The Cramer factor

Some consider him a lunatic, others, including myself, routinely tune into his show, "Mad Money," which airs three times daily each week on CNBC. Since its inception a year ago, "Mad Money" and its effusive host, Jim Cramer, have captivated viewers and investors with his trademark sporadic and ebullient rants promising to make one rich with his stock picks. Regardless of whether you are a Cramer fan or not, you have to give him credit for his enthusiasm and knack for stock picking.

Today, Cramer's recommendations spur investors and, in turn, have moved so many stocks that "the Cramer effect" is a phrase now widely used on Wall Street. In one scenario, Cramer recommended MT Medical Inc. and, soon after, the stock shot up 30%. However, analysts warn Cramer fanatics that just as easily as Cramer can pump up a stock, if one doesn't get out at the right time he/she can be in big trouble. "People making investment decisions based on nothing more than his say-so probably shouldn't be in the market," said Steven Thel, former general counsel for the U.S. Securities and Exchange Commission and a law professor at Fordham University.

Back in January, on Cramer's "Mad Money Lightening Round", MacWorld reported that Cramer was viewed screaming "Apple Computer is going way up! Apple is going to $100. Two thumbs up for Apple!" Evidently, Apple computer did rise up to 85 from about 43 making a ton of people money, however, in the ensuing months it dropped all the way back down to 53. As Greg Goldstein, president of Long Island-based broker-dealer Marquee Investment Capital, says, "all of sudden, if they don't sell fast enough, once the buying stops, they're dead." Last night, Cramer included Apple in his "Booyah Jim Cramers Mad Money Stock Picks for Tuesday August 1" and the stock is already up 1.6% today!

Matt Himler is a sophomore at Amherst College where he plans to major in economics and political science.