Jim Cramer

Stick to Investment Basics and Forget Jim Cramer’s Speculative Advices

Jim Cramer, is better known as a former hedge fund manager and runs a show called Mad Money on CNBC.

Who exactly is Jim Cramer in the business world? He is a Harvard College magna cum laude graduate with a BA in government. He first started investing in the stock market when he was in law school and began promoting his stock choices using his answering machine. Impressed with this, Martin Peretz, the owner of The New Republic magazine gave Jim Cramer $500,000 to invest in the stock market, earning $150,000 in two years time. This paved the way from him to become a stock broker at the Goldman Sachs Private Wealth Management in 1984. Three years later, he founded his own hedge fund called Cramer & Co which operated from Steinhardt, Fine, Berkowitz & Co. of Michael Steinhardt, a hedge fund pioneer.

Jim Cramer keeps an investment blog called www.realmoney.com where he doles out investment and trading advices. He has a website www.thestreet.com which he co-founded with Martin Peretz which features stock buy recommendations. Jim Cramer has advised people to buy Bear Stearns several times and has included it in the buy recommendations in his website but when it collapsed, he denied doing so and removed the recommendation from his site.

He has a cable television program called Mad Money with Jim Cramer on CNBC. According to their mission statement, the show educates people on how to analyze stocks and the stock market. On Mad Money, he tells people what stocks they should buy, though, complete with sound effects and childish banter. A lot of people see the show as simply a way of generating ratings and getting advertising revenues, just like any show on CNBC as well as promoting Jim Cramer’s books.

In 2007, a video shown on Youtube.com which showed a December 2006 interview on www.thestreet.com created quite a stir. He described how hedge fund managers manipulated stock prices using questionably legal or simply illegal means. He also said that he could raise and lower stock prices when he was operating his hedge fund using legal means. Jim Cramer exposed several hedge fund managers used in influencing the prices of stocks such as spreading false rumors to stock market and business news reporters which could bring the prices of stocks down. Though it may be illegal, this practice has been going on for years because the Securities and Exchange Commission does not understand it, he stated further. Jim Cramer has admitted that in many ways, the hedge fund managers including him have robbed people in a hedge fund operation that is common and well known but has still not been stopped by the SEC.

Jim Cramer should be more correctly referred to as a speculator, not an investor. Several of his advises have resulted in people losing money. In one episode of Mad Money, he informed an investor not to move his money from Bear Stearns as it was not in any kind of trouble. After that episode however, Bear Stearns stocks fell as much as 92% and eventually acquired by JP Morgan at $10/share. People, who understood the advice as pertaining to shares of stocks, held on to their shares and lost a lot of money. Jim Cramer however, attributed it to a misunderstanding, claiming that he had meant that money invested in Bear Stearns was safe and did not need to be moved out. However, Bear Stearns was listed in Jim Cramer’s site, www.thestreet.com as a buy recommendation for $62 on the day of the Mad Money episode and a day before the collapse of Bear Stearns. This listing was taken out of the site on the day of the Bear Stearns collapse.

Jim Cramer is more of a speculator. His investment and stock market guide require more careful study and complicated methodology that ordinary or amateur investors would not have the time and the business expertise necessary to learn and do it. Speculating is risky and beginners might possibly end up losing all their money. Sticking to investment basics would ensure that money invested will end up in investments that will pay off or keep the money safe.

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