New Column: Monitoring the ‘Mad Money’ Madness

RealMoneyMy latest screed is now posted at TheStreet.com, titled New Column: Monitoring the ‘Mad Money’ Madness .

It looks at some of the more speculative elements of Jim Cramer’s Mad Money show, and discovers that for lots of investors traders, the show has become little more than a tout sheet.

Here’ an excerpt:

"I’ve been mulling over investor complacency for some time now, and Doug Kass’
concerns last month heightened my interest in this area.

In case you missed it, Kass penned a
piece
comparing Jim Cramer to 1980’s investment guru Joe Granville: "It is
the immediate, frantic and unquestioning manner in which investors/traders
respond to [Cramer’s] ideas (not the ideas themselves) that is reaching silly
proportions, and that has me unnerved, causing me to question whether the
response to "Mad Money" is a microcosm of a market that has driven fear and
doubt away and is ready for a fall," Kass wrote.

You can read Cramer’s response here,
but I wanted to see if Kass was correct. I was not disappointed in my hunt for
signs of speculative excess."

It seems there are some signs of specualtive excess appearing . . .


>

Source:
 Monitoring the ‘Mad Money’ Madness
RealMoney.com, 2/3/2006 12:24 PM EST
http://www.thestreet.com/_tsccom/comment/investing/10266337.html

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What's been said:

Discussions found on the web:
  1. David Silb commented on Feb 3

    Careful. Even at his age Kramer still looks like he can kick someone’s ass. Barry you might run into him in the halls at CNBC or MSNBC or FOXNEWS or ABC or NBC or CBS. so, be careful.

    In other words, “watch your back” man. Kramer has been known to beat the S*&t out of computer Monitors, and keyboards.

  2. royce commented on Feb 3

    I watched Cramer’s show for a while when it started because it was goofy and fun. But it really just was him giving a flash opinion on a bunch of stocks and why he liked them. It scared me when they started putting through callers who were like, “Jim, I made 200k on your pick on [forget the stock], so I want to know what you think of . . .”

    His confidence in his own opinions is infectious, particularly among people who don’t know much about the market.

  3. Josh commented on Feb 3

    I don’t know what is more frightening, the ebay bidders willing to pay hundreds for Jim Cramer paraphernalia or the fact that the cnbc stock ticker (formerly sponsored by Fidelity investments) is now sponsored by Gorrilla Trades.com.

  4. mh497 commented on Feb 3

    I agree, I watched the MadMoney special from Harvard a few nights ago and all that kept popping in my head was “Market Top”.

  5. c! Media commented on Feb 3

    Is it a coincidence that Barry’s piece comes out on the same day that Cramer’s pick RHEO loses 2/3 of its equity value/market cap?

    Good call, Jimmy. Ouch. Tanks 9 bills in one session!

    We don’t know about you, but we’re using Cramer’s picks as a CONTRARIAN indicator.

  6. Mark commented on Feb 3

    Its seems wrong to me that Cramer can use his show as a platform to promote his book and pump his own ego.

    He claims these big returns. Well, if I went on TV, pumped stocks up and then credited myself with the closing price I think my “picks” would do pretty well also.

    Cramer couldn’t even outperform the Nasdaq after taxes and fees as a hedge fund manager. Now he is on TV giving investment advice.

    He should dye the small amount of hair he has left red and place a red nose on. It would be far more appropriate.

  7. Barry Ritholtz commented on Feb 3

    A few qualifiers:

    1) I wrote the piece a few days ago, submitted it yesterday, and it went live today; RHEO was just coincidence.

    2) What I wanted to point out was not the show itself, but the reaction to it thats so over the top!

    3) 24% returns over 15 years is pretty damned good. Give the man his props.

    Lastly, Cramer’s net worth is a lot more than mine, so therefore — he won’t hit me! (Its not worth a half million dollars!)

  8. Mark commented on Feb 3

    24% per year is damn good, but he happened to manage his fund during the greatest bull market in US history. The problem with most fund managers is that they can’t outperform their corresponding index to save their lives.

