Monday, August 20, 2007

Mad Money=Bad Advice; BOO, NOT BOOYAH!!

From Baron's cover story "The Cramer Effect, and Defect: Shorting Cramer":

Jim Cramer is held out by CNBC as the guy who can help viewers make big money. But a comprehensive and careful review of his stock picks by Barron's finds that his picks haven't beaten the market. 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, a Website run by a retired stock analyst and loyal Cramer-watcher (see top chart above).

We also looked at a database of Cramer's Mad Money picks maintained by his Website, It covers only the past six months, but includes an astounding 3,458 stocks -- Buys mainly, punctuated by some Sells. These picks were flat to down in relation to the market. Count commissions and you would have been much better off in an index fund that simply tracks the market.

The bottom chart above shows how Cramer's stock picks surge an average of +2% following his recommendations, then remain flat for the next month. Subtracting the effects of a rising stock market, and Cramer's picks trail the overall market by quite a bit.

Read a previous post about Cramer here, with links to other posts about Cramer.

Recommendation: For investment purposes, buy and hold a stock index fund from Vanguard or Fidelity. Watch Cramer for entertainment purposes only.


At 8/20/2007 3:17 PM, Anonymous Anonymous said...

It's great what he's done to get people investing but it's nice that someone has pointed out he's not perfect.


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