when he's wrong, can you?
I've lost money at first because I didn't do my homework. After reading his books at least twice, you need to do this because after you make mistakes, he reminds you why when you read it the second time.
I'm now ahead of the curve and I'm loving it during the last week of pullbacks. Mr Cramer teaches me how to invest. I must decide which stock, why this stock and when to sell.
His show "introduces me" to possible stocks he likes. Thank you Mr Cramer.

[droskoph]

It's often quoted: "Most people would rather die than think, and they do." Lessen the severity and you have Cramerica - Most investors would rather be entertained than profitable, and they are.

[Bob B]

Knock it off.Cramer makes you sit up and research.

[abelardo]

great post..

I saw the exchange live. Cramer's "yeah what?" had the tone of someone getting busted. He was.
I am amazed that he doesn't know that his "buy, buy" crap wa all on digital..why deny it?
Because he is a boor.

[Will Rahal]

Cramer may know every stock in the universe but he still favors "what works now" and seem to lack a good view of the macro picture. I clearly remember in 2005 when he was recommending housing stocks b/c the P/E 's were low and the earnings growth were high (low PEG).
In his favor, the "what is working now" technique may result in big profits for a long enough time.

One can be right enough in this business to make huge amounts of money too! The trick is, that when you are wrong, you have to cut losses quickly.
By the way on Friday Jan 19, (after being bearish) I call for a ST bottom on the market.
See "ST Bottom for Jan 22, 2008"
wrahal.blogspot.com/20...
at wrahal.blogspot.com

[Will Rahal]

On Thursday I called for buying the dips.
On Friday I said sell the rallies.

Both calls generated huge profits for day traders.
The point is, again, one can not be right all the time but certainly enough times to make a lot of money.

To substantiate this, I recommend reading my site starting from Friday 19, and follow what happened in one of the most interesting weeks on Wall Street.

It will take you 3-4 minutes.
wrahal.blogspot.com

[sb-tiger]

Cramer is a smart guy - amazing knowledge of stocks and Wall Street, an entertaining show, educational is ways too.

However Cramer is a perma bull - "there is a bull market somewhere…". His MO is buy high sell higher - may work well in a bull market but a disaster in 'normal' markets. That strategy is strictly for nimble experienced traders - not for newbies - that his show is supposedly about. Touting stocks like Under Armor, Crox, Lulu, Sears (because Eddie Lampert is his friend) - this is utter madness. He is simply trying to hype the stocks. I am a value/conservative investor - all Cramer picks lost me money - HAL, VLO, JCP, ACAD, CVTX,... (I was quick to get out a long time ago with minimal damage). Don't tune to his show anymore.

Cramer is strictly about momentum (recommends IBD - momentum only). He states all this in his book - he was bullish on .com but was smart to get out in time, making a ton of money. Anyone who was bullish on .com (and is proud of it), a 7 Trillion massacre for common investor - is simply intellectually corrupt and represents the Wall Street greed.

His horsemen are dying not to mention the CROX's and the like.

Santelli always the voice of reason and common sense - extremely uncommon in the financial media - I love is views.

[sb-tiger]

Just to my above post - lot of his picks FWLT, MON, AAPL, ... etc have made a ton of money for people (even CROX did for a while). I did not pick any of these. My home work pointed me in a different direction.
So to be fair to Cramer (I have no love for him) - pick him if you like his style - which is all about momentum and is hence fraught with high risk. That is NOT my style.

[GKM]

Some great comments. I particularly appreciated Mr. Kenyon's follow on comment regarding Cramer's public acknowledgment of his manipulation of the markets. Did Cramer do that based out of sheer ignorance or arrogance, or perhaps disdain for the regulators?

I have to say I watch both Cramer and Kudlow's shows at the end of the day to lighten my mood. They're always worth a chuckle or two for their nonsequiturs. On a more cerebral level, maybe I should spend more time feeling sorry for those bamboozled by C & K, but then again caveat emptor and free advice is worth what you pay for it (and you usually pay a lot for it after the fact).

They unfortunately aren't the only ones and are simply the easiest to point the finger at on a day-to-day basis. If it wasn't C & K it would be Cheatum and Howe (since there is more money as a market pundit these days than chasing ambulances). They are a barometer of the psyche of the average investor after years upon years of bull markets. The complacency that has been instilled in that average investor will be soundly tested in the coming weeks and months, if not years.

The turning point for me in calling the top of the market was Google over $1000/share. Cramer was cheerleading that and upping the highest analyst projection. (How many Cramerican's 401k's are in the tank now thanks to that?) I knew my charts projecting the market turn were confirmed once nonsensical analysis like Cramer's started appearing. I see that others have caught on as well since, where previously stocks would jump after a Cramer recommendation, the smart money sells a Cramer recommendation in the after-market hours.