    Cramers fund was basically a hyper active Nasdaq 100. 24% after short-term capital gains ( Cramer wasn’t holding for 12 months+) is about 16%. The Nasdaq returned 21% over the same period. Every single one of Cramer’s investors would have been better off buying an index fund…..

    Not knocking the guy, but praising him as a guru is hardly appropriate.

  9. joan commented on Feb 3

    Barry,
    Cramer is the same GURU
    who gave his “Action Alerts” subscribers CHTR !!!
    That was about 70% loss.
    I usually think you know what your writing about….
    Please don’t start kissing his royal CNBC A$$

  10. angryinch commented on Feb 3

    Cramer has admitted he has attention deficit disorder and it shows on his program.

    He has about a 15-second attention span and moves from one thought to another. Some are entertained, others are horrified. Either way, doesn’t matter to me.

    I’m sure a certain number of viewers believe he has some “inside” info and think he’s a good source of market insight. Too bad for them. His DNA is pure momentum trader or daytrader. That’s probably not true for most of his viewers.

    I imagine there are a few savvy traders who are using Cramer’s picks to get in and out of a stock quickly: wait for the invariable AH or at-the-open pump…then dump. I hope they’re making money. I assume, like everything else, this will work until it doesn’t.

    I don’t know that Cramer’s show is indicative of anything. I guess it’s a sign of the times—that our culture is inundated with get-rich-quick-itis. But that’s been true for a while. Every state has a big lottery. Casinos are springing up everywhere. Las Vegas is our fastest-growing city. Every channel has a poker show. Home flipping is/was all the rage. This is nothing new, it’s been brewing for quite some time.

    If folks want to take action on Cramer’s reco’s, go for it. It’s just another form of gambling, like betting on a coin flip.

    My only gripe with Cramer—aside from the fact that watching his show is like fingernails on a blackboard to me—is that he makes very little effort to communicate just how speculative (and dangerous) stock picking is.

    Take RHEO, for example. He mentioned—barely—that it was a “speculation.” What he didn’t mention was that the company’s entire stock price was predicated upon clinical trial approvals. If those approvals succeeded, the stock would probably sell off anyway. If they failed—as they did a week later—the stock would likely lose 50-80% of its value and would be dead money for at least a year or two.

    So reco’ing RHEO wasn’t a case of a stock that might dip a bit, it was a case of a stock which had a 50/50 chance of getting blown out of the water and taking all your money with it.

    That’s more than a “speculation”, that’s a coin flip.

    I appreciate Cramer’s enthusiasm for the market. But his show needs a warning label: watching this program could be extremely hazardous to your wallet.

    That said, sooner or later viewers will learn the hard way, especially if he comes up with a few more RHEO’s.

  11. B commented on Feb 3

    Barry, we realize you are friends with Cramer and given the outcry on here against his antics, most would realize you would defend him but 24% for 15 smells more of his bulls8it than audited facts. He managed a hedge fund for 15 years? Hmm…. Or are we including the time he was a Wall Street salesman?

    And I would guess the suspicious eye would believe his ability to generate personal income was more of a result of his ability to sell himself than generate returns. Either that or most everything I’ve read about him is an outright lie. That wouldn’t be the first time journalists wrote something based on a personal agenda of insecurity or other reasons.

    I’m sure he is alot of laughs and likely the life of the party-and one I’d enjoy yucking it up with as well-but I think he’s quite comparable to another self promoter by the name of Donald Trump. The Donald was the son of a wealthy man and has managed to take that inherited wealth into bankruptcy more than once as I recall. His name may be on alot of new developments going up but the majority of the money isn’t his anymore. He’s the marketing or sales glitz that drives the investment. Nothing wrong with that at all. We all should find our core competency. But, it’s self promotion and salesmanship that are his forte. I believe many think the same of Cramer because of his style……ie, If it walks like a duck……

  12. K commented on Feb 3

    Now days it seems everybody are making fun of JJC, but this is not right, especially for a guy who has been giving us a lot of laughs. I think Cramer is a true genius here, don’t laugh at me, Barry R is not even close to him.

