Back in August of 2007, Barron's Bill Alpert slammed Jim Cramer's stock-picking abilities in a cover story (subscription required). At the time, Alpert reported that "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."Now Alpert is back for more. In the latest issue of Barron's, he writes (subscription required) that "Cramer's recommendations underperform the market by most measures. From May to December of last year, for example, the market lost about 30%. Heeding Cramer's Buys and Sells would have added another five percentage points to that loss, according to our latest tally."
The article goes into fairly excruciating detail, looking at the data from a number of different perspective, all with the same result: Investors would do just as well throwing darts at the stock table. What gives? Part of the problem is that Cramer is simply giving way too many stock picks. Warren Buffett has has said that an investor can expect only a handful of good investment ideas in an entire lifetime: Cramer gives several every night. With all his media appearances, how could he possibly have time to learn enough about all these companies to have an edge over the market?
In the end, I think you'd have to be pretty dumb to buy or sell any stock based on what a television commentator says. But Cramer is one of the smartest minds in the financial markets, and his show is one of the only truly entertaining places to learn about Wall Street. If you don't take his manic antics too seriously, there's a lot to be learned from the show.











Reader Comments (Page 1 of 2)
2-09-2009 @ 1:13PM
Kent said...
It would be interesting to hear a retort from Jim Cramer about your article. Keep us posted.
2-09-2009 @ 2:07PM
Alan said...
Everything that we hear today regarding investments is nothing more then a ploy to take our money. It is in a way much larger then Madoffs ponzi scam. Nobody knows what is going to happen a minute from now less a year down the road. The
smartest thing to do is just to put what ever money one has into banks and get between 1% and 2%. At least you will not lose. You can bet that if you put money into stocks you are going to lose unless you hit lotto
2-09-2009 @ 6:23PM
Dan Barnett said...
But given that Barron's is a division of NewsCorp (owners of Fox Business), it does not surprise me at all to see them after Cramer & CNBC. Fox Business' ratings have sucked eggs and it is rapidly developing the nickname of Fox Porn.
2-09-2009 @ 7:49PM
Joan Nalband said...
Jim Cramer has no more idea of what stocks will do in the intermediate future than anyone else..it is all theatre.
J Nalband
2-09-2009 @ 7:44PM
Beltway Greg said...
Jim's a sweetheart, but as I've said many times the action unfolds from moment-to-moment directly in front of you on your computer screen. One thing that separates the winners from the losers is an absolutely adroit, down to the marrow beyond your DNA understanding of risk and an absolute head on the chopping block sense of realism. I was the biggest bull in the world last spring and then things started to run against me but I kept a few things in my back pocket. One was an absolute conviction that commodities were going to collapse. Of course, I didn't mean collapse like they have but, with all respect to the boys and girls at Cannacord there wasn't any way POT was going to $400. Moreover, there wasn't anyway oil was going to $250 a barrel. Also, coal stocks were ridiculous and SKF is still god's gift to the rational man. Read my lips, it is destined to return to $100.
Where do we go? Honestly, most people should be in ETFs. Sorry it's the truth. Give me people who are stupid but realistic over delusional eggheads any day of the week. Look at what happened at LTCM and look at what O'Neal, Prince, Thain, Fuld, etc. did to our banking system: smart experienced people who rode the horse straight over the cliff.
Markets are complex but don't get greedy. I kept telling my wife that every time Citi or UYG dropped under $3 I should buy a million shares. A fairly safe bet but too much risk. I rather make a nickel than lose a dime.
Markets have been and always will be full of what I like to call dislocations. At the moment commodities, specifically oil, is in just such a place. It might drop but it will be back to $70-80 a barrel probably by the end of 09 most definitely by 2010. I bought a bunch of that long triple oil garbage and I'll wait. TIN is another stock that will probably be back to $15-20 within 12-24 months. It ain't sexy, but it beats working.
So give Jimbo a break. He tries to demystify the markets and, truth be told, the mystery is really in the behavior of individuals. I don't agree with Buffett, I think there are tons of opportunities that are playing themselves out at any particular time.
Read Barton Biggs' two books and the book "Demon of our own Design."
2-10-2009 @ 6:41AM
Dudley Haas said...
Boo-jwan! I made millions in stocks this past year thanks to Cramer. He's my hero! The economy is better now than it's ever been and I think Bush done a pretty good job.
2-10-2009 @ 7:12AM
schatzej said...
Been studying and reading Jim Cramers books. I knew nothing except how to lose in IRA(thousands), I am in treasury bonds
now waiting on the bottom and pretending
to invest by using Jim's suggestions. I feel like I will make a lot of money when the market turns around and I owe it to
watching, listening(Ipod) and reading Jim's theory on investments and especially his advice on research.
Schatze
2-10-2009 @ 7:32AM
Goods said...
