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Faith Doesn't Cut It - Cramer's Mad Money (8/29/08)

Hmmm. It sure has been interesting watching the last two Mad Money shows. Clearly, Jim Cramer has gotten pressure from the 'powers that be' to try to explain himself to the public--as all of the recent negative web chatter about him seems to have his star suddenly waning. Afterall, without viewers, he loses his gig (just like other notable nutcases and recent TV failures such as Suze Orman). So the the word clearly came down to "suggest" that he explain himself and his motives to We the People.

Also clearly, I believe we will now start seeing a much more cautious JIm Cramer, when it comes to "telling" people to buy this or sell that. I think that the recent posting on You-tube of him doubling back on his stock and sector recommendations in June, was the critical mass for getting him (and his bosses) to see how out of control he really was. Hopefully he's learned that you can't outright go on the air and tell people directly to buy or sell something--and then turn around and say the equivalent of, "ooops, you screwed up, you trusted me. I'm just here having fun!" Maybe now people will understand he is really just on the air "to have fun," and that it's listen to him at their own risk. IMHO, that was nowhere near clear before Thursday and Friday. I think (in his manic mind) he thought people knew that. Instead, people have been using his word as "the expert" he claims to be, as the gospel-- and of course losing their shirts. However, I do think there is something important to consider when it comes to his stock picks (as it is with most money managers) which I would bet most people don't realize. It involves time frame. I believe the biggest mistake private investors make in general (present company included in the past) is thinking a stock will perform on command. As a former big time money manager, when someone like Cramer says 'buy it and expect a profit', they don't mean the next day. They don't even sometimes mean next week or next month. Because those guys have so much capital to play with, their time frames are yearly. So if it takes 6-10 months for them to hit their price target, even having the stock lose some ground for a time period, then so be it, they can wait. If you watch Fast Money, that example is shown time and time again. Private investors on the other hand, with much less capital, expect their returns within a week or two, maybe a month on the outside. When this doesn't happen, the private investor feels they've been screwed and that they have to cut their losses and move on. Sadly, and I used to know this all too well, it's ususally a day or two after that sell, that the stock finally moves (without you). Which btw, is exaclty what the big short players expect you to do. Their strategy is hold the stock down (and heading lower) as long as possible so you will become frustrated and sell off in a huff--then they cover up and reap the rewards. In the end, the big money manager makes his or her profit, while the private investor loses out. Again, IMHO, if there is anything a private investor needs to learn to be successful on Wall Street is that time is the key to success. If one does not have a decent time window in which to tie up funds, there will almost certain be heavy losses (or at least going nowhere fast).

To be sure, Jim Cramer has been less than objective on many occasions--i.e when it comes to SIRI. Among other instances, in his interview with Mel Karmazen, he chose to only focus on the GS opinion about the stock (which is the most negative and has the lowest price target--and we all know why he highlighted them only), when there are plenty of other analysts who think SIRI is undervalued RIGHT NOW--and have a BUY or OVERWEIGHT rating overall (including the S&P Analyst Research Notes and Lehman Brothers) with price targets of $2 or higher. Why wouldn't Jim Cramer mention them (that's a rhetorical question)? All Jim Cramer had to say to the millions of people hanging on his every word, was "why should I buy the stock when it says right here (as he flapped his report in his hand) it's going down to $1?" Come on Jim...that's a loser tactic!

So, Jim Cramer, if you happen to read this post, if you really want to 'help' your adoring public (which beside having fun, is the only other reason you say you are on the air), do them a favor and become more objective and responsible. Realize you have people hanging on your opinion, and acting on it). As you have now just said yourself, you come from a different world as a money manager (and worse from a hedge fund). You need to stop giving advice based on that existence, under the guise that you want to "expose the bad guys" and "tell people all the secrets that are hurting their financial performance as small investors." Stay focused on that small investing a few stocks at a time, with limited capital, requires a time investment, and tell people THAT. Keep reminding them that when they buy a position in a stock, there is a 97% probibility it will either go down first, or stagnate under short side pressure for an extended period of time. Tell them what they need to know as small investors, not as big time money managers with tons of capital with which to hold constant side cash positions (to capitalize on cost averaging and unforeseen haircuts). And certainly be WAY MORE OBJECTIVE and if you recommend or dislike a stock or sector, give BOTH SIDES OF THE STORY. You talk about homework. Obviously, either you don't do all of yours (which I don't believe), or you just choose not to reveal all the information a SMALL INVESTOR would need to know (which is more believable esp. when you know it would disrupt your friends from making their 'MAD' money hand over fist). Tell the good AND the bad Jim Cramer and then let the people make their decision. Say, "GS has a target of $1 on SIRI but then again, look, Lehman's opinion is OVERWEIGHT @ $2.10." It's fine to hammer the convertible note issues, but then turn right around and tell the people all the positives Citi has reported in the new combined company (and in owning the common stock). This was a great example of how you couldn't resist falling back into your 'alter persona' as a hedge shark. Your only real question to Mel was, "why shouldn't I (meaning his current shark friends) just keep shorting and hammering the stock to recoup my money in relation to the notes? There's no reason for me not to." If you want to help break the mold when it comes to your 'insider knowledge and former dirty practices', you can help the little guy the most by also revealing the other positive info the the money managers don't want known (about any stock or company). This is how how you can 'help people' the most--and keep your star on the rise.