    Yeah, this does look like a top, but don’t claim the victory too early, what the heck about NASDAQ 2600 call?

    Nobody can be right all the time, except…..

  13. Bud commented on Feb 3

    Cramers 24% returns were cumlative from the inception of his fund, not 24% annualized return. Big difference. You had to be in the hedge fund from the beginning to have those returns. He did 2% in 1998.

  14. sturmundrang commented on Feb 4

    I applaud Jim Cramer and his Dancing Cojones. He has created a cottage industry for himself and his wild-and-crazy-stockdude schtick in spite of an Internet-load of devastatingly embarrassing wrong-way market calls.

    Americans love to forgive and forget…or at least forget. Especially when they think they can make an easy buck. So Cramer keeps on trucking and dispensing thousands of stock pick a year figuring some of them will pan out sooner or later.

    Reminds me of the guy selling programs at the race track: “We’ve got all the winners right in here.”

    There’s no better guarantee of permanent employment than to be a stock market guru—however wrong for however long. People just can’t seem to get enough.

    Take James K Glassman. That guy continues to pop up everywhere banging his “Dow 36,000” drum. Just read an article where he’s saying “I love the Dow!” Says he holds individual positions in GE, INTC, MRK, etc.

    Now I know why he gives so many speeches and writes his books. He needs the money.

    Americans love optimists. You can never go wrong telling people that things are gonna be great. And sooner or later, no doubt, Glassman will be right. I hope he’s still alive to collect the accolades.

  15. chartjockey commented on Feb 4

    As someone who uses charts to determine entry/exit points in my trading and investing, I have a few gripes with Cramer especially as it relates to smaller-cap issues.

    Cramer’s legions frequently jump all over the dozens of stocks he mentions—particularly the ones he says “Booyah” to—in a concentrated period of time. It’s not unusual to see these stocks jump 10-20-30% in one day.

    I understand smaller-cap stocks are occasionally subject to sudden movements due to news, rumors or gamesmanship. But Cramer mentions so many companies—dozens a day, 5 days a week—that it’s not inconceivable that a couple thousand stocks a year will get Cramerized.

    These sudden movements render these charts unplayable, often for weeks or months until the pattern can calm down again. Only then can you determine if real buying (or selling) is coming into the name.

    I know that there have been market-moving touts before that have altered the short-term landscape of stocks (Granville and Marcial come to mind.) But those guys would mention a few stocks a week. Not dozens a day.

    Cramer’s touts are now magnified through chat boards and other Internet sites and the news of a stock getting “Cramered” spreads like a virus throughout the land.

    I suppose if you are quick to act, and very short-term in your view, you can potentially profit from these outsized moves. But if you are like me and are looking to make trades that can be held for weeks, months or longer, Cramerization is a bane.

    He makes far too many calls, spends far too little time explaining his rationale, doesn’t do nearly enough research, and has far too big an impact.

    He’s killing dozens of charts a week.

  16. jzeide commented on Feb 4

    Thought this worked along the same lines of the Cramer dolls on Ebay…

    Portrait inflation? “Greenspan” fetches $150,400

    By Tim Ahmann Fri Feb 3, 6:21 PM ET

    WASHINGTON (Reuters) – It’s not a Picasso, but for the price you’d have been able to buy one.

    An oil painting of newly retired
    Federal Reserve Chairman
    Alan Greenspan by 25-year-old artist Erin Crowe was auctioned on the online market eBay on Friday for $150,400.

    For that hefty sum, you could have snapped up an oil by celebrated American portrait painter John Singer Sargent at a New York auction in November or grabbed a Picasso sketch in May — and still had money left to burn.

    If nothing else, Crowe’s work is unique. It was created in one day under the glare of the public eye at business cable channel CNBC. And it wasn’t just any day — it was Greenspan’s 6,749th and final day in office.

    “It absolutely takes my breath away,” said Crowe, who began painting the iconic Fed chief in 2003 and has completed some 56 pictures of him in various poses.

