Besides his show Mad Money, Cramer is all over CNBC dispensing investment advice left and right. He's got to be out-performing other investment advisers and especially the market, right? Not really.
Tyson points out that Cramer's past hedge fund results (the basis for his claim of investment success) have never been audited or independently verified. Then Tyson starts his assault on Cramer's more-trackable public stock recommendations with the following:
There is a web site, yourmoneywatch.com, which, unbelievably, tracks all of the stock recommendations on Cramer's television show. The web site is operated by Michael McGown who has been tracking Cramer's television show picks since July, 2005. Over that time period, Cramer's picks, after being held accountable for trading fees, have performed worse than the broad market averages. His overall average with simply picking stocks that go up is pretty dismal. The most recent tally shows that out of more than 1500 stock recommendations, more than half have gone down!
A second source delivers similar, though more damaging, findings:
CXO found that Cramer's stock market predictions (monitored from 2000 onward) were worse than average and even worse than simply flipping a coin. Cramer's prognostications fared better than the market averages only 47 percent of the time. Regarding Cramer's predictions, CXO comments that, "His predictions sometimes swing dramatically from optimistic to pessimistic, and back again, over short periods. It is difficult to infer his guiding valuation theory, if he has one. We wonder whether he tends to be swayed by the arguments of forceful advocates with whom he most recently interacted...He seems more a stream of uncalibrated opinion than a stock market maven."
Finally, Tyson includes a link to a video where Cramer, "boldly proclaimed that the stock market lows hit in mid-July marked the end of the stock market's downturn!" We all know what's happened to the market since then — July was certainly not anywhere near the low point.
As with any advice, Tyson says it's "buyer beware" when listening to financial advisers who claim to have superior knowledge but no real proof of success. Media outlets build up investment "experts" (or "personalities" if you prefer) to generate ratings, period. If the advisers can do that, they're a success for TV. But that in no way means their advice will prove success for the viewer that applies it. Think about it this way, do you really want to take investment advice from an actor?
For our money, we'd go with Warren Buffet's advice and recommend index funds. Then again, our investment performance is yet to be verified as well. Time will tell.
The Worth of Jim Cramer's Advice [Eric Tyson]
Jim Cramer Deconstructed [CXO Advisory]
The buy and hold, even with index funds is no longer a viable option. Take someone getting his retirement going 10 years ago with an S&P index fund. 10 years later the value of the fund is now 85% it's original value (excluding dividend payouts which I don't have a number for)
Interesting links either way, thanks~
]]>It's just a matter of knowing what you are doing.
]]>what, you all actually still believe in independent auditors? The independent auditors don't...
]]>the "picks" he gives on tv are just trading ideas, people shouldnt just hit buy as soon as they see the ticker on cnbc while jim cramer hits the buy buy buy button! people have to be responsible for their own investments. its easy to get the information on stocks now with yahoo cnbc msn money and morning star giving free info. people should do their own fundamental and technical analysis and use his "picks" as a way of minimizing the amount of homework you have to do. he keeps recommending walmart, on my analysis its at a fair value already, sure good place to hide in this market but i made the decision not to buy
the day of buying a "hot tip" and expecting to sit on a pile of cash is nothing short of fantasy at this stage.
if you want to be entirely fair you should analyse what he has actually bought for his own portfolio the action alerts portfolio he does for charity. sure it might have a similarly bad return but its only fair to judge him on his own performance of what he actually bought and sold
]]>He is against buy and hold, most of his recommendations (with the exception of dividend plays he's been pushing during this downturn) are positions that he is recommending for 6-18 months AT THE MOST.
So taking picks that he made years ago and tracking their performance until now is disingenuous.
If you watch his show regularly you will notice that stocks he recommends today he may vehemently tell people to not buy 6 months from now. This is because market conditions change and cycles...well they cycle.
]]>@sleze69: That and rating Bluth as 'Don't Buy.'
]]>Cramer isn't an analyst, he's an entertainer.
]]>He just yells louder and acts like a crazed ape on camera...
]]>If you're tracking 1,500 individual stocks over the course of a year, especially this one, you're going to see a downward trend! The methodology employed by the "researcher" is pretty bad.
Interesting article none-the-less and it reinforces what Jim always tells people:
1. NEVER invest money you wouldn't spend in Vegas gambling.
2. If you aren't willing to spend at least 1 hour per week per stock you own researching it you should go with a brokerage firm.
Cramer is a naive idealist. He's not into dealing with market conditions the way they are *now*. He's hung up on how things *ought* to be.
]]>That being said, the fact he's (apparently) worse than a simple tracking index on a certain number of calls doesn't say he'll make you less money necessarily. It all depends on the relative size of gains and the amount invested, of course.
]]>Or just turn down the volume to zero and watch for a few minutes. It's quite entertaining.
]]>Sounds like proof established to me, then. Fred Rogers is one of my Heroes.
]]>Screw brokers.
]]>Toss Up with Susan B Anthony.
