This kind of emotional reaction is why markets capitulate, washing out the sellers in a spike down in sheer panic and desperation. Cramer I suspect would not make a good trader. He’d be the guy selling at the bottom.
Mag
St. Louis Fed President William Poole told Bloomberg News in an interview that only a calamity would justify an interest-rate cut.
He knew the future and we feel like he did back thenFunny how things pan out, seems Cramer wasnt even exaggerating in this interview
Hehehe Cramer will never live that episode down...ever!Wayne,
Do you know what this sentence in an article on marketWatch.com reminded me of?
Yep, you guessed it
"Bill Poole is a shame... He's shameful!"
LOLOLOL
Looks like Cramer got his wish
Shorting Cramer
THANKS TO HIS NIGHTLY CNBC SHOW Mad Money, Jim Cramer has become the chief cheerleader for the bull market, or what was the bull market until a few weeks ago. Last spring, he was giddily exhorting the Dow Jones Industrial Average toward 15,000, with no troubles in sight. Earlier this month, as the Dow tumbled in the direction of 13,000, he had an on-air meltdown, complete with screaming, sobs and predictions of financial doom. The clip quickly made the rounds on YouTube. Friday, after the Fed cut the discount rate, he said that the Dow's run to 14,500 had begun. With dramatic pronouncements like that, it's no wonder that more than 100,000 viewers tune in each weeknight for his antic mashup of sound effects, Streetwise advice and stock picks.
It's those stock picks that caught our attention. Cramer, by all accounts, had a stellar career as a hedge-fund manager. And he is held out by CNBC as the guy who can help viewers make big money. But a comprehensive and careful review of his stock picks by Barron's finds that his picks haven't beaten the market. Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%, according to a record of 1,300 of the CNBC star's Buy recommendations compiled by YourMoneyWatch.com, a Website run by a retired stock analyst and loyal Cramer-watcher.
We also looked at a database of Cramer's Mad Money picks maintained by his Website, TheStreet.com. It covers only the past six months, but includes an astounding 3,458 stocks -- Buys mainly, punctuated by some Sells. These picks were flat to down in relation to the market. Count commissions and you would have been much better off in an index fund that simply tracks the market.
When we asked Cramer and CNBC for their own records of Mad Money's stock-picking performance, they had more excuses than a Tour de France cyclist dodging a blood test. They complained that the list from YourMoneyWatch.com contained some stocks from the program's "Lightning Round," in which Cramer gives a quick analysis and a buy or sell decision on stocks phoned in live by viewers. These, they argued, shouldn't count in our tally.
CNBC officials also said that viewers should buy Cramer's picks a week after they're aired. They said that the show is mainly educational, and not just about stock-picking. In the end, they said we should focus only on the tiny universe of stock selections -- about 12 a week -- that Cramer researches the most. And we should do it only for the issues picked this year. CNBC analyzed these stocks, and said that if held for one month, they beat the S&P by 0.8%, or 1.7% after two months. They offered no results for the year-to-date.
We analyzed those stocks ourselves, and, as in all our calculations for this story, relied on Patrick Burns, a statistical-computing expert in London who consults for hedge funds and major investment firms.
It turns out that CNBC did its analysis incorrectly, and that the stocks beat the S&P by 0.4% in one month and 1.2% over two months. CNBC measured the stocks' performance against the average performance of the S&P year-to-date, instead of against the performance of the S&P from the date of each stock pick. Also, it included more than 100 recently recommended stocks that weren't held for the full one- or two-month holding period that CNBC claimed.
More important, the stocks fell short of the S&P by a statistically significant 2.2% through last week.
Our question is: How are viewers supposed to know that they should pay attention only to this subset of stock picks each week and ignore the thousands of others that Cramer makes on his show?
Then there's the day-after-pop phenomenon. Our analysis of Cramer's picks over the past two years, from YourMoneyWatch.com, showed that, on average, the stocks jumped 2% the day after he mentioned them. From there, they usually moved sideways or down for the following 30 trading days (see chart). This offered an opportunity to make money -- 5% to 30% a year -- by selling Cramer's selections short.
Cramer agrees that there is a shorting opportunity in the temporary effect he has on stocks -- a trade that he'd jump on if he still were at a hedge fund. "If you short the bump, you will do well," he said last week. "I've said it on the show many times."
There's no doubt that Cramer is trying diligently to make you money. His advice is generally smart, his knowledge of individual stocks amazingly detailed. But the credible evidence suggests that the telestockmeister's picks aren't beating the market. Did you really expect more from a call-in host who makes 7,000 stock picks a year?
THE 52-YEAR-OLD CRAMER HAS PROVEN HIMSELF a Renaissance man, if you don't mind applying that term to someone who goes on TV donning everything from Rasta wigs to football helmets, and, on a bad day, decapitates bobble-head dolls made in his own likeness. He struck it rich in the heyday of hedge funds, started a successful online media company and put up some of the best financial journalism in print and broadcast. Simultaneously.
