9.19.2005

Crappy TV -- Jim Cramer's Mad Money -- Let's Turn It OFF!

One thing wrong with our consumer driven society is the crap on TV, including Jim Cramer's Mad Money and the Keeping up with the Jones' shows like, The Fabulous life of...on VH1.

Where I'm coming from
Our consumer driven society's current saving level is the lowest since the government began recording this number in 1959, while the national consumer credit outstanding revolving (credit card) debt is up to $806 billion as of June 2005. It is absolutely sickening to see facts such as these and then consider the consumer driven garbage that is on television. What about shows that could teach us the value of the basics of personal finance, not the buy/sell opinion of a TV personality?

Is it TV in general or just shows like this?
I'm sure we can all come up with TV shows that are not financially prudent to watch. I think we also all know that advertisements are the biggest offender! If instead of watching TV and advertisements, we spent our time reading books on our hobbies, personal finance, or even great literary works I think our world would be better off. With regards to TV, for now I'd like to focus on Mad Money, Jim Cramer and the ill effects of active trading and preaching to to a world-wide audience.

Me vs. Jim Cramer
Perhaps, Jim Cramer ran a hedge fund and has other "Wall Street" experience, but I really think it's bad TV for the general public to watch TV shows like Mad Money. According to what I've found, Cramer worked at Goldman Sachs and then formed Cramer & Co., a hedge fund in 1987. "After a stellar 2000, Mr. Cramer's fund finished up the year +36% vs. -11% for the S&P and -6% for the Dow Industries. Mr. Cramer decided it was time to get out and he now devotes all his attention to TheStreet.com" and his TV show on CNBC, Mad Money. Yes, he also did graduate Harvard and Harvard Law School. This brings me to some questions I would like to answer:

Does this validate giving stock advice to millions (sorry couldn't find a statistic that shows the audience size of Mad Money) with regards to what he believes and what is not necessarily prudent for that investors personal situation? Clearly NO, but Cramer isn't the only offender, think about the broad brush strokes of folks like Dave Ramsey. Ramsey fans don't murder me, I am merely stating that his responses to radio shows hardly dig deep enough to give prudent financial advice for that particular caller's financial situation. Ramsey does do the world some good by preaching to get rid of debt and spend less than you earn, so don't burn me at the stake. Heck, he even advocates turning off the TV and reading a book, which I definitely agree with. What I am merely pointing out is that Jim Cramer, nor Dave Ramsey, know the exact financial situation of the caller and shouldn't be giving some of the advice they give. Yes, Cramer says he is just giving advice to those that have side money and want to dabble in the market, but does he know if that person's portfolio is already overweighted in the sector that he is recommending a buy of a certain stock in that same sector?

What's Jim's portfolio record? If you take a gander over at Booyah Boy Audit one can see an unbiased record of Jim Cramer's Performance Scoreboard for the last month and a half. Has he beat the market?...yes (Cramer 2.11% vs. S&P500 -0.47%). Does he have a 70+ year record of annualized rates of return of 12.74% for Small Stocks (Small Cap) or 10.43% for Large Stocks (S&P 500)? NO

Should the typical investor be in and out of the market to "Back up the truck and buy" or "Sell, Sell, Sell" as Cramer's soundbites suggest? Let's rack up another NO for this one! One thing I don't think is reflected in Jim's return at the above link, is the commission charges for executed trades, or the short term capital gains one would have to incur on a winning pick. Yes, you would have to pay to buy the stock, then pay to sell the stock, and then pay the government if you made money on the stock. What a great arrangement, I wonder why Jim Cramer isn't recommending buying the stock of On-line brokerage firms who are making the money off of Jim's advice.

Is Jim Cramer doing any good for the general public? Hmm....I'll give this a MAYBE. The reason for the maybe is that while he is giving specific recommendations that I think would be crazy to act on alone, he does provide market insights and sometimes backs up his recommendations with an explanation. However, this should only be the beginning of one's research into investments in general or a specific investment (if they have determined that they want to dabble in individual stocks, which I don't agree with in the first place). Do you think a lot of viewers are doing anymore due diligence with regards to what Cramer is saying...or seeking the individual advice of an investment professional? I don't.

So, what is my point?
My basic point is this. America turn off your television, pick up a book (or read blogs like this one!), and learn. Is Jim Cramer the only offender of bad TV? No, but it was fun to highlight a show and drill down why it's bad for America to watch it.

On another note, if you would like to know my opinion on investing (not very valued, I know) here is the very, very simple version:

Spend less than you earn and pay off your debt if you have any.
If you don't have any debt, invest the remainder.
For short term goals, liquidity is your friend.
For long term goals such as retirement, buy passively managed, low fee ETFs or Mutual Funds.
Allocate/Diversify these funds in different asset classes according to your risk tolerance and time constraint for being in the market. It's been proven that that your Asset Allocation Policy provides 91.5% of a portfolio's return (Financial Analyst Journal, May-June 1991). Also, according to the William F. Sharpe (Stanford Univ.) Study of 1990, 90.9% of a portfolio's return is based on the style selection (read Asset Class), compared to only 9.1% coming from the security selection.
Rebalance your portfolio once a year.