And it's really a Susan B Anthony dollar.
]]>Too bad the arc reactor never worked out...
]]>Sure, some of his picks continue to go up even after he's picked them, but the majority of the time, the money has already been made, and the people jumping in based on Cramer's bellowing are making the smart, rich investors more money on their way out.
]]>How dare you compare Billy Mays with the likes of this guy!
]]>Cramer was a hedgie whose advantage was that he could leverage large sums of cheap money from his deposits, allowing him to turn positions doing moderately to mildly well into substantial gains.
For instance, if you borrowed $100K based on $5K in collateral at 2% interest and got a 3% return on your investment, then your net profit is 1% of the $100K = $1K, or a 20% return on your original $5K.
So even if his picks as a hedge fund manager underperformed, he probably could still generate better-than-average returns, provided he had access to cheap money. The problem is, most of us don't have collateral that would allow us to leverage ourselves to the hilt like Cramer did.
]]>Folks, Cramer is just ENTERTAINMENT. I used to laugh at his antics while my wanna-be stock broker buddies would nod knowingly at the screen and take notes.
I remember being in Chicago once and he was on some big screen in a hotel or the airport and all of these powersuit guys waiting there were rivetted to the screen, but not one smile on their faces... I really wonder if they were in on the joke or were the actual punch line themselves.
People - especially rich ones - are often very stupid.
]]>It's basic finance-class stuff. If you're a billionaire you can stand a lot of risk, go ahead and play the game. If you're a working-class person with an IRA and a 401k, you don't want risk, you want your money to be safe until you need it and hopefully make a little in the process. If you can't afford to end up with nothing out of that investment, you've got no place picking stocks.
]]>If the inverse is true, then Mr. Rogers was the most reputable TV guy ever.
]]>It's not Cramer's fault, just an overly sensational press.
50% average on returns right now is nothing to be ashamed of.
]]>It's like those self help books on how to make millions of dollars. The actual content of those books is close to useless. The way to make millions of dollars is to write self help books on how to make millions of dollars.
]]>@Troy F.: I knew he was full of crap when he recommended selling stock in Stark Industries after they announced they were getting out of the weapons industry.
]]>Cramer's career can best be summarized as, Here lies a man who knows the price of everything*, but the value of nothing.
* Well, not really, but damn it, I'm on a roll here!
]]>I laugh at Billy Mays as much as the next guy, but I have to say that stuff does work as advertised.
]]>As for index funds, they're junk. You haven't performed in 10 years. The era of indexed buy-and-hold strategies is and has been over - you can't count on the general performance of US equities anymore and need to focus on best-of-breed baskets of stocks in a variety of industries.
]]>I don't think you can find any financial guru at the moment whose stock picks aren't currently tanking.
]]>@Front_Towards_Enemy: hahahaha! if you yell loud enough, they will come.
]]>Part of the problem is that people are looking for that one sweet ride to the top. The company that will multiply your money tenfold and keep going and not drop like a rock.
.
They do happen, but they're rare and they look like a lot of other promising companies that are never going to turn a profit.
.
In other words, it's like playing the lottery.
.
Smart investors look beyond returns to look at the costs of a stock and the costs of continual trading. They pick a good balance of funds, rebalance occasionally and realize that this crisis will pass and they'll have gotten more shares for their dollar.
Ow! It burns!
]]>I never even heard of this guy before Iron Man
]]>Ben, I'm not sure if you've ever cracked a financial textbook if you bolded this passage: Cramer's prognostications fared better than the market averages only 47 percent of the time.
That's pretty good, much better than expected for a guy that I badly dislike. It runs contrary to your headline. It's also limited - they should construct a portfolio of his recommendations and determine the MPT variables - alpha, beta, sharpe ratio, r-square, and std. deviation.
]]>In the past Cramer was a successful investor working for Goldman Sach's and even had his own hedge fund. He himself is a smart person, he just needs to make good TV.
]]>Get a broker, get a book, learn on the internet, something, anything except for blindly following 1 persons advice on TV.
]]>But out of fairness...has anyone paid any attention to what kind of market we're in right now and what the economy is doing? Saying - "half his stock picks have gone DOWN!" isn't a reasonable critic given the fact that nearly every stock out there recently has been performing poorly...
But the article main point is still valid...never take advice from someone who doesn't know what he's talking about...
]]>Jim Cramer is the Billy Mays of the financial World.
]]>LOL, this guy was saying to buy banks and homebuilders right at the peak. Thank god for guys like Cramer so I could buy puts so cheap on a guranteed win.
]]>He who yells the loudest has the most to hide.
]]>How could it? If it did, he'd be bailing out GM, Chrysler, and AIG on his own.
]]>The key takeaway is:
you should never believe a claimed return unless it has been independently audited
I'm no fan of Cramer, but Tyson says that Cramer does not beat the market after brokerage fees, but such a claim seems to be no more independently verifiable than any of Cramer's claims about himself.
So perhaps they are both full of crap.
]]>