He's written several books, including Confessions of a Street Addict, a wonderful memoir of his highs and lows as a trader and entrepreneur. It's peopled with the amazing Old Boy network that Cramer started building during his days as a student at Harvard: New York Gov. Eliot Spitzer, New Republic editor-in-chief Martin Peretz, Microsoft CEO Steve Ballmer. And, it turns out, the screaming, chair-throwing character that Cramer plays on TV is based on the real-life person he was, as he pursued success through any obstacle, including those of his own making. In the memoir, Cramer freely confesses to his screw-ups, as he continues to do on Mad Money. That self-flagellation makes him a lovable protagonist in a modern American success story.
After entering Wall Street as a Goldman Sachs broker, Cramer started his hedge fund in 1987. The market crashed, but he was in cash. His firm, Cramer Berkowitz, went on to rack up 24% annualized returns over the next decade or so, a performance for which Cramer generously shares credit with his former colleague, Jeff Berkowitz, and one of the firm's traders: his then-wife, Karen.
If Mad Money offers unconvincing proof of Cramer's long-term stock-picking prowess, so does his account of his hedge-fund activities. His memoir suggests that some of Cramer Berkowitz's profit came from clever trading. The $300 million fund might execute hundreds of trades a day, some of them a bit gimmicky. Cramer describes how they'd find a stock in which selling had petered out, then build a position. Next, they'd hunt up some bullish news on the company and feed it to sellside analysts and reporters. On the subsequent rise, Cramer could profit by selling out his position. "Buzz merchandising," his book calls it. Smart and effective, but definitely not in the fuddy-duddy style of Graham & Dodd.
In December, Cramer made a video for TheStreet.com describing the ways his hedge fund had used tricky trading techniques. He said hedge funds could pass negative rumors to "bozo" reporters. When the video circulated through Wall Street and caused an uproar. Cramer said that he'd only been talking hypothetically, to blow the whistle on the hedge-fund industry's bad actors.
OF COURSE, CRAMER DIDN'T NEED REPORTERS to get out the story on his stocks. Early on in his hedge-fund career, he pioneered a new kind of participant journalism through his frequent magazine columns and television appearances. Cramer talked to his audience from the playing field, instead of from the distant press box where other financial journalists sat.
In outlets like SmartMoney, he often discussed stocks that his fund owned. That was a good thing, if Cramer imparted valuable information and didn't secretly trade against his recommendations. Over the years, regulators have frisked Cramer's trading records for duplicity. They've always found him clean.
In 1996, Cramer launched TheStreet.com, his own financial-media vehicle. Three years later, the mania for dot-com stocks was epidemic. At their initial offering, shares of TheStreet.com's (ticker: TSCM) were priced at $19, but opened at $60. For a short while, Cramer's stake was worth upward of $250 million. Then the dot-com bubble burst, driving the stock below a dollar by 2001.
But the Website survived the shakeout, and the stock now is around $10. TheStreet.com has become a feisty competitor to other online financial news sites -- including those of Dow Jones (ticker: DJ), which publishes this magazine and is half-owner of Smart Money. Cramer has always been the site's main draw, but TheStreet.com has employed many other talented editors and reporters.
After retiring from his hedge fund in 2000, Cramer became a full-time journalist, writing for TheStreet.com and New York magazine. But he had the most fun on TV. For years, he'd pitched broadcasters, trying to get his own show. He finally succeeded with CNBC, the financial channel owned by the NBC Universal unit of General Electric (GE); first, with Kudlow & Cramer, and then, in March 2005, with Mad Money. (Dow Jones currently has an agreement to supply content to CNBC).
CNBC's evening schedule had been Desolation Row for years. Mad Money changed that, grabbing viewers with a combination of unequivocal stock picks and slapstick -- a concept that Cramer developed with the help of his nephew and co-writer Cliff Mason, as well as some talented CNBC producers. By cable-television standards, the show has been a hit, with its Nielsen ratings rising every year to a 2007 level of 134,000 homes -- many of them fairly affluent.
Something Cramer says may be useful after-all. Just do the opposite of what he says.
How did this bizarro world where nine-tenths of the companies I have followed as a stock picker for the last 20 years are losers and one-tenth are winners? To answer that question, you have to throw out all of the matrices and formulas and texts that existed before the Web. You have to throw them away because they can't make money for you anymore, and that is all that matters. We don't use price-to-earnings multiples anymore at Cramer Berkowitz. If we talk about price-to-book, we have already gone astray. If we use any of what Graham and Dodd teach us, we wouldn't have a dime under management.
So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own?
A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10. And my next 10 and my next 10 after. Only those companies are worth owning. The rest?
You can have them.
Thank you.
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