Jim Cramer On The Stock Market

I don't like the flashy and loud style of Jim Cramer. I don't watch his show. I try not to pay attention to him, and I never buy a stock based on his recommendation. That said, I found this on Yahoo! Finance, which I do read every day, and discovered that I agree with Jim Cramer about something:

One of the worst myths out there is that the market is always rational and makes sense. Cramer knows this is not true; on any given day the market can be totally wacky for reasons that do not make sense. Sometimes stocks go up when they should have gone down, and sometimes entire sectors move for ridiculous reasons.

"Never assume that just because something happened, it has to make sense because the market is always supposed to make sense. That's nonsense," Cramer added.

"The worst mistake, the most common mistake you can make these days, is to say that because a particular stock or commodity trades at a given level, it therefore deserves to trade there. Often, that is just fiction now," Cramer said.

Aesop Or Jim Cramer?

Troy Adkins thinks that Aesop wins the race. His choice for the best book on investing is The Tortoise and the Hare:

Given the simplicity of the famous fable "The Tortoise and the Hare," it may seem out of the ordinary to recommend it to people as a guideline for their retirement-planning decisions. However, the moral overtone provides meaningful insight in terms of helping people plan for their retirement by keeping them grounded in proper virtues that will likely lead to successful investing over time. Unfortunately, the simple principle of this story seems to have been largely forgotten, as evidenced by the fact that many people do not prepare adequately for retirement, and they tend to make very foolish mistakes while investing.



"The Tortoise and the Hare" is a story that is based on a race between a rabbit and a turtle, and the story explains why a turtle ends up winning a race that should have been won by a hare. The simple moral of this fable is that a slow and steady pace will win a given race. The essence of the story has pertinent meaning to the retirement planning process, because it stresses the need for people to start saving at a young age, and to follow a systematic and methodical approach to building their retirement nest egg over time, rather than getting greedy.

Good advice. Take that, Jim Cramer!

The Predictions Of Experts

From Learning How to Think by Nicholas D. Kristof:

The predictions of experts were, on average, only a tiny bit better than random guesses — the equivalent of a chimpanzee throwing darts at a board.

“It made virtually no difference whether participants had doctorates, whether they were economists, political scientists, journalists or historians, whether they had policy experience or access to classified information, or whether they had logged many or few years of experience,” Mr. Tetlock wrote.

Indeed, the only consistent predictor was fame — and it was an inverse relationship. The more famous experts did worse than unknown ones. That had to do with a fault in the media. Talent bookers for television shows and reporters tended to call up experts who provided strong, coherent points of view, who saw things in blacks and whites. People who shouted — like, yes, Jim Cramer!

Mr. Tetlock called experts such as these the “hedgehogs,” after a famous distinction by the late Sir Isaiah Berlin (my favorite philosopher) between hedgehogs and foxes. Hedgehogs tend to have a focused worldview, an ideological leaning, strong convictions; foxes are more cautious, more centrist, more likely to adjust their views, more pragmatic, more prone to self-doubt, more inclined to see complexity and nuance. And it turns out that while foxes don’t give great sound-bites, they are far more likely to get things right.

This was the distinction that mattered most among the forecasters, not whether they had expertise. Over all, the foxes did significantly better, both in areas they knew well and in areas they didn’t.

“Oh, oh, a comedian is attacking me!”

From Jim Cramer fires back at Jon Stewart amid debate over financial coverage by Matea Gold:

The ongoing economic crisis has now spawned another contretemps: a full-blown media feud between “Daily Show” host Jon Stewart and CNBC pundit Jim Cramer.

As the two television personalities exchanged retorts on the air this week, a broader debate is raging about whether the financial press did an adequate job covering Wall Street’s handling of the complex transactions that precipitated the current recession. CNBC, the most prominent business news network, has come in for a large share of criticism that the media failed to alert the public to the system’s precarious footing.

Read the rest here.

For what it’s worth, I think that Cramer is obnoxious and not worth listening to, and that Stewart is funny and worth listening to.

The Future Is Now Past

I’m glad that someone at Foreign Policy has been paying attention.