For the record, I'm short Cramer, Kudlow (and 90% of his guest list), and Denis Neil (whose ignorance is manifest and who should consider changing his name to Paulie Anna). I'm long Santelli, Greenberg, and Margaret Brenan (but for not entirely objective reasons). There are others you can be long and others you have to be short - but that's where the Cramer phrase "do you own homework" is perhaps the truest (and most legal) one ever spoken by that man.

[Ryan]

Love it! Thanks for sharing.

Regards,
Ryan Freund
freundinvesting.com

[saboth]

Good for Rick. Cramer is an Adam Henry and I have been made at him since he bad mouthed CROX and other shoe companies for his own gain.

[tkenyon]

I agree - an excellent discussion here - I think GKM summed it up very well. Kudlow used to really get on my nerves when he came on at five pm. Now I don't have to listen to him ramble on about the Goldilocks economy anymore since he's on at 7. He fiddled while the credit markets burned. He brought on guests who backed him up, and talked over anyone who disagreed.

I think there are a few folks out there who can make money, at least for a while, via momentum investing. One thing is for sure though: it requires lightning fast trading to get in and out of positions at the right time. By the time Cramer to comes on at 6pm, the momentum ship may well have sailed. Does anyone think Cramer took his eyes off his screens for even a minute in his fund days? Yet he is asking mom and pop investor to do just that (if only for 24 hours).

I know I'm not "smart" enough to know when to jump in and out of overpriced stocks. If you are, you should be running a big hedge fund and not reading this. If you're not, don't listen to Cramer. Invest in good companies at cheap prices for the long term.

[Duane Burger]

Thanks for getting the truth out about Cramer. He's all froth and no broth! Santelli is the most accurate and honest commentator along with Steve Leisman on CNBC. There's no posturing with them, just the facts. And no grandstanding, which I cannot stand from pundits.

[jturano7423]

YES CRAMER IS ENTERTAINING, EDUCATIONAL AT TIMES, BUT SOMETIMES HE MAKES YOU THINK WHY DOES HE TOUT CERTAIN STOCKS TO DEATH. HIS HEAD HAS SWELLED DO TO HIS SUCCESS WHICH IS ONLY NATURAL, BUT IT IS REFRESHING TO HAVE HEARD RICK SANTELLI CUT HIM DOWN TO SIZE TO SHOW THE HUMAN AND VULNERABILITY OF THE MAN. PERSONALLY I THINK HIS SHOW WILL BE CANCELLED BY THE END OF 2008 AND FAST MONEY HAS SUPERSEDED CRAMER'S SHOW ALREADY WITH FAIR ACCURATE CALLS AND PROBABLY BE THE DOMINANT FORCE SHOW OF CNBC WHEN IT COMES TO INVESTING.

[odenhoven]

INTERESTING THE BATTLE BETWEEN 2 HYPER INDIVIDUALS RICK AND JIM. I APPRECIATE BOTH ALTHOUGH I FIND BOTH VERY HARD TO WATCH. IF ONE LISTENS TO CRAMER HE OFFERS MANY IDEAS AND INSIGHTS. PROBABLY THE MAJORITY OF HIS STOCK PICKS ARE WINNERS AND ONE HAS TO REMEMBER IF A CEO IS RIGHT 60% OF THE TIME HE IS A HERO. CRAMER PROBABLY REACHES A VALUE OF BEING 60% RIGHT AND THAT SI MORE THEN THE AUTHOR CAN SAY.

[NormanLepoff, M.D.]

It is very easy to pick stocks when the market is going up. It is when it is going down or sideways that it is a challenge. Cramer failed miserably on both counts. Barrons was correct. An investor would do much better with an index fund than listening to Cramer. So beware!!!!

[Sandy44]

If you listen with both ears, Cramer does advise anyone who doesn't have the time to spend one hour a week per stock (no more than five and diversified) to be in a mutual fund; Use Mad Money and not retirement money; Decide when to buy and sell as part of the homework; Keep your ear and eyes open to any news that may change the stocks position. I think that about covers most of the complaints I've read so far.

[nofactor]

it's only entertainment
why are most analysts, commentators or however they like to call themselves, men ?
please more women giving stock recommendations

[Pudzilla76]

Sure Cramer is an entertainer but he is brilliant! He knows his s*** and has the right formula to make people sit up and listen. I can't think of anything more boring than watching bills, notes, bonds and their "points" up or down. Santelli needs to get out of that bond pit and get into some equities. He is taking the bond crap too serious and needs to lighten up.

[Pudzilla76]

As far as stock recommendations, the only woman I would listen to is Becky Quick. If she recommended buying stock in an ice plant in Antarctica, I would mortgage the house and say "What next?"