Monday, December 8, 2008

Cramer Nailed It (sarcasm)

I just couldn't resist. The following are quotes from Jim Cramer on his July 29th show. Keep in mind that this came one day after he said, "There is no relief in sight."

“It smells to me like something, in fact many things,” he said, “have at last changed for the better.”

“I am indeed sticking my neck out right here, right now,” Cramer continued, “declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15. and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they’re] missing a great deal of upside.”

“Stop waiting,” he said, and “buy the next dip because I think it might be the last big one.”

“My bottom call isn’t gutsy,” Cramer said. “I think it’s just a smart call that all the evidence points toward.”

“Bye, bye bear market,” he said. “Say hello to the bull and don’t let the door hit you on the way out.”

The S&P 500 closed July 15th at 1200. It ended yesterday at 876. That's a decline of 27%. If we measure from July 15th to the most recent bottom on November 20th, we get a 37% decline. Defenders of Cramer (who by now must be down to his wife, mother, and shrink) will be quick to point out that Jim changed his view of the market before the recent lows.

In fact, on October 6th he appeared on the "Today" show and practically begged people to pull any money out of the money that they needed in the next 5 years while encouraging others with more "flexibility" to ride it out. I suppose he's covered either way with that call. If the market falls, he told you to pull money out. If it rises, he told you to ride it out. Part of the problem with Cramer is that he hedges his views and flip-flops way too often to actually be helpful. He claims he wants to help people invest, but his recommendations are more suited to the masochistic, bipolar day trader.

Smart professionals don't try to call the bottom. They're humble enough to recognize the uniqueness of every bear market as well as the tremendous number of unknowns. For instance, the severity of the recession is unknown. The degree to which corporate earnings will decline is unknown. The trough valuation that will be applied to those earnings is unknown. The degree to which fear and investor psychology will influence prices is unknown. The amount of deleveraging still to come is unknown. The magnitude of the positive or negative impacts of Fed and government action is unknown. In light of such uncertainty, no one could possibly know where the bottom is. It's one thing to say that the market has become more attractive, but it's another altogether to try and call a bottom. Of course, if you call the bottom often enough, you'll eventually be right.

One of my favorite Cramerisms came on November 8th of 2007. On that day's show, Jim stated, "You should be buying things and accept that they're overvalued, but accept that they're going to keep going higher. I know that sound irresponsible, but that's how you make the money."

Jim was partly right. That is irresponsible. That isn't investing. It's gambling. It's relying on a greater fool to come along and pay an even more ridiculous (stupider) price for your asset than you did. It was precisely this mentality of greed and lack of concern about risk and valuation that contributed to the housing and credit bubbles.

Many positives (as well as some huge negatives) will come from this downturn. Private-sector leverage (debt) will be reduced, savings will increase, lending standards will rise, capacity will be rationalized, and the valuation of many risky assets will once again be attractive, to name just a few. A discontinuation of Cramer's "Mad Money" program would be the cherry on top.

As Cramer is fond of saying, "There's always a bull market somewhere." Jim has been marketing his bull for far too long now.

Disclosure: The Rubbernecker would much rather be long dart-throwing monkeys than Jim Cramer.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.