The lands of Greece may be an economic and financial basket-case nowadays, but they are also the site of origination of the multitude of parables of ancient Greek mythology. In a way, current economic and political conditions in Greece are a continuation of this moralistic tradition of the use of story-telling as a precautionary tale of how not to live one’s life or as a way to describe in memorable detail particular dangers that mortal man must watch out for lest he fall prey himself. By looking at what the Greek economy has become, and why it has become this way, a warning is sounded– come not this way, weary traveler!
But there are other lessons for the investor to be learned from Greece and her mythology. One recurring character in Greek mythology was the Siren, a dangerous creature in the form of a bird-woman who often traveled in a flock. The Sirens of Greek myth lived on an island in the sea, and with their beautiful, enchanting singing they would lure unwary sailors into the choppy waters along the coast, ultimately destroying the sailors’ ships on the treacherous rocks just below the surface and stranding them.
Ulysses, the hero of the Greek epic The Odyssey, spared himself a similar fate. Knowing that tragedy would befall himself and his men if they allowed themselves to be fooled by the songs of the Sirens, Ulysses had his men stuff their ears with wax while he himself was lashed tightly to the mast of their ship. In so doing, Ulysses and his men safely passed the island of the Sirens unscathed and were able to return home to Greece with their health and wealth in tact (well, alright, The Odyssey is a bit more complicated than that, but you get the picture, hopefully).
Today’s investor would be wise to heed the moral of Ulysses’ encounter with the Sirens because today’s investor faces islands of Sirens on the investment sea himself, the loudest and shrillist of which would probably have to be CNBC’s Jim Cramer, former hedge fund manager and host of the show Mad Money.
Cramer’s siren-call is something seemingly out of a legend itself– having completely blown it on his calls on the Tech Bubble (the greatest bubble of all time, until the Housing Bubble, and then the Credit Bubble and then who knows what’s next…), Cramer remains as unashamed, unapologetic and unreasonable as ever as this perma-bull par excellence who never saw a Fed rate-cut he didn’t like has gone on to deny ever more fundamentals and tout ever more marginal stocks in his quest to help the poor, benighted citizens of “Cramerica” get rich quick.
To the untrained ear, to the undisciplined mind and to the unsteeled heart, Cramer the Siren belts out some soothing, truly fantastical notes, no doubt. Who doesn’t want to make big bucks with minimal effort and even less thinking?
You should be buying things and accept that they’re overvalued, but accept that they’re going to keep going higher. I know that sounds irresponsible, but that’s how you make the money. Right now up is down, left is right, peace is war, all that 1984 stuff. But don’t laugh, ’cause this could very well mean the difference between closing out the year on a high note and getting crushed. All these things are driving the pros batty and making tons for amateurs, and it’s not over yet.
So what should you do now? Stop trying to out think it. Stop trying to be smarter than the market. Forget what you used to know; it’s not working right now. The bottom line: you have to recognize, like we do in Cramerica, that there are bull markets – oil, tech, alternative energy, fertilzer, ag. You gotta play ’em. So go buy some Transocean, go buy some Deere, go buy some Baidu. Just go do it – it’s ok. Go buy some Google. Buy a little. Stop worrying that everything’s too expensive at the moment. Welcome the rate cut, take a little off after it goes up, and thank me later. (Oct. 31, 2007)
Who wants to be the one sucker on the block who didn’t dive headfirst into a pile of easy money because he was being overly-cautious?
Do you hold your nose and buy ABK because of those rallies? I believe, oddly, yes. Now, there is simply no percentage in admitting you would ever recommend a worthless security. But this is a game of performance, not a game of valuation. There are plenty of genuinely worthless stocks that have gone up huge. There are tons of cases where gigantically worthless stocks — almost every dotcom circa 1999-2000 — gave you great returns. (Apr. 13, 2010)
Never mind when the “gigantically worthless stocks” Cramer serves up on a silver-platter of platitudes, such as Wachovia or Countrywide Financial, turn out to be… gigantically worthless stocks. This is Cramerica, where fundamentals don’t matter and neither does anything else besides continual Fed rate-cuts to juice the stock market ever higher. “Ladies and gentlemen, the bull is back” (Sep. 19, 2007) and you can thank Mr. Cramer later.
Now, Sirens have always proven pretty deadly and disastrous in their own right and for thousands of investors, Jim Cramer is no exception. And as badly addicted to easy credit and central banker-bailouts (“People have to realize the IMF is going to be successful. It’s going to save us from the total collapse of all these sovereign bonds.” May 13, 2010) as Cramer is, the thing that’s most nauseating and frustrating about him is the fact that the man is an unprincipled hypocrite. Yes, this Siren is exceedingly quick to change his tune, as Cramer explained on Monday, May 10th, 2010:
This morning several people asked me if my Dow 9,000 price target was still on because I did hint about that last week and the answer is: no.
See, remember what I said, I said, we could go back there if Trichet, the head of the European Central Bank, continued to do nothing to solve the euro’s problems and the disaster that is Greece. But that’s not what happened. I said I was negative because Trichet had left the building, remember I had said he had left the building– he came back in Friday night! Dragged by other countries’ ministers, particularly France and Germany.
He and his fellow European finance ministers did something, and not just anything. They did amazing things this weekend along with the EU and in coordination with our Fed Chairman Ben Bernanke and Treasury Secretary Geithner, they understand these problems we’re facing better than any other people in the world. And you know Ben Bernanke is the best central banker in the world, I said that on Friday.
Now, when that European contagion risk is taken off the table, what am I supposed to do, just stay negative? I can’t! When a plan that basically delivers all the things I was calling for and crying for on Thursday and Friday comes along, I can’t fight it and say, “Uh uh, nope, it’s not what I want, gotta stay negative, uh uh!” I can’t. The plan was exactly what I wanted.
In the words of the late, great economist and investor, maybe the best of both, John Maynard Keynes, who would have absolutely approved of Europe’s solution, and I quote, “When the facts change, I change my mind. What do you do, sir?”
Essentially, this right here is all you ever need to know about Jim Cramer and the rest of the flock of financial Sirens. When you hear soaring songs of adoring adulation for fiscally-insane $1-trillion bailouts and the proud heralding of the wishy-washy “wisdom” of the world’s number one economic terrorist, John Maynard Keynes… stuff your ears full of wax, watch out for rocks concealed just below the surface and be thankful that the stewards of your investment dollars in the Bearing Fund had the good sense to lash themselves to the mast long before.