Tuesday, March 17, 2009

Jim Cramer's Real Problem

I've seen a number of people making some variant of the claim that Jon Stewart is the only one brave enough to stand up to the financial journalists who helped get us into this mess.

This is purest poppycock. Jim Cramer had no influence over the twin manias that afflicted America in the last ten years: the madness of homebuyers for ever more expensive houses, and the madness of bankers for buying bonds based on those homes. Jim Cramer did not persuade the Asian savers to pour moronic amounts of capital into oversaturated American markets. He did not talk up MBS or CDOs to any level that could be vaguely said to have meaningfully increased the amount of leverage in the system. If you want a television host, or network, to blame all of our troubles on, you'd do better to cast your ire on Home and Garden Television, and Flip This House. They're the ones who told Americans, over and over and over and over, that it was possible to get rich by installing granite countertops.

Jim Cramer ran a show on trading. You can say it might have been nice if he'd run a show on financial regulatory theory, but there's no reason to think that he would be any good it it--the guy's a trader, not a regulator, not a crack investigator. The skills that make someone a good trader, like a short attention span and an appetite for risk, are not what makes someone good at economic theory or managing regulation. We lost precisely nothing, as a society, when he decided to tout stocks instead of take a dive into public policy.

No, neither Jim Cramer nor CNBC created this mess. They focus mostly on stocks, and though people tend to think of the stock markets as synonomous with the financial system, they just haven't had much to do with the current problems. And thank God, really. I'd rather not hand over the responsibility for the US financial system, or even my retirement account, to a guy who goes on camera to bite the heads off of plastic bulls.

The problem with Jim Cramer is that he encourages people to pursue a destructive activity, trading their own portfolios, when most economic research shows they'd be better off in an index fund.

~Megan McArdle,
The Atlantic

21 Comments:

At 3/17/2009 2:18 PM, Blogger Jody said...

The real problem is basic human nature. A flashy, screaming trader like Jim Cramer being filmed with a constantly-moving camera attracts a larger, younger audience - and more advertising dollars - than Louis Rukeyser's mild-mannered puns or Paul Kangas' "Best of good buys."

Paul who?

Exactly.

 
At 3/17/2009 2:55 PM, Anonymous The Meatriarchy said...

I miss Luis Rukeyser and I always forget to watch Paul Kangas. That show was awesome in the 90's but I hated when they changed their music.

 
At 3/17/2009 2:59 PM, Blogger ExtremeHobo said...

To be fair he does recommend index funds to those people who do not wish to invest more than 5 hours a week into actual stock research.

And yeah it does attract a younger audience of people like me.

 
At 3/17/2009 3:03 PM, Blogger Patrick said...

I couldn't disagree with the last bolded statement more. I feel that simply pouring money into mutual funds or index funds diluted any semblance of corporate accountability to shareholders that existed in the 90s and 00s. It's so ridiculous to me that people still think they can just blindly pour money into "the market" and expect it to be there when they need it. Investing is hard work, and I guarantee that 90% of the people who have a 401(k) couldn't tell you the first thing about what they actually own in that portfolio.

By the way, Cramer himself says you shouldn't invest in individual stocks if you can't spend the time to research and keep up with them.

 
At 3/17/2009 3:06 PM, Anonymous Anonymous said...

Jim Cramers real problem is that he works for a network that calls itslef "The place to turn to for financial advice" when really it doesn't investigate anything it "reports" and to a certain extent just blows smoke up all of our asses. It is no more the place to turn to for sound financial advice than a CEO of a company. They will tell you that thier company is doing great even when they are crapping out. That is what Cramer did for the longest time. He knew what he was saying was bullshit and he touted it as sound financial advice.

 
At 3/17/2009 3:16 PM, Blogger ExtremeHobo said...

Anon - I would have to say thats not entirely true. Most CEO's know that they are setting their stock up for a landslide loss if they put out bloated figures and don't meet them. The best stocks have low expectations and higher than expected results. The few that have blindsided us lately are paying for it in stock price.

 
At 3/17/2009 3:17 PM, Blogger Patrick said...

Anon,
Blaming Jim Cramer for the problems we have today is worse than the person who blamed McDonald's cause they didn't know that eating 3 Big Macs every day would make them fat. What happened to people's sense of caution and personal responsibility? Everywhere I look people are blaming this person or that organization. It all comes back to what my parents taught me long ago -- if you don't look out for yourself, no else will.

 
At 3/17/2009 3:53 PM, Anonymous Anonymous said...

The problem isn't Jim Cramer. It is that his network markets itself as a place for sound financial advice, when it isn't that. CNBC marketing its content in this way to the American people is dishonest. They do not investigate the financial sector so they should not tout themselves as the place to turn to for financial advice. If your financial advisor gave knowingly faulty financial advice they would be arrested for being a swindler, but Jim Cramer and CNBC do it on a national broadcast every night and are perfectly allowed to do so. That is dishonest and they should be held accountable.

 
At 3/17/2009 4:57 PM, Anonymous Anonymous said...

The main thrust of Stewart's outrage toward Cramer was that Cramer - and all the other media financial "experts" like him - dramatically failed to foresee the likelihood of the financial bubbles bursting and the resulting crash.

 
At 3/17/2009 5:05 PM, Blogger David said...

The media in general usually functions as a positive feedback loop, aka vicious circle. If tech stocks in 1999 or housing prices in 2007 are going up, then they will be hyped as going up forever. Ditto on the way down. This is sadly true of much of the financial media as well as the general media.

An awful lot of media players are individuals who are desperately interested in being involved in whatever is fashionable at the moment, and are hence the last people you can count on to provide balance and detachment.

 
At 3/17/2009 5:14 PM, Blogger bix1951 said...

right now CNBC is announcing as a fact that we are having a rally in a bear market.
Is it a fact or an opinion?
Whose opinion is it?

