Tuesday, October 18, 2005

Jim Cramer’s Definition of “Buy”

Did anyone else happen to see the bizarre segment of Jim Cramer’s “Mad Money” program last Thursday evening? Taking the theme of his show from the Jewish holiday of Yom Kippur on that day, he began to repent for quite a few of his recent “buy” recommendations.

But that wasn’t the bizarre part. He then went on to explain that when he screams “buy,” he does not, in fact, mean “buy.” He said that all he really means is that viewers must ‘do their homework,’ going on to detail just what that meant. Hours Googling company names, reading “every” article written about them, and buying transcripts of conference calls with analysts. He added that he was not any viewer’s ‘personal financial advisor.’

Wow! You could have fooled me! With that take no prisoners attitude toward buy and sell recommendations, Cramer sure seems to believe he is advising his viewing audience. Especially on those occasions when he promises to guide them in and out of specific stocks on a day-by-day basis, due to some unique market dynamics.

What I wonder now, though, is whether somebody has sued Cramer, and/or his producers, and the show, over some of his recommendations. Was this his attempt at some type of on-air disclaimer?

He makes a point of having run a hedge fund in prior years. How did that venture end up? Other "former" hedge fund managers who come to mind are Julian Robertson, Michael Steinhardt, and, more recently, Alberto Vilas. Unless I’m mistaken, none of them voluntarily retired until they had lost so much money for their customers that they had to close their funds. It doesn’t seem to be a business which many managers leave on account of too much success on their customers’ behalfs.
But, back to Mr. Cramer’s comments on Thursday evening. What came to mind upon hearing his sudden change in attitude was one of his programs a few months back. He was castigating some newspaper writers for criticizing his stock picks this summer. They alleged that his recommendations had performed poorly. Cramer, on the air, countered that the writers in question had missed the programs wherein he, Cramer, had recommended selling the positions.

And that is what piques my interest. If Mr. Cramer on one hand offered his program’s record of his buy and sell recommendation as a basis on which to judge his selections, how can he now allege that when he says “buy,” or, presumably, “sell,” on his program, he does not really mean that at all?

Not that I take him seriously. I am an equity portfolio manager with a completely different style than Cramer’s. When I tune in, it’s for entertainment. And perhaps to keep an ear open for the opinions of someone with whom I typically disagree, just to test my own reasoning.

His description of what he means by “buy,” the other night, however, reminded me that there is a big difference between making “lightning” fast recommendations on the air to viewers who call in, and actually managing a real portfolio with real positions. One seems to be for entertainment and ratings. The other is to make real money.

Watching Mr. Cramer last week brought back a memory from long ago. Does know what ever happened to a short-lived market guru from long ago- Joe Granville?

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