Sound off and let me know what you think!

PS - If anyone wants to sign up for ActionAlerts PLUS by Jim Cramer, it's $349.95 a year to get emails of what and when he trades. Sorry, I don't endorse it so I won't provide a link to it!!!

10 Comments:

At 9/19/2005 11:38:00 AM, Anonymous Phil said...

Hi. Come by my site sometime. I can't promise you'll like it better than Jim's show... But hey, I do what I can.

 
At 9/19/2005 02:34:00 PM, Anonymous Anonymous said...

Wow! What a dumb post. With this one post you have moved out of my "to-read" list. Blaming a tv show host for America's low savings and high consumptions lifestyle. Isn't there an off button on your tv remote??

 
At 9/19/2005 03:14:00 PM, Blogger Financial Fruition said...

Sorry to offend, but I thought I was pretty clear, especially when I got to my point at the end of this post, which read:

"My basic point is this. America turn off your television, pick up a book (or read blogs like this one!), and learn. Is Jim Cramer the only offender of bad TV? No, but it was fun to highlight a show and drill down why it's bad for America to watch it."

Yes, there is an off button on my tv remote, but I don't think the general population of america (which has a low savings rate and high credit card debt)turns the tv off! Hence the reason I wrote the post.

 
At 9/20/2005 07:51:00 AM, Anonymous Anonymous said...

You didn't offend me so no need to apologize. I don't like the attitude of blaming people's problem on anyone but them. The people who buy stocks only based on Cramer's recommendation are the same kind who invest in Canadian penny stocks or buy lotteries. If it wasn't him it would be someone else and not necessarily on tv. The fact of life is there will always be stupid people and there will also be people who profit from this fact. I am not a big fan of his show but I find it a good starting point for my research as I get to know a little about a bunch of different companies in about an hour without getting bored to death.

 
At 9/26/2005 02:51:00 PM, Anonymous Jack said...

Jim Cramer is exactly what's wrong with financial media today. If Jim actually had a clue as to what he was talking about, do you really think he'd be on a tv show giving people all these money making ideas? No, he'd start a hedge fund and clear $100 million a year.

The guy is a hack, and what no-one ever seems to mention is that Cramer was investigated by the SEC when he was operating his fund... he was allegedly promoting stocks he owned to the readers of his financial columns and then dumping them. He was never charged, but would a legimate trader engage in this kind of hackneyed carney-like scheme?

Investing, like anything, is hard work... its fun if you enjoy finance but people who are looking for "fun, easy and exciting" investment ideas are being deluded by the Cramers of the world.

As for "anonymous" who likes Cramer's show because he/she gets to know about companies without being bored to death -- if researching and analyzing companies bores you, then you are in the wrong business. Better stop now and start investing in index funds.

 
At 9/26/2005 03:37:00 PM, Blogger Steve Mertz said...

I think Cramer's show is very helpful for many people. Some of his stock picks are good but he is better at identifying investment themes-you still need to do the homework. Comissions? $7 a trade at Scottrade. Short term gains? I hope I have a year where I have to pay $250,000 in additional taxes. I love to hold stocks, mutual funds, etf's for ltgains but most investors don't have a clue as to when to sell! Cramer makes people think about $$ which is Great!

 
At 10/30/2005 01:11:00 AM, Blogger John Derrig said...

Cramers show must be of interest to some and appreciated by many. Othewrwise it would not be aired three and sometimes four times a day. I like Cramer for some of his old school thinking on certain issues. We have to remember just becouse we as an individual do not like a particular show does not make it a bad show. It just means we dont't choose to want to watch the show and change the channel. You are showing signs of being self indulgent when we think along those lines(I don't like it or find fault with it so it must be no good.)not a good way to be.

 
At 11/30/2005 07:27:00 PM, Anonymous Anonymous said...

I think Mad Money is entertainment. Why, TV is entertainment. But as with many things on TV, not everyone is looking for the fruits of knowledge, but are rather looking to be entertained. Mad Money is a product designed to entertain more and educate less. Cramer himself says it's about your 'mad' money. He's been on radio for awhile doing the same. More entertainment, with some education. Do not be bitter, as it is harmless. Those who would blindly put money in anything would do it regardless of their motivation. You know cramer means well for everyone listening to him, but he does not have time in the sound bite driven media and entertainment world to save everyone from themselves.

 
At 1/06/2006 06:58:00 PM, Anonymous paul said...

Many individuals become jealous when they watch t.v. like mad money. Jim just making money so you can join him or go watch your favorite reality t.v. show. The participants in the reality shows have learned what cramer teaches. And now they are on some island with some hot babe.

 
At 1/10/2006 06:09:00 PM, Anonymous Clifford Cox said...

Cramer has an informative show that I find very entertaining. He has said many times that he acts as has he does to get people interested, while then stressing the concept of buy and homework. I would rather have my daughters watching his show and becoming interested in investing and the world of finance then watching many of the offerings presented by the networks encouraging sex, drugs, crime, ect. As for turning the TV off and reading a book, that is a good idea- but the two do not need to be mutually exclusive.

 

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