Cramer vs. Buffett: An ETF Perspective

Includes: BRK.A, DBA, GDX, IAK, IYT, UNG
by: Gary Gordon

It doesn't matter what type of information that you follow -- technicals, fundamentals, contrarian indicators. Yesterday, the markets seem content to flirt with the lows set in January.

Does this mean that stock markets will ultimately break down further? Conversely, is this the type of stage-setting precursor to a legitimate rally for equities?

Warren Buffett recently suggested that investors "wait it out." That fits with his philosophy of value hunting on long-term time horizons of 10+ years.

Buffett's company Berkshire (NYSE:BRK.A) has been scooping up beaten down financial companies as well as transportation leaders. If you've got the stomach, then, you might acquire shares in the Insurance Index Fund (NYSEARCA:IAK) and/or the Trasportation Index Fund (NYSEARCA:IYT).

In contrast, media mega-stars like Jim Cramer argue that the wealthiest people often have the luxury to say, " don't have to do anything." Perhaps that explains Jim's ever-changing mood on whether to "buy, buy, buy" or "sell, sell, sell."

Cramer's guidance changes with extraordinary frequency, swinging rapidly from bearishness to bullishness, then back to bearishness, then back to bullishness. He moved from extreme optimism at the start of 2008 on tech bellwethers like Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL), to extreme pessimism on all technology. He called "the bottom" on financials on 1/10/08, but seems to have backed off this "call" in more recent weeks.

Cramer likes what's hot right now, including agriculture, natural gas and gold. And that goes well with his mantra, "There's always a bull market somewhere, and I promise to try and find it for you."

You can gain exposure to current Cramer faves with the PowerShares DB Agriculture Fund (DBA), United States Natural Gas Fund (NYSEARCA:UNG) and the Gold Miners Index (NYSEARCA:GDX).

So who's right... Manic Jim or Super-Serene Warren? Both/Neither!

In essence, the difference between both is as old as the origins of stock markets; that is, there's the "value" approach that seeks bargains that may not prove worthy until the tortoise crosses the finish line. Then there's crazy, mad momentum, where one buys something because it's going up faster than all comers.

Granted, Cramer frequently talks about fundamentals. But he is more likely to change his tune depending on which way the prevailing momentum winds are blowing.

I view both men with respect for their accomplishments as well as each man's unique contributions to society. Yet I respectfully disagree with the idea that "value" is best or that "growth/momentum" is more crucial. (Let's face it... different styles look good at different times.)

Still, Cramer is right when he expresses skepticism of holding-n-hoping for a decade. Ask those who purchased the brightest stars of 2000 (Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), GE (NYSE:GE), Disney (NYSE:DIS)) whether they are pleased with having lost money over 8 years. (And I didn't even mention the Enrons, Worldcoms, KMarts or Countrywides that many chose to hold.)

In truth, one is best served by seeking out long-term investments. As long as your "value" or "growth/momentum" choice is working -- 10 years, 10 months, 10 weeks, 10 days -- you would keep it. When it is not working, as defined by your tolerance for downside risk, your greatest success will come from the wisdom of avoiding the big loss.