Jim Cramer: The Good, the Bad, and the Ugly
Who is Jim Cramer?
You probably know Jim Cramer from seeing him on his popular CNBC stock picking television show, Mad Money. ‘Cramer’ has quickly ascended to a position as one of the poster boys of the financial world, achieving levels of popularity that very few have been able to on Wall Street. He has one of those can’t ignore personalities that you either love or hate. However, for this article, I’m going to try to give a balanced look at the man, and let the readers share their views through commenting.
The Good of Jim Cramer
- Charismatic Entertainer: First and foremost, Cramer can provide great entertainment value. He’s got a great sense of humor, is enthusiastic about his vice, has a ton of energy, no shame, and has some very intriguing takes.
- Wall Street Knowledge: Cramer does know quite a bit about happenings on Wall Street. Cramer claims to have returned an average of 24% after fees during his 14 years at the helm of the hedge fund Cramer Berkowitz. This record has been debated, as hedge funds do not have to publicly report their returns. If true, however, that is certainly an astounding record that very few have ever been able to match. At the very least, Cramer survived managing a hedge fund on Wall Street for 14 years in addition to being a broker at the prestigious Wall Street juggernaut, Goldman Sachs (GS). The man has more insider knowledge than just about anyone.
- Work Ethic: Without a doubt, Cramer is one of the hardest working entertainers on television. For starters, he records an hour long show for one hour a day just about every weekday (including holidays – have you noticed?). He also very actively promotes his show through media appearances and college tours. He runs a charitable trust fund (he’s supposedly worth more than $100 million). He started a publicly traded website, thestreet.com, has written numerous books, has a family, all of this on top of having an insane knowledge of even the most obscure stocks. Whether you think he’s a stock picking genius or not, it’s hard to argue that he hasn’t earned every dollar he’s made. How does he find time to sleep?
- Infectious Enthusiasm: If you’ve never had an interest in stocks or investing, Cramer has an enthusiasm about investing that can be quite infectious. I owe a lot of my personal initiative in increasing my investing knowledge to Cramer’s enthusiasm.
- Satisfies a Market: There is obviously a market out there for the ADD, testosterone packed, Sportscenter-like brand of stock picking that Cramer is selling. Mad Money’s longevity and his book sales speak for themselves.
The Bad of Jim Cramer
- Overboard Ego: Humble pie is a dessert that Cramer has never tasted. He quotes his investing track record in favorable light all too often. He’s also not the first to admit when he’s been wrong, which is quite often. Perhaps, it is his ego which allows him to spit out buy and sell recommendations at breakneck pace. I hope someone, somewhere, is keeping track of the returns of all of his buy/sell picks. I’d love to see the results.
- Hogs Get Slaughtered: Cramer needs to take a piece of advice out of his own favorite saying: bulls make money, bears make money, and hogs get slaughtered. Let’s take a look at Cramer’s books, which have come out at an increasingly feverish pace. His first book, Confessions of a Street Addict (2002), is a must read for anyone interested in the inner workings of Wall Street. His next four books were released in 2005, 2006, 2007, and again in 2007. Judging by my read of the first two and the reviews on the last two, his literature is becoming increasingly watered down. Maybe it’s time to stop being a hog, and work towards providing can’t-live-without valuable content to your loyal following, Jim.
- Homework? I think Not: Cramer preaches that if you’re going to take his recommendations that you do your homework beforehand. However, by the nature of his content the guy has a loyal following of somewhat unsavvy investors. When you’re in the position of an unsavvy investor and a stock picking ‘genius’ gives you a recommendation, why not just roll with it? He knows more than you do, right? If I’m not mistaken, this is the premise that the entire full service stock broker industry was built on.
The Ugly of Jim Cramer
- It’s the Lemmings, Man: Let’s face it, Cramer is a market mover. As soon as he pumps a stock on his show, there is a jump in the price of that stock (I’ve watched this happen live). Sometimes stocks jump as high as 6-7% in after hours trading right after a recommendation. If you are looking to trade into a stock that Cramer recommends, especially in regards to making an after hour trade, you will get burned. I’m sure that there are hundreds if not thousands of people out there just waiting to click the buy button with every one of his shows. There are pros out there that are going to do it faster than you.
- Manipulating Futures: If you haven’t seen the Jim Cramer interview on the Street.com regarding manipulating markets, I recommend it. Cramer openly admits to taking advantage of certain stocks in order to get better returns. He even refers to investors who hold onto solid stocks as ‘moron longs’. You have to appreciate his honesty. It’s his willingness (and everyone else in the hedge fund business) to play the game which is questionable.
Jim Cramer discussion:
- have you ever made or lost money based on a Cramer pick?
- do you think he’s genuine in caring about others making money or is he only interested in his own net worth?
- do you think he knows what he’s talking about, or is he just a talking head?
- what do you think of his books?