Street Slam
5/28/98
James J. Cramer
Co-founder, TheStreet.com
"(I joined TheStreet.com because of James Cramer's) passion, his brilliance and his
willingness to put his money where his talkaholic mouth is…"
Herb Greenberg, columnist for TheStreet.com, SF Examiner 4/27/98.
Hey Herb --you wouldn't feel that way because he signs your paycheck now, would you??
Sorry – but I had to use that. The first time I read it, I was laughing so hard I could hardly
breathe.
Yes, my focus today is Jim Cramer. Allow me to use his language for awhile here.
I don't know about you, but Jimmy Cramer bugs the living crap out of me.
No, it's not because he takes controversial views on stocks, the markets and its many
players. No, it's not because of his oversized ego (although that does come in a close
second).
It is because he utilizes the forum he has created to blatantly tout and advocate
securities positions from which he will directly benefit.
"What's wrong with that", you are probably asking, "we all like to get good stock ideas".
Well, legally nothing, as long as this "activity" is properly disclosed to those that are
listening, reading or whatever. This is not a new phenomenon, by any stretch of the
imagination. Jimmy Cramer just happens to be the loudest at the moment.
Let's do a quick demonstration. Think about who wins the most when Jimmy Cramer
starts pounding the table on a stock or group of stocks on CNBC and the stocks react
favorably to his "opinions". That's right. He does. He's making a heck of a lot more
money than you (because he has more of it) and his securities prices are much lower
than yours ever will be. This is his motivation in being "helpful", in case you are
wondering.
Get what I am talking about here? Unfortunately, this practice happens all of the time, and
certainly not just by Jimmy. The "disclosure" guidelines that are offered by the various
securities industry regulators to the investing public are very weak, because the rules
surrounding proper notification are so vague. So let's use another, broader based
example, to clarify this point.
For someone that has never been a part of the securities industry, reading that a
brokerage firm has managed a secondary or initial public stock offering for a client
company doesn't seem like that big of a deal. It certainly does not intuitively lead to the
question of whether or not the "analyst" that is publishing his/her opinions on the
company is doing so in response to garnering revenue from that company, or to allow
his/her brokerage firm an opportunity to capture more business in the future.
Put yourself in senior management's shoes of any reasonably sized company. Who are
you going to give your corporate finance business to? A brokerage firm that has a "buy"
rating on your stock or one that has a "sell" rating?
And people say that being a senior executive is a tough job.
But back to Jimmy. In case you are wondering, Jimmy Cramer is one of the reasons I
developed this site. Go back to Disclosure and Who Is the Fabulous Market Babe,
where my motivations and the basis for my writing these columns, are captured. It could
not be any clearer.
Now that Jimmy's "motivations" are out of the way, let's touch upon his trading abilities,
shall we? Despite "having over 20 years of trading experience", Jimmy seems to
frequently make basic trading errors. Such as being wedded to one's positions. (For
example, holding on to a long stock position, despite the position going against you in a
big way). Take DIS for example. I remember Jimmy commenting last week (in his usual
ballistic manner) that he should have lightened up on DIS 10+ points ago but hung on
because he liked the stock so much.
Guess what. I believe his investors wish he would have too.
Every trader makes mistakes. Every single day, no doubt about it. But this is a basic,
basic rule. When a stock starts breaking meaningfully after a huge run, you either pick a
spot to load up the truck and average down (so your investors aren't so severely
affected), lighten up your position (so your investor's aren't so severely affected), or blow
out the position (so your investor aren't so severely effected). Get the theme here?
You DON"T just do nothing and wait it out, just hoping it will all go away. It never does.
Let's use another example. It involves DELL; another one of Jimmy's disclosed holdings.
When Jimmy appeared on CNBC (the morning following the Dell earnings report, no
less), he was bitching about the stock trading down in Instinet on low volume post the
quarter being reported. Why did he make such a stink about it and take the time to
"educate us"? Because he was losing money.
Correct me if I am wrong, but I do believe that stocks are allowed to trade at the best
price available for that point in time.
But, unfortunately for Jimmy, his charismatic personality has not been enough to combat
the change in sentiment in the techs. (Shameless promo: read Stock of the Day - Dell
5/20/98 and Market Mood 5/26/98 for more information). In case you are wondering,
Jimmy has lost a little more money in DELL since then. (Picture my tears if you must).
I think you are getting the basic gist of what I am saying here. If someone is taking the
time to "help" you out in making a financial decision, 99.9999999999999999999% of
the time they have a vested interest in doing so. This is why it is so important that you
take the time to do your own research and educate yourself, so that you can properly
distinguish between what is fluff and what is not.
I hope I am not droning on here, but this is just the tip of the iceberg. Expect to see future
columns on this subject, as this type of behavior will no doubt continue.
As for a final stab, Jimmy, I really don't give a ##@@!!** what you do all day long. I've
been there, after all. But I do know why you do it.
Is it because your sole goal is to let others see what really happens in a trading room and
"educate" us?
I don't think so.
Anyone who had traded stocks (professionally or not) knows there is no bigger rush than
being king of the trade and winning. Only when you beat your chest about it, as Jimmy
frequently does, your vision gets colored.
What am I talking about?
Despite Jimmy's ballyhoo to the contrary, his "inside" view of the financial world is
certainly not the only one. You just don't hear about it a lot from the buy side, because the
fund companies with integrity hardly ever speak to the press, try to tout their positions or
cloud public opinion. They just let their stock picks speak for themselves.
As a parting shot, Jimmy, you really should know better. After all, in addition to everything
else, you have violated one of the basic principals of web design.
To paraphrase one of my favorite web gods, Vincent Flanders....
NEVER put up a photo of yourself on your web page.
Unless, of course, you are a model.
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