Cramer's an entertainer, not a guru. Pro traders take full advantage by fading his picks, knowing all too well that his loyal watchers are just waiting to be told what to do without having knowledge of how the markets really work.
Cramer's always been an underperformer. Quietly ignoring or reversing wrong calls and loudly touting the right ones.
He says he made 26% annually on his hedge fund. That was during the tech boom where some hedge funds were making 1000%.
Take his advice for the sideshow it is.
2-10-2009 @ 7:33AM
Viperpit said...
I started tracking a few of Cramer's recommendations myself. All I can say is thankfully I didn't actually invest. And this was even before the crash. When he recommends something, it will spike for a while. I suggest that if you really believe in one of his picks, wait a few weeks till the bubble passes after his recommendation, and then maybe. But buying it right away when he recommends it is about the same as buying something from those spam emails you get about the next big stock. And regarding the point about his show being entertaining, I found that to be the case for a little while, but it gets on my nerves now. And why are there never any callers talking about how much they lost by buying his recommendations. I remember him saying "I am a buyer of OI at this price" and I wonder if he ever follows his own advice. I suppose if he did, he'd be seeing below-market returns, but I guess he makes up for it by selling books to people who think he will make them rich.
2-10-2009 @ 7:59AM
Accidental Market Timer said...
Here's an even bigger mystery. Why should any of us total amateurs listen to any so-called experts? Most of my friends who invested with the experts have lost 40% of their portfolios. Some idiots like me "only" lost 20% being very conservative and have wound up with relatively the same amount of money as those who put their money with "experts." The experts did an outrageously poor job at monitoring their markets, let alone, doing any whistle blowing. I need a good mechanic more than I need any of these financial experts.
2-10-2009 @ 7:53AM
J R Moses said...
Cramer is great for educating investors and is a pretty good entertainer, but if you don't think he "pushes" his own stocks like the rest of the so called guru's, you have your head in the sand.
2-10-2009 @ 8:18AM
Joe said...
I bought three of his picks. One performed
well but the other two were dogs, eventually,
and I lost money.
I stopped watching him long ago. If I want
entertainment I am better off viewing
"Seinfeld" reruns.vAt least I don't lose money
watching Jerry and friends.
2-10-2009 @ 8:20AM
jd said...
Cramer is an idiot.
2-10-2009 @ 8:45AM
AFlyOnTheWall said...
GIVE US A BREAK...
HOW can anyone RESPONSIBLY evaluate the "Net +/- %" change in value of following Cramer's advice OR ramdomly choosing stocks -- without specifying that the SAME $ amount or # of shares would be bought/sold on EACH & EVERY pick?
BUT - NEITHER Cramer NOR anyone applying his strategies and/or using his 'picks' INVESTS EQUALLY IN EVERY STOCK! So, HOW can a responsible reporter report that Cramer was 'dissed' without also reporting on the methods used to 'evaluate' his advice?
Apparently, the SAME POOR JOUNALISTIC QUALITY was used to report the PARTISAN opinions about the CAUSES of the current economic crisis, and WHO is 'responsible.'
2-10-2009 @ 8:47AM
J W said...
Cramer and Berkowitz, Co. made money shorting stocks, not going long. Cramer and his wife Katherine were sanctioned by the SEC for spreading rumors about companies. Katherine worked for a LARGE investment house while Jimbo worked his hedge fund. Once the rumor floated around Katherine's house, the rumor grew and the Cramer's made money. As to Jimbo's personal fortune, it was made by him selling his 50% to Berkowitz and not trading stocks
2-10-2009 @ 9:09AM
algonquinj.calhoun said...
jim cramer is the reason why i am $200,000 in the hole...just days before the Big Swoon last year, he was touting GE, Alcoa, FCX and Goldman Sachs at record highs...most of my Cramer suggestions are down 50-75%...and at this rate, it will take a very long time to get my money back.
2-10-2009 @ 9:50AM
geoff groedner said...
It's amazing how alike are the two TV Cramers. Jim has his money, so any rant will keep him on the air until the next rating book. As long as he is on the same channel with Keith Olbermann, he'll be okay. Olbermann's ratings are two points lower than the Bubonic Plague, and sinking fast.
2-10-2009 @ 10:03AM
baseballdude1210 said...
I personally lost all respect for Cramer's advice when he adamently told people on his show not to sell their Bear Sterns stock less than a week before the company went belly-up.
2-10-2009 @ 10:16AM
ossurworld said...
Ask Matt Lauer what he thinks of this so-called expert. He excoriated one of their own MSNBC people, and now Cramer refuses to appear with Lauer. He is handled now by Viera.
2-10-2009 @ 10:21AM
r bearfield said...
the guy isn't a stock expert, he is on tv to be an entertainer, NOTHING ELSE.
anybody that takes him seriously as an expert is as ignorant as he is.