Category: Jim Cramer

The Siren song of CNBC’s Jim Cramer

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.

Jim Cramer: Still drinking the Kool-Aid

Don’t let the press confuse you. We are almost at Dow 9,400 because things are better than you think, and still improving by the day.
~ Jim Cramer, CNBC’s Mad Money, August 13, 2009

Note: Thankfully, the best contrary indicator of the past 3 years is still gracing us with his rants. The bear market in stocks has no chance at bottoming until this carnival barker is shown the door. In fact, before this secular bear is over CNBC will likely either be shut down or spun off from its bankrupt parent company, GE.

Got momentum?

2007 should go down as the tale of two markets. The credit bubble has burst, with banks (BKX) -17.9%, brokers (XBD) -14.5%, housing (HGX) -36.2%, and subprime lenders practically getting wiped out. Meanwhile, momentum investing is on fire, with technology (NDX) +21.2%, energy (XOI) +24.5%, emerging markets (EEM) +40.2%, and China (FXI) +69.9%.

Investor’s Business Daily is the bible of the mo-mo crowd. Its heat seeking index, the IBD 100, is +46.8% year-to-date. Component companies of the index break down as follows:

  • basic materials: 14
  • energy: 10
  • industrials: 12
  • technology: 28
  • shipping: 2
  • emerging markets (other sectors): 16

Fully 82 of the 100 stocks in the IBD 100 are plays on the global economic boom theme. And 25 are members of the “BRIC” countries (Brazil, Russia, India, China).

Such an abundance of winning bets and conviction on the part of speculators is classic of bubble tops. Combined with the death of the credit canary, in our opinion, the curtain is about to come down on Jim Cramer and his momentum apostles.

Cramer on the public investor

People are getting back in to the greatest game on earth. — Jim Cramer, CNBC‘s “Mad Money,” October 18, 2007

Tech’s Four Horseman getting carried away

Bull markets typically die when speculators crowd into a narrow area, taking a small group of adored stocks on a parabolic joyride. The Teflon theme these days seems to be “global economic boom” (coupled with a weak dollar) and the clear winners are what Jim Cramer and his followers are calling the “Four Horsemen:” Google, Amazon.com, Apple, and Research in Motion.

The Nasdaq tape pre-market this morning was practically all GOOG, AMZN, AAPL, RIMM and GRMN (GPS co. Garmin). For the deep-pocketed corporate buyer, these companies can be had for $445.2 billion. That purchases $21.7 billion in annual gross profit (20.5x) and $3.55 billion in annual R&D spending (125.3x).

Or the acquisitive type might consider 5 larger, though still world-class companies with enviable competitive positions: Cisco Systems, Oracle, Qualcomm, Yahoo! and eBay. The price tag of $446.9 billion comes with $52.1 billion in gross profit (8.6x) and $10.1 billion in R&D (44.4x). Neither group is exactly cheap by historical standards, though the former is in nosebleed territory reminiscent of the valuations on tech companies during Tech Bubble 1.0 in the year 2000.

Barron’s throws cold water on Cramerica

In this weekend’s Barron’s, Bill Alpert wrote a not-so-flattering accounting of Jim Cramer’s stock picks during his Mad Money reign:


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.

Predictably, Cramer disputes the findings:


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.

If commonsense were in ample supply, the consuming public would take Cramer with a healthy grain of salt:

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?

As we seem to recall, quite a few people believed the Beardstown Ladies had consistently beaten the market… until it was revealed in 1998 that they didn’t know how to properly calculate their returns.

If “there’s a sucker born every minute,” obstetricians having been working overtime the past decade.

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