Updated: May 21
“ A passionate investment professional who is the target of many investment professionals.”
By: Allan R Kirby
Jim Cramer is a CNBC TV investment personality and host of the show “Mad Money”, a financial television program which focuses on investing advice through commentary, interviews and special segments on diversification and statistical analysis. His most popular segment of the show is called the “Lightning Round”, which gives viewers an opportunity to call and ask Cramer questions about specific stocks to determine if they should buy, hold or sell. Using an array of sound effects, jokes, interesting commentary and quotes Cramer then provides his advice in a few quick sentences.
“Not long after Mad Money aired in 2005 Joseph Nocera, a business columnist at The New York Times, once opined that the "people who are watching Mad Money and following Cramer's advice are fools."
It’s no surprise that the “Lightning Round” is not only the most popular segment of his show it’s also one of the most controversial. Cramer's advice and opinions seems to be the focus of many people who are critical of him and his show. These critics through meticulous research have found for example; that his Action Alerts Plus portfolio has underperformed the S&P 500 index over the years. Additionally these many people also question Cramer claims of his successful investment returns while at his hedge fund, which has never been subject to a public audit. Past interviews, market calls and articles have all been vetted to find fault with Cramer’s stock picks and opinions.
“Cramer’s audience through Mad Money and Action Alerts Plus are not big money managers or hedge funds, but individual investors seeking information to help them build wealth."
So does he help?
The toughest question is not about his highly energetic personality; it has to do more with his viewers, the average investor. Are the average retail investors benefiting from watching Mad Money or as his critics highlight, he is hurting them?
As a retail investor myself, I know that it’s ultimately left up to the individual investor to either follow Cramer’s recommendations on stocks or not. He may recommend a stock but he is not buying the stock for you, you have to decided. I fully agree that he has often changed his mind on particular stocks, something that is commonly highlighted by people who are critical of his calls. However keep in mind I also change my mind on stocks all the time when new information comes available so it’s not surprising he changes his mind. It's par for the course in the investment world.
Secondly learning the ins and outs of investing can be difficult and not to mention really boring at times but Cramer does it in an entertaining way. For example he helps viewers by providing an understanding of the technicals’ used to evaluate and identify stock opportunities. Cramer also takes the time to talk with executives of publicly traded companies as well as showing the basics of diversification through his segment “Am I diversified”.
Finally one has to admit he is not calm and collected like Warren Buffett, however it’s clear that it’s his high intense and boisterous character traits on the set that makes him successful and watchable on TV. Mad Money would not be around today if he did not have the personality that he has. But through executive interviews and discussions with industry experts Cramer provides good basic investing information to help individuals make decisions.
My take on Cramer:
To be brutally honest I never learned a single thing from any financial advisor I ever talked to. In fact I now know that many of my past advisors used their investment knowledge to take advantage of me in order to make money and receive their bonuses. This also extends to many members of my extended family as well. They have also learned over the hard way of how professionals in the investment community can take advantage of customers' limited investment knowledge.
“Financial services industry has lost credibility and trust with many consumers."
Today I loathe at the professionals who speak negatively about Cramer either on social media or on TV. Many Investment professionals only have themselves to blame for years of taking advantage of hard working people just looking to build enough to retire. It’s ironic Jim Cramer is held to such a high standard yet no such standard is given to the investment community miss managing 403(b) plans through high prices, confusing literature and taking advantage of customers.
“Cramer has owned up to his mistakes, Something I never got with my investment advisors."
I have learned that investing requires some humility and hard work, and I think Cramer works hard to get that across his show. It is clear, however, that some are less receptive to his message than others. I am not saying all in the investment community are unethical and bad, in fact most are likely very good at helping their customers. Unfortunately this has not been the case with my experiences as a client. I found that many of the investment professionals I dealt with to be incredibly arrogant, selfish with an air of superiority. Worse, they never owned up to mistakes I felt they made with my portfolio. For example, One day through some digging I found a bond fund within my portfolio that had a net gain of $30 over ten years. I think it was a return of about 1.1% . I was inundated with confusing industry jargon from two advisors as to why the return was not that bad. But I realized it was not only the fees but the types of bonds within the fund that were killing my return. Worse it took two days of constant phone calls and arguing to finally sell everything so I could invest the money myself.
“There is more to Cramer than stock picking, he does provide other information that can be useful to viewers; this is often ignored by many people who do not like his show or methods."
I eventually created my own website to provide insight and knowledge on money management because of my frustrations over the years with major banks and investment firms. Learning how to take control of my financial well-being took time, effort and a few mistakes however today I am on a sound footing. Mad Money may not be perfect to many however unlike the fund managers I dealt with for years, at least I learned something and have gain a better understanding of investing.
Does Cramer have a flaw?
Regardless of your feeling towards Jim Cramer, we can all agree he has clearly provided us with a unique way of being entrained and educated on the subject of investing. However if he has any flaws, I would say he is maybe too passionate about investing, but is that really bad? I don’t think so. Finally I do believe Jim Cramer does have one flaw but its not with his investment methods, it’s his constant support for the Philadelphia Eagles, sorry I am a Green Bay Packer fan.