Saturday, August 18, 2007

Cramer Exposed

Cramer is the cover story in Barron's this weekend. Vindicates all of what has been posted here and more. Some excerpts from the article follow.

A

Free access courtesy of Barrons:

Shorting Cramer

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When we asked Cramer and CNBC for their own records of Mad Money's stock-picking performance, they had more excuses than a Tour de France cyclist dodging a blood test.


Over two years, YourMoneyWatch has tracked 1,300 Mad Money picks. It's this tally that shows Cramer's stocks lagging behind the Dow and the S&P 500.


Then there's the day-after-pop phenomenon. Our analysis of Cramer's picks over the past two years, from YourMoneyWatch.com, showed that, on average, the stocks jumped 2% the day after he mentioned them. From there, they usually moved sideways or down for the following 30 trading days (see chart). This offered an opportunity to make money -- 5% to 30% a year -- by selling Cramer's selections short.

If Mad Money offers unconvincing proof of Cramer's long-term stock-picking prowess, so does his account of his hedge-fund activities. His memoir suggests that some of Cramer Berkowitz's profit came from clever trading. The $300 million fund might execute hundreds of trades a day, some of them a bit gimmicky. Cramer describes how they'd find a stock in which selling had petered out, then build a position. Next, they'd hunt up some bullish news on the company and feed it to sellside analysts and reporters. On the subsequent rise, Cramer could profit by selling out his position. "Buzz merchandising," his book calls it. Smart and effective, but definitely not in the fuddy-duddy style of Graham & Dodd.

Jim Cramer has defined himself as a financial journalist who gives you clear Buy and Sell recommendations to make you money. If he's serious about that mission, he or CNBC should publish a database that tracks all his picks from the show's launch date. Even cheerleaders need to be accountable.

6 comments:

Anonymous said...

Hi Allan,if his picks pop on average 2% the nexr day,is it possible to develop a trading system based on this? Now we know that most will gap up,but how about trading the stocks that gap up less than !% and then hold for a day?
Thanks,Ron

Allan said...

Ron, he can't be trusted, so a system based on anything he does is automatically at risk. There are more honest sharks out there to feed off of.

A

Anonymous said...

Ron:

Here in Greece we have an ancient saying:

A good tree is a good tree and cannot bear bad fruit. A bad tree is a bad tree and cannot bear good fruit.

We also have a "sound mind=sound body" concept as well.

Given the state of Mr. Cramer's body, how strong of a mind could he possibly have?


Let us take these lessons from our Hellenic forerunners, shall we not?

I'm sure the forum moderator should concur.

Leonidas
Southern Greece

Allan said...

Leonidas,

What time are the US markets open your local time? I can trade my system anywhere there is a high speed internet connection and it sounds so romantic, "Daytrading from Southern Greece"

Any beaches, beautiful women, good food?

Two out of three works for me.

A

Anonymous said...

Mr Harris:

We are at GMT +1. The East Coast of the US is at GMT-5. Depending upon what time zone you are in and what markets you trade, you can do the math.

In my region, southern Greece, data must come from satellites. In Athens, I believe you have various choices for that.

I assume your comments about women and beaches constitues some sort of jocularity.

The islands and beaches are the best and most beautiful in the world (Scorpios, Lesbos, etc.) and as for our women, they are headstrong and superb fighters.

They too are taught from an early age to make sword and shield and spear as much a part of their bodies as their beating hearts.

To go into our cuisine- simple but nourishing to the body. Don't look for something like what is available in France- a small piece of meat smothered in 10 different rich sauces. That is not our style.

Greece is the forerunner of modern European society but in many ways is stuck in its pre-AD past.

The climate is usually warm (mildly so) and so is the "comradeship" if you follow my drift.

We welcome your triumphant arrival to or nation! We are happy to have you! Enjoy! Live for the moment for tomorrow you may die!


Leonidas.
Southern Greece

Anonymous said...

Leonidas:

Thanks for the quick and insightful introduction to Southern Greece. I do like the food part --simple and nourishing.

Interesting thing about the saying:A good tree is a good tree and cannot bear bad fruit...

We have a similar saying in India and goes something like: A bad karma(fruit)can not be born of a good dharma (root of the tree).

Allan: Agree. "Daytrading from Southern Greece" does sound exotic! I am just wondering if you are really serious.

--Ramesh.