From The 10 Worst Predictions for 2008:

1. “Barack Obama is not going to beat Hillary Clinton in a single Democratic primary.” —William Kristol

2. “Bear Stearns is not in trouble.” —Jim Cramer

3. “…only a naval power of the United States’ strength could seriously disrupt oil shipments.” —Dennis Blair and Kenneth Lieberthal

4. “[A]nyone who says we’re in a recession, or heading into one—especially the worst one since the Great Depression—is making up his own private definition of ‘recession.’” —Donald Luskin

5. “For all its flaws, an example to others.” —The Economist on Kenya’s presidential election

6. “Arizona’s maverick senator, John McCain, will end up the country’s next President.” –BusinessWeek

7. “These events have the potential to fundamentally alter matter and destroy our planet.” —Walter Wagner

8. “The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.” —Arjun Murti

9. “It starts with the taking over of South Ossetia and Abkhazia, which has already happened. It goes on to the destruction of the Georgian armed forces, which is now happening. The third [development] will probably be the replacement of the elected government, which is pro-Western, with a puppet government, which will probably follow in a week or two.” —Charles Krauthammer

10. “I believe the banking system has been stabilized. No one is asking themselves anymore, is there some major institution that might fail and that we would not be able to do anything about it.” —Henry Paulson

Maybe we should pay less attention to all of these people in the future.

Some of these people I am not familiar with. Some of them, such as William Kristol, Jim Cramer, Charles Krauthammer, Henry Paulson, and even BusinessWeek; I’ve never much cared for. Only arrogant fools think they can predict the future.

What You Know And Who You Know

From Between Thee And The Bedpost by Cernig:

It simply doesn’t compare, though, with the likes of Andrea Mitchell reporting on the bank bailout plan - and blaming Obama for its failure - while married to Alan Greenspan and not making full disclosure of that fact before every report.

I was having a similar thought this morning while watching Mrs. Greenspan on the Today Show. Perhaps the assumption is that everyone knows who she is married to, although that certainly is no excuse for not making full disclosure.

Who is Henry Paulson married to? George W. Bush and Goldman Sachs and his investment banking buddies, that’s who. Are we really to believe that he cares more about the average American than he does about his current work buddies and his former work buddies?

The same thing holds true for Jim Cramer giving advice and opinions on the bail out on the Today Show. Does he really care more about my financial future than he does about his own or his investment buddies financial future?

I’m not saying that these people don’t know anything and shouldn’t be listened to. All I’m saying is we should consider who they have been associated with and who they represent. A little balance from less self-interested parties would also be nice. Plus more informative and pointed questions from the likes of Matt Lauer would help. Instead we get things like Jim Cramer scoffing at economic academics (who opposed the bail out) for not being part of the real world. (As if college buildings are less tangible than financial derivatives.) There is no analysis of content, just an attitude of superiority. “I used to trade these things, so I know better.” (I’m relying on my memory here, but I think that’s close to what he said.) And Matt Lauer just lets that go. He doesn’t ask Cramer if he helped contribute to the problem because he used to trade these things. He doesn’t ask Cramer about the uptick rule and whether he ever benefited from the elimination of it. Chances are that Cramer never did (He even called for its reinstatement), but the point is that Lauer doesn’t ask these questions. I don't know who is right here, I'm just saying that we heard Cramer's point of view, and nothing else.

Steny Hoyer and Roy Blunt were also talking to Ann Curry on the Today Show this morning. Their talk disturbed me greatly. From what they said one could infer that short term stock market moves on Wall Street are what is driving how they will decide what policies to put into place. This is scary. Short term gambling on Wall Street, rather than long term investing on Wall Street is part of the problem. To have legislation that is driven by the former, rather than the latter will only make things worse.

We seem to think that the very same “experts” that have been part of the cause of the problems we now face are going to come up with a solution. The President and Congress allowed for way too much deregulation and too little oversight. The investment bankers (like Henry Paulson), and other financial speculators “played” the market with greed as their guide while things were good, and fear as their guide when things were bad. They weren’t investing, they were gambling. And to make matters worse, they were gambling with things they didn’t understand. Now we turn to them to not only explain what they were doing, but to come up with a solution. How insane are we? Instead of reporting on the dangers of the deregulation and lack of oversight, the media focused on the ups and downs of the market on a daily basis. The roller coaster ride of greed and fear probably got better ratings than the text of the newest bill passed by Congress and the President. Yet, who is now supposed to be fixing everything, and who is telling us about it all? The very same people once again. Why should we trust any of them? Do we have any alternatives?

Let’s look at another marriage. Mr. and Mrs. General Electric. General Electric owns NBC. NBC produces the Today Show. General Electric is also largely a financial company, and as a financial company they are heavily involved with loans.

From General Electric:

Since over half of GE's revenue is derived from financial services, it is arguably a financial company with a manufacturing arm. It is also one of the largest lenders in countries other than the United States, such as Japan.

The conflict of interest of Andrea Mitchell, while important, kind of pales in comparison.

Update:
This Modern World