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.
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Reader Comments (Page 2 of 2)
2-10-2009 @ 10:41AM
Harry said...
I personnally don't see how anyone could seriously listen to these so called financial experts. The CEO's are consistantly juicing there books so normal market trends can't be trusted.
The majority of my friend were wiped out listening to the expert. Me, well I employ common sense. When businesses started stampiding to move overseas and people losing there jobs(consumers), the influx of ILLEGAL workers in this country causing citizens to lose there jobs, the price of homes hitting the ceiling, this country fighting to wars, one of which was a war of choice, and the Bush administration spending money like they didn't have to repay it, the multi-national companies dictating to the government policies, I sold every piece of stock I had at a premium when the market was at it peak. When the middle class started losing there jobs I knew the bubble was going to bust.
My friends thought I was crazy, I still have my original investment and a 1000% profit while the are broke.
Whatever Cramer and other experts said to do I did the opposite.
2-10-2009 @ 10:58AM
OliveMarieJones said...
I have tried to watch his show but I find the callers so annoying with all "booyah" crap that I have to change the channel. It's too much!!!
2-10-2009 @ 11:35AM
riprog said...
Follow Crammer long enough and he always contradicts himself. Occasionally he has something profound to say in his column but mostly it is gibberish. I watched his show once for a few minutes and found him so irritating I switched to the Golf channel, where ironcially ex Vice President Dan Quayle was on touting his 22 billion dollar hedge fun.
2-10-2009 @ 11:37AM
franco parilo said...
THROW DARTS AT THE NASDAQ PAGE OR GO GAMBLING IN VEGAS. EITHER WAY YOUR CHANCES ARE THE SAME AS DOING YOUR HOMEWORK.
2-10-2009 @ 11:51AM
MarkV777 said...
People's memories are short. No one ever calls Cramer on his late 2007 call that the Dow would close at 14,500. Thanks Jim ...
that advice cost me a lot of money !!
2-10-2009 @ 12:07PM
don said...
The show is a lot of hot air for fools who have nothing else to do.Who in their right mind needs instruction on how to lose money. An idiot can do that.
2-10-2009 @ 12:08PM
geocentre said...
The stock market is nothing but a big casino!
2-10-2009 @ 12:07PM
irishkids1234 said...
Some of the best minds in the financial arena took a beating this past year. The public was sold a lot of generalized info that worked most years. Last year was a disaster. The general public has no chance in something like that. The unfortunate thing is that they are all too shook up to get in now -- perhaps the best buying opportunity in their lifetime.
2-10-2009 @ 12:10PM
Bill said...
If you think there is any kind of profitable "invest & forget" strategy, then go with Cramer and the like gurus and experts. You'll lose faster or slower than other instituionals, but you WILL still lose. Investing is a business, and like any business requires your total attention to be very successful. Don't show up for doing business and you LOSE the business you're doing.
At the low valuation given the market today, there are a ton of well-heeled, superb companies trading at 8-12 PE, also having daily volitility of several %. Buy low, and sell high still works. Some big pharma stocks would have already made you >15% richer in 2009 alone, if you paid attention and moved when timely. Up 2% from your buy, then sell; down 2% from your last sell price, reinvest 102% and buy back; playing the spread @ 4% bandwidth while institutional market moves these stocks as much as 8% in a day; repeat as events make buy/sell opportunities become available.
That's my 2% opinion.
2-10-2009 @ 12:12PM
General said...
Wall Street and the people running it are corrupt. Just look at all the "smart" people who lost billions with Bernard Madoff. Now the SEC has agreed to a settlement that will keep him out of jail. Meanwhile, corporations send jobs overseas, where poor people work for a dollar a day, to make cheap products that American consumers buy to feed their vanity. Change is coming.
http://www.youtube.com/watch?v=eQ9vTJLIA8M&feature=channel _page
2-10-2009 @ 12:41PM
babyrett79 said...
Really? You're getting stock tips from some guy on a cable show?
2-10-2009 @ 12:48PM
Natalie said...
glad to see your catching on. This is NOT news, he has been doing just this for years. While channel surfuing he always bring a chuckle but I keep going...he a goof!
2-10-2009 @ 12:48PM
Tim said...
A broker will make you broker.
2-10-2009 @ 12:54PM
cmr2323cmr said...
Any guy who gives advice punctuated with a 'fart' sound effect, who then rings a cow bell, should not be taken too seriously. The constant movement of the camera makes me nauseous.
He reminds me of Howard Stern.
2-10-2009 @ 1:34PM
Dennis The Man said...
I remember when Cramer urged a buy on Schering-Plough and RIMM (when it was at 150). I felt very uncomfortable with these recommendations but I wanted to watch them as well. Both of them tanked. Especially RIMM, which is now trading at 45-50. Keep up the good work Cramer !
2-17-2009 @ 12:17AM
Bud Gallant said...
"Smartest minds?" LOL...
you've got to be kidding me... there's a reason it is called "MAD Money".
If you want stock tips that are not "insane", I suggest looking up Don Harrold on YouTube.
2-10-2009 @ 2:36PM
sb said...
Jim Cramers show should be called------HAD MONEY
2-10-2009 @ 2:41PM
KitCat said...
Beltway Greg ... I understood few of your references, but the definite and distinct authority with which you expressed yourself made me swoon.
Not flirting, just sayin'....
(That silly heiress would say, "That's hot!") lol