    CNBC put the 24-by-30 inch painting, which captures a typically pensive expression on the central banker’s face, up for auction to raise money for Autism Speaks, an organization dedicated to research on the developmental disorder.

    “People often bid premiums for things if they think the money is going toward a good cause,” said eBay spokesman Hani Durzy. Asked if this was the reason for the lofty price, Durzy hedged. “I would have no idea,” he said. “I’m no art expert.”

    For Crowe, a Virginia native studying art at Goldsmiths College in London whose most expensive previous work sold for $12,000, the eBay auction and Greenspan’s departure marked the end of an era.

    “That’s my last Greenspan,” she said in a telephone interview. And, no, she doesn’t plan to paint new Fed chief Ben Bernanke, the former White House adviser who took office on Wednesday.

    “I’m a little nervous about saying what I want to do next because there are all these copycat Greenspan painters,” said Crowe, noting that a number of other Fed chief portraits popped up for sale on eBay this week. “If I say what I want to do next, I might flood the market.”

    The buyer could not be immediately identified. Greenspan declined to comment.

  17. c! commented on Feb 4

    chartjockey writes:

    ….I understand smaller-cap stocks are occasionally subject to sudden movements due to news, rumors or gamesmanship.

    Don’t forget that a majority of the stocks Cramer pumps have a very thin float — all he has to do is yell a ticker, and you’re bound to see a jump.

    For the most part, most people think Cramer is some sort of messiah.

    If everyone realized that 1/2 of his research comes from page 8 of Investors Business Daily, they’d take him off his pedestal.

  18. Phan commented on Feb 5

    Cramer is well informed, intelligent, and attaches appropriate warnings when a stock is speculative. The implication otherwise that I pick up is unfair. Nor is it fair to pick out a couple of mistakes and dwell on them (of course I didn’t buy any of the stocks mentioned, so I am not bothered by them).

    He is helpful two ways. First I understand what industries to concentrate on and which to reduce. His calls regarding industries rather than specific stocks have been excellent. Second, I get a good feel for which stock or stocks in a given industry have the best management.

    As Cramer points out over and over, one does one’s own homework. Regardless of his praise, I still have my own set of rules and don’t invest unless the stock meets them. Also, I would never buy something he mentions until at least a week has passed. I follow that rule for any news event on any stock, and a Cramer mention is an event.

    I have a sneaking feeling that much of the criticism comes from people who don’t like the general public hearing straight talk about given stocks, and I have to wonder why.

  19. Barry Ritholtz commented on Feb 5

    Its not the show, its not Cramer.
    Its not the show, its not Cramer.
    Its not the show, its not Cramer.

    IT IS THE REACTION TO PICKS THAT REFLECTS SPECULATIVE EXCESS, NOT CRAMER

    REACTION, NOT CRAMER
    REACTION, NOT CRAMER
    REACTION, NOT CRAMER

  20. The Personal Finance Weblog commented on Feb 7

    Thoughts on Jim Cramer

    I read a brief post by Barry Ritholtz today talking about TV Mad Money show host Jim Cramer. He mentions the speculative excesses that seem to be swirling around him. Here’ an excerpt that he quotes from the article:…

  21. The Personal Finance Weblog commented on Feb 7

    Thoughts on Jim Cramer

    I read a brief post by Barry Ritholtz today talking about TV Mad Money show host Jim Cramer. He mentions the speculative excesses that seem to be swirling around him. Here’ an excerpt that he quotes from the article:…

  22. The Personal Finance Weblog commented on Feb 7

    Thoughts on Jim Cramer

    I read a brief post by Barry Ritholtz today talking about TV Mad Money show host Jim Cramer. He mentions the speculative excesses that seem to be swirling around him. Here’ an excerpt that he quotes from the article:…

  23. mon commented on May 15

    — Daily Technical Review —
    HHH (Internet Holders)showed weakness on Friday as it gapped lower below thursday’s low of (53.50) and closed in the negative territory. So if it show weakness on Monday look for moving lower below Friday’s low of (52.94) but if it show strength look for moving higher above Friday’s high of (53.70). Note also Full Stochastics is keeping trading aggressively in oversold area.

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