They mix up reporting and editorializing so you can't tell the difference. That is unethical journalism.

 
At 3/17/2009 5:28 PM, Blogger Patrick said...

Anon,

"The main thrust of Stewart's outrage toward Cramer was that Cramer - and all the other media financial "experts" like him - dramatically failed to foresee the likelihood of the financial bubbles bursting and the resulting crash."

I assume Mr. Stewart constantly rails against the weather(wo)man also, seeing how they also have difficulty doing their job of predicting weather patterns. Oh, and let's not forget the sports analysts that can't seem to predict who's going to be in the final four. I wouldn't get much sympathy if I went and bet all my savings that the Cards were going to win the superbowl because John Madden said so on a pregame show. I don't see this as any different.

To my knowledge there is a disclaimer that airs on Cramer's show saying that his advice is not a guarantee or something to that effect.

 
At 3/17/2009 5:40 PM, Blogger Patrick said...

Bix1951,
I'm sure they are reporting that we're having a rally, but I'll bet they aren't saying we're going to have a rally for 3 more days and that people should buy now and sell 2.5 days from now. If the general public can't tell the difference between what can and can't be accurately predicted and act accordingly then I'm at a loss. CNBC has a large group of contributors that have very different opinions, but they are just that, opinions. Do you want them to have a disclaimer to read every 5 minutes just so no one tunes in and thinks they are getting an inside track on the next big deal? Usually there are at least two diametrically opposed viewpoints being shared at any given time, which one is the opinion that is mis-leading editorializing?

 
At 3/17/2009 6:01 PM, Anonymous Michael Comeau said...

That's probably the most well-done defense of Cramer I've seen in some time. Good points on all the "housing bubble" tv shows - I remember scratching my head when Flip This House came out.

 
At 3/17/2009 10:43 PM, Anonymous Anonymous said...

I think John Stewart really didn't have a basis for his blast against Cramer and CNBC. He presented one sided view, and is just using it to make his own headlines.

The show is labelled Mad Money or Fast Money - which is geared for Traders not long term investors. John's mother is 75 and investing, where Cramer has mentioned if you need cash for the next 5 years take it out of the market.

Do not get me wrong, I think there are many things wrong with CNBC. I do not watch them often because there is so much noise - ex..watch their afternoon sessions or some episodes with Kudlow where you have "how many people can i fit on one screen" episodes, with 10 people just making no sense...but to blame them for the financial mess and to try to make them into a regulatory agency is like asking John Stewart to put on a apron and be Marth Stewart.

John's Stewart's defense is that he is a comedian..he needs to pick one..comedian or Mike Wallace?..because when he tries to do both, he makes it very unbalanced and distored

 
At 3/18/2009 12:33 AM, Blogger DaveinHackensack said...

These recent comments by Cramer seem to be what has set Jon Stewart and other folks on the left against him so vociferously:

I favored Obama over McCain because I thought Obama to be a middle-of-the-road Democrat, exactly the kind I have supported all my adult life, although I will admit to being far more left-wing during my teenage years and early 20s.


To be totally out of the closet, I actually embrace every part of Obama’s agenda, right down to the increase on personal taxes and the mortgage deduction. I am a fierce environmentalist who has donated multiple acres to the state of New Jersey to keep forever wild. I believe in cap and trade. I favor playing hardball with drug companies that hold up the U.S. government with me-too products.

But these are issues that we have no time for now, on the verge of a second Great Depression. This is an agenda that must be held back for better times. It is an agenda that at this moment is radical vs. what is called for. I am proud to have voted for the Obama who I thought understood the need to get us on the right path, and create jobs and wealth before taxing it and making moves that hurt job creation — certainly ones that will outweigh the meager number of jobs he’s creating.

Most important, I believe his agenda is crushing nest eggs around the nation in loud ways, like the decline in the averages, and in soft but dangerous ways, like in the annuities that can’t be paid and the insurance benefits that will be challenging to deliver on.

So I will fight the fight against that agenda. I will stand up for what I believe and for what I have always believed: Every person has a right to be rich in this country and I want to help them get there. And when they get there, if times are good, we can have them give back or pay higher taxes. Until they get there, I don’t want them shackled or scared or paralyzed. That’s what I see now.


As I noted elsewhere ("More Obama Supporters Concerned by the President's Recent Actions"), Warren Buffett and Stewart Taylor of National Journal have made similar criticisms of Obama recently. Cramer has been getting the heat, apparently, because he's a much easier target.

 
At 3/18/2009 12:35 AM, Blogger DaveinHackensack said...

And ExtremeHobo is correct that Cramer recommends index funds for investors who don't want to spend an hour per stock per week doing research.

 
At 3/18/2009 1:38 AM, Anonymous Anonymous said...

See how (in)accurate Jim Cramer's Mad Money recommendations for Google stock were... Cramer's stock calls shown visually on the chart over a two-year period -

http://www.stocktagger.com/2007/07/jim-cramer-google-inc-goog-track-record.html

 
At 3/18/2009 4:24 PM, Blogger marketdoc said...

No one has ever made any money by following the herd mentality. Remember when the mainstream media declared gold "dead" as an investment in the late 90s? Now they are telling us to buy all we can get. If these "financial networks" would report more facts and less opinions we would be better off.

 
At 3/18/2009 4:53 PM, Blogger ExtremeHobo said...

Well said Patrick

 
At 3/18/2009 5:46 PM, Blogger 1 said...

"Jim Cramer's Real Problem"

Cramer's real problem was that he didn't reach across the table and give that delusional blowhard Stewart a shot to the chops...

What a sniveling little bastard that clown Cramer turned out to be...

 

Post a Comment

Links to this post:

Create a Link

<< Home