Jim Cramer's dramatic statement

These are the times that try men's souls--Thomas Paine

Amy Winehouse is turning to Scientology. Previously unknown Jim Petruzelli TKOs Kimbo Slice. The most shocking event of all though: Jim Cramer is dissing the stock market.

Jim Cramer went on the Today Show yesterday and advised people to take any money out of the stock market that they will need in the next five years. Why? He sees the possibility of a 20% decline in the Dow and wants to help the little guy get out of the way of a runaway train. I admire his sense of noblesse oblige. It is also refreshing to see a money manager that it's okay to raise cash.

Some will see this as a sign of capitulation, not unlike that famously contrarian indicator "The Death of Equities" BusinessWeek cover from August 13th, 1979. Still, I don't think that Cramer is consistent enough to serve as a contrary indicator. He is of the school of whatever's working. Cramer throwing in the towel is him saying, "If I can't figure this out, I doubt if you can." He's just being honest in his exaggerated manner. Most people should not be trying to time the market. They should ride out the markets short-term fluctuations. He just made a compelling case for investing in low-cost index funds, much better than Buffett did with his bet against Protégé Partners LLC.

Paul B. Farrell vs. Jim Cramer

Today is the Great American Smokeout, but let me suggest that we also declare it National Get Over Jim Cramer Day. Paul Farrell is the latest member of the financial media to take a shot at Jim Cramer. Last week, Paul Farrell wrote a MarketWatch column attacking Jim Cramer's trading strategy. In it, he acknowledges that he has only listened to "Mad Money" once but found it insufferable; I doubt if he's read Cramer's books. Farrell then goes on to make the usual anti-Cramer attacks: he trades to frequently, he's an irresponsible idiot, my passive approach is cheaper and takes much less time. Nothing new really.
So Cramer responded to Farrell's attacks, also on MarketWatch. Here is Cramer's defense of his picks. As usual, Cramer painted himself as a man of the people, the Huey Long of the stock market if you will, giving the people the means to live out their dreams. Farrell made the mistake of insulting Cramer's viewers, which allowed Cramer to break out his anti-elitist screed; his viewers are not idiots, they are fairly level-headed and sophisticated, they do their homework.
Cramer is part entertainer. He has never shied away from this role or denied it. He's not trying to