A 1-In-100 Blogger: A Tribute to Jim Cramer's Mad Money

Tuesday, March 17, 2009

A Tribute to Jim Cramer's Mad Money

Happy Fourth Anniversary, Mad Money!

On the eve of Mad Money's fourth anniversary, it seems the press hasn't changed on its stance of attacking Jim Cramer. Some media enjoy a good story, whether true or false, and I suppose Jim Cramer makes for a great target. He's in the news a lot, and he isn't afraid to say how things are rather than how things should be. Moreover, Cramer is a market guru but who's susceptible to mistakes. After all, he is human! However, unlike many pundits in the media, Jim Cramer actually upholds self-accountability, as well holding others accountable. For myself personally, this is a quality trait my father taught me when I was growing up, placing great importance upon accountability. Holding this value closely to those I take advice from, it's probably one of several reasons why I appreciate Jim Cramer more than others in the media.

What's more interesting about the anti-Cramer enthusiasts, it's the fact that in order to devalue anything and everything he says, they must neglect Jim Cramer's Rules for Investing and Trading:
* Cramer's Twenty-five Rules for Investing

* Watch and Learn Cramer's Rules to the Game

* 20 Golden Rules for Traders

* Cramer's 20 Rules for Effective Trade Execution

* Cramer's 20 Rules To Stop Losing Money

Without these rules, the naysayers, the pundits, and the bashers will have you believe Jim Cramer is a loudmouthed buffoon ranting about this and that, without any background or knowledge on the subject at hand. They'll have you believe Cramer has no idea; when in fact, these misinterpretations cannot be further from the truth.

For Jim Cramer's Mad Money Fourth Anniversary, I have written a quality sourced time-line of all the great calls he has made, and how - if you actually watched and listened to Jim Cramer - his advice would have saved you a lot of money. In fact, Cramer would have made you a lot money.

Starting on August 3, 2007, before the stock market began spiraling down toward a recession, Jim Cramer can be heard in what is now known as the infamous 'Rant Heard Round the World.' The Mad Money host Jim Cramer made a passionate plea to Federal Reserve Chairman Ben Bernanke to consider cutting interest rates and, in turn, help the market and the people who are losing their jobs on Wall Street:

Jim Cramer's list of accolades doesn't end there either. On July 8, 2008, also before the financial meltdown began, he brought up the possibility of bank failures. In his article, 'Look At The Facts,' Cramer said, "The losses are increasing, the auction-rate preferreds are now biting, the mortgage implode-a-meter now measures how many home-builders are going under." Then on July 9, 2008, during a segment on Mad Money, he again pointed out the forthcoming Financial Collapse. Cramer described the problem lurking in the stock market: "stocks dropping without a sound." A frustrated Cramer pointed out, "These companies are failing not because of things said, but because of things not said -- none of the right people are saying the right things."

Fearing an imminent financial collapse -- and not a small one, but one on the scale of big money -- Cramer discussed his worry over Citigroup, Bank of America (with its dubious acquisition of the troubled Countrywide), WaMu and Wachovia (given its lack of CEO and sharp decline), the lack of news from Lehman (besides the unavoidable finger-pointing), the silence from Merrill, and more silence from Fannie Mae, and Freddie Mac the twin giants.
"Most frightening," Cramer said, "is the silence from those in the government who could take action but haven't. If silence means there is no plan, that's trouble for everyone."
Despite Cramer's warning to the oncoming disaster, the government's silence was shared by the media, and Cramer's silent rant went unnoticed.

Turns out silent Cramer was correct.

A few months later on September 15, 2008, the Meltdown occurred, loud and clear. The financial system rocked top Wall Street Institutions. To quote a few sources,
"In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer."

Others call this day, "Bloody Monday" The Dow Jones industrial average declined by 504 points (4.4%), its largest drop since September 17, 2001, when trading resumed after the 9/11 attacks. The financial slide proceeded unabated, leading to an 800 point decline of the Dow Jones in less than a week. Since the World's stock markets are interconnected "around the clock" through instant computer link-up, volatile trading on Wall Street immediately "spills over" into the European and Asian stock markets thereby rapidly permeating the entire financial system.

U.S. News & World Report in its Money & Business section concluded, "It's pretty big. It's pretty bad."

For those that listened to Cramer, viewers were likely heard saying, "We know. Jim Cramer told us this was coming."

Other media started to notice problems with the silent meltdown too, wondering why regular investors only heard "the fundamentals are sound," right up until they weren't. Brian Maloney pointed out on his blog, The Radio Equalizer, had you listened to Barney Frank, "the poster child for how we got into this mess," you would have lost all of your money.
"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
I suppose, to Frank's defense, he had every right to defend these Democrat-led agencies. Your money invested in these companies or not, it was at his benefit to claim nothing was wrong:

Where's the outrage on that? Why are all the fingers, instead, pointing directly at the one guy who actually tried warning investors - Jim Cramer? This doesn't make sense. And it shouldn't to you either. Especially after I have clarified all of the details to you.

It came to no surprise for those listening to Jim Cramer when on Hardball with Chris Matthews for September 19, 2008, Cramer suggested "It's not too late to be on the sideline." On this day the Dow was resting at an uneasy 11,388.

Furthering his own warning, Cramer spoke on the Today Show on October 6, 2008, suggesting to investors, "Whatever money you need for the next five years, please take it out of the stock market." The financial guru continued to warn that investments could lose 20 percent of their value:

By February 24, 2009 the Dow was down to 7,351. Since Jim Cramer's first warning to investors, the DOW plunged some 3,000 points.

If numbers and statistics don't measure how much this call would have saved you had you listened to Jim Cramer, here's a chart indicating the direction of the market, red lined from Jim Cramer's September and early October warning to where the stock market ended up:

This proves a monster saving to those who listened to Jim Cramer. But does he get any due praise? Nope. The pundits rant and rave that he's the culprit who should have warned them of this happening. Are they not listening?

It takes a lot of guts to suggest something like what Jim Cramer said on air, especially when the market is so vulnerable to every day comments. Yet Cramer comes through in clutch times to help you make money, or in this case, save a lot of money. Where are others pointing this stuff out? I guess it's much easier, after the fact if you lost money, to blame him rather than listen to what he's actually telling viewers. Sure, it might feel good to rip on someone who receives a lot of media attention, but it seems to me if you're looking for a direction to point your finger, go back and read more on Barney Frank.

Or better yet, blame Geithner for the market mess. Cramer criticized Timothy Geithner’s unwillingness to address the public with a clearly defined idea of how to save the financial markets. He asked, "What will happen to the banks? Will preferred shares be saved? What about bonds?" Instead of answering these questions, Geithner reserved his statements for just a few select reporters. How about helping the regular investor, Geithner? Where the heck is Tim Geithner, anyway?!

"His recklessness is shocking," Cramer said, and Geithner’s failure to act "will continue to be reflected in the averages."

Outrage after outrage, Cramer continued to call out Treasury Secretary Tim Geithner. Here's one on Geithner's decision to forsake Citigroup's preferred shareholders, which could have had disastrous consequences for banks across the board:

Where's the praise for Jim Cramer calling out Geithner?

Next, there's the Uptick Rule. Jon Stewart, unfortunately, he will have you believe that Jim Cramer is part of the Short Sellers reigning in against gains in the stock market, helping lose you money. Sure at one point in time, during Cramer's stint working at a Hedge Fund, he did take part in this activity; however, those days are long gone. Consider it a change of heart. Instead of helping Hedge Fund managers Short the market, Jim Cramer is helping to reveal their methods. Cramer routinely mentions on his show that he no longer shorts stocks.

On the March 20, 2008 episode of Mad Money, Cramer launched his campaign to reinstate the uptick rule, which was taken off the books in July 2007. The uptick rule was devised in the 1930s by Congress and the SEC following the "Great Crash" to prevent a repeat of it from ever occurring. They investigated the tactics used by market manipulators and installed the uptick rule -- a rule that "required short-sellers to wait until a buyer could be found to pay an uptick, meaning a higher price, before they could short a stock." Without this rule in place, Cramer said, "This kind of savagery has cost the average investor millions and millions of dollars."

On March 28, 2008 Jim Cramer further underscored the true scale of the absence of the uptick rule, pointing out how they harm today's stock market. He said reintroducing the short-selling uptick rule would help stabilize the banking sector:

As many of you know, these tactics Jim Cramer discussed were learned by him while working at a Hedge Fund, he knows how easy it is to manipulate stocks. He's done it before. However, in his eagerness to help others make money today, and because he knows the skeptical tactics used by Hedge Funds are wrong, he's trying to get everyone else to imagine what the uptick rule will do for the stock market if reinstated - how it will benefit your 401(K). He again discussed reintroducing the uptick rule during his November 21, 2008 episode of Mad Money, "Out with Cox, in with Uptick Rule."

What's intriguing and likely due to Cramer's insistence on bringing this rule back, on February 25, 2009, in a question-and-answer session with the House Financial Services committee, Bernanke said that the rule "may have had some benefit" during the current crisis. Luckily, Mary Schapiro, the new chief of the Securities and Exchange Commission, said that she's thinking about reinstating the rule.

In praise of Jim Cramer's efforts to help the every day investor - booyah!

Jim Cramer says it all. It doesn't end there. As I mentioned in a previous blog post, the day after Barack Obama was sworn in, Cramer created a stock index to track the new president’s progress. Going back to his values on accountability, he called it the Obama Accountability Index. He chose companies that operated in the very sectors that needed the most help, with which their performance would tell us how effective Obama had been and whether or not his plans to save the economy had worked.

Clearly shown on Obama's 30-day report card, the administration wasn't helping the economy in any way:

The index was down 35% since Jan. 21, the day it was created. The S&P 500 over that same period declined just 8%. So Obama, at least according to Cramer’s portfolio, wasn't doing too well.

More recently however, on March 6, 2009 Cramer offered his "worst-case scenario for the Dow Jones Industrial Average." Suggesting a low of 5,320, he mentioned this during a segment on Stop Trading!:

Disclaimer: Cramer didn't think the Dow would actually drop to 5,320. He just tried to calculate a worst-case scenario to find a potential bottom for the index.

Had you listened to him there, and had you listened to him earlier when he warned you to take money out of the stock market, you would have saved money before the market fall and you could have used his advice to reinvest back into the market at just the right time -- immediately before the rally began.

Ultimately, one must choose who they listen to for advice and who not to hear. As I mentioned previously, not all press is equal in value. There are pundits who refuse to hear what Jim Cramer has to say, instead taking every opportunity to thrash him when the opportunity deems fit. Even when Jim Cramer is telling viewers exactly what the Jon Stewart's are ranting about, they still don't listen. Contrarily, there are those who actually want to learn how to make money in the stock market -- Jim Cramer is there for you.

If this doesn't make more clear who the real pundits are, maybe you should keep listening to Barney Frank, he'll tell you which stocks are better to invest in. Right? Even worse, take advice from Jon Stewart, whose show tag line reads, "Comedy Central's INdecision Reduced-Fact Political News." Where facts are meaningless and ratings are essential, surely he will point you in the wrong direction at just the right time.

In the meantime, here's to another four more years of Mad Money -- Booyah Jim Cramer!


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Adam said...

LOVE Mad Money! Very entertaining, Jim Cramer is great! He does seem to have a unique ability to explain complicated market issues in a way that makes sense. He's made a lot a great calls.