What's your opinion of Jim Cramer?

My dad watches Jim Cramer all the time and pretty much got involved in stocks because of him. So, I seem to get a Jim Cramer book every year for Christmas. I found his last book (Make Money by Watching TV) pretty piss poor - a thin cash in/ad for the TV show. It was literally a book on how to watch Mad Money. I started his new (now annual) book without expecting much, but it’s actually really good. It isn’t just about stocks and his TV show, it focuses a lot on the different kinds of investments and what you should put your money into if stocks isn’t your thing. There’s a lot of advice on what to look for in buying mutual funds, bonds, putting money into 401ks, IRAs, and of course stocks.

I’ve always found him to be a solid information source overall, but I understand there a lot of people on the internet who can’t stand him. What’s the problem with him? I don’t watch much of the TV show, but I’ve read his books and listened to a bit of the radio show and I like how he presents the dry stuff in a more entertaining way. Maybe he gets people too excited, but in the books he is very clear about the discipline required to invest in individual stocks. Maybe he dishes out a lot of advice on particular stocks that don’t pan out, but he also breaks down and explains how the stock market WORKS, which is always insightful on a general level.

Anyway, I recommend the new book, Stay Mad For Life, to anyone trying to learn more about their options for saving money.

The problem with Cramer is that is is insane. He just goes off sometimes like a mad man. However, his stock picks are usually pretty good and the ones he mentions always seem to get a small bump (even if it’s just for a day or two). At the same time, his picks rarely seem good long-term picks.

Yeah, he gets accused of manipulating the market because almost every stock he mentions gets a small bump for a few days.

But he has no personal wealth in the market. I think it’s inevitable that the stock is going to go up a bit after he talks about it with the size of the audience he reaches.

Are you sure he doesn’t have any stock holdings? Where did you hear that?

I’ve heard that he doesn’t too, but instead manages mutual funds which take advantage of his tips.

I have no idea if there is any basis for these accusations, its just what I’ve heard.

i made pretty good returns on his action alerts plus service, which he still runs on realmoney.com. even in down markets. and it was fun to read his daily evolving views on his holdings… the man is a genius - an eccentric, egotistical genius…

I’ve only ever watched this guy on the gym TVs with no sounds, but my first (and, to this point, only) impression is that he’s just a clown in a button-up shirt. He jumps around, uses props, gesticulates wildly, and gets really worked up. I thought he was just entertainment. I had no idea he was supposed to be taken seriously.

He mentions it about a hundred times in his books. He runs a mutual fund for charity, but even for that he is bound by all kind of rules.

“I’m hearing good things about the Bluth company.”

Do not confuse acting like a clown with being a clown.

The guy graduated magna cum laude from Harvard undergrad, has a law degree from Harvard law school, was a Goldman Sachs stock broker, had enough success there to form his own (successful) hedge fund, and is the majority owner of thestreet.com.

He’s the real deal.

Here’s an article summarizing one study of some of Cramer’s picks.

Which doesn’t mean he’s not a shill. Few of his stock picks perform well over the mid and longer term. He doesn’t pump bad stocks, but it’s not like he’s finding any gems out there.

An enterprising SEC investigator could probably bag a few big fish by finding out who’s been consistently buying Cramer stocks in the weeks or months leading up to a pick and them dumping them shortly after. My bet is it’s Cramer’s fund manager buddies.

Oh, and for a guy who rails against government intervention in the free market and the evil of rescuing industrial dinosaurs, he was sure on the financial front lines begging the government to bail out his “yeah, giving a $500k mortgage to a guy with bad credit is a good idea because we’ll jack up the interest rate in 1 year” buddies.

“Give me a fish and I will eat today. Teach me to fish and I will eat for a lifetime.”

Do you have evidence for that?

Phil linked it.


Well, that’s not the same one I read but basically the gist of it is that Cramer doesn’t do much better than the S&P.

Isn’t it pretty good to beat the S&P at all? It’s not like he’s saying his opinions are perfect and everybody should blindly dump their money into whatever he says. I don’t know exactly what they mean by “Stocks recommended by Cramer”, but if that includes his Lightning Round picks, it’s pretty useless. He’s got about 3 seconds there to decide if any random stock on the market is good or not. The Lightning Round is crap, but he also does a good job going into depth on a couple stocks every day, giving in-depth analysis on why the stock should or shouldn’t be bought. You don’t have to jump in a buy the stock because he says he likes it, but I think it’s at least valuable to hear out his thought process. He breaks it all down much better than anybody else I’ve seen.

Couldn’t be bothered with reading Seekingalpha’sa article?

Results of the study

When Engelberg and his colleagues tested the market data for each of the 246 Mad Money buy recommendations, they discovered the following consistent outcomes for Cramer’s stock picks:

  • significant short-term price increases (between 1.96% and 5.19%) after he recommended them, but those gains were nearly all reversed within 12 days after the episode;

  • large increases in trading volume and buy/sell imbalance over the short term (trading volume for small firms was 3 times larger than normal on the day of the recommendation, nearly 9 times normal on day 1 following the recommendation and 4.5 times normal on day 2); but

  • no significant change in bid/ask spreads – this suggests that the market makers and institutional investors did not regard Cramer’s blessing as improving the value of the stocks in question

Anyway, as I said above, you could potentially make money by buying the stocks he recommends and selling them in a day or two, although any returns you made could be offset by rather painful taxes and broker fees.

That article says nothing of the sort. In fact, it really isn’t for or against Cramer at all.

It points out the interesting phenomenon (to be expected under the efficient capital market hypothesis) that Cramer’s picks cause an immediate price spike (because so many people go out and buy based on it), that the price (naturally, given that there is no reason for the spike other than Cramer’s pick) historically returns to normal fairly shortly after the pick is made, and that arbitrageurs have recognized this and are shorting the stocks to take advantage of the price reduction that they know will occur. The efficient capital market hypothesis part of interest is that of course people know that arbitrageurs will short, so they are then acting on that information, balancing it out.

The article is about an interesting blip of activity that occurs because of Cramer’s pick, and has nothing to do one way or the other with the actual value of his picks.

If the gains are reversed after 12 days and there are no changes n the bid/ask spread, then couldn’t you assume that they are not great long-term buys, on average?

He does make good calls on occasion. I remember him being bullish on Amazon, RIMM and Apple early in the summer and those sticks really picked up, but I would say those are more the exception than the rule.