Cramer under fire

Robert Arber
0 Comments| October 17, 2008


It’s no mystery that Mad Money host and creator of TheStreet.com has made some spectacularly bad calls recently. One famous video clip of the vocal trader has him touting over and over that “Bear Stearns is fine!” days before the company was turned over to JPMorgan (NYSE: JPM, Stock Forum) at fire sale prices. 

More recently, Cramer identified Wachovia as one of very few banks that were well-positioned to weather the financial storm, and then it was announced that Wachovia would be acquired by Wells Fargo (NYSE: WFC, Stock Forum) – Citigroup (NYSE: C, Stock Forum) is also in the mix. Cramer later apologized on his show for his Wachovia call and admitted that he “let [investors] down.” 

Cramer has also stirred the pot by recommending that investors who need their money within the next five years ought to be selling equities and going to cash. Why this has stirred up debate is anybody’s guess – more “respectable” analysts recommend the same thing every day. “Cash is king,” anyone? 

The upshot is that Cramer is now in the never-fun and always-precarious position of being an easy target for competitors – namely, Fox Business Network, which is a rival broadcaster to CNBC, broadcaster of Cramer’s Mad Money show. According to reports, a spokeswoman at Fox called Cramer “irresponsible, sloppy, and wildly inaccurate” with his predictions. FBN went so far as to take out print ads in The Wall St. Journal and The New York Times, bashing Cramer and CNBC. 

It comes down to a fairly age old question. Just because a lot of people listen to you, does that mean you have to be more right when you express your opinion? Cramer is not the only one calling for lower lows in the stock market (check out a site called Stockhouse.com for a few radical opinions on that), but he’s one of the most-listened to financial opinion-givers in the world this side of Warren Buffett – and does the average Mad Money watcher who actually acts on Cramer’s advice know the Oracle of Omaha? 

Many financial analysts, advisors, newsletter writers, traders and more offer opinions (we hope with disclaimers) every day – they are never right all the time. But if no one is listening anyway, does it make a difference? People listen to Cramer. He has strong opinions, and he’s entitled to them; if people want to give him a platform to express those opinions and there is an audience that wants to listen, well then what’s the problem? 

If he is wrong more often than he is right, he will be cut loose. If he is wrong “bigger” than he is right, then he’ll be cut loose too. But if he is right more than he is wrong – isn’t that the best any of us can hope for from our financial resources? 

Disclosure: Author has never seen an episode of Mad Money nor has he any idea of what Jim Cramer’s good call / bad call ratio is. But he likes to give the benefit of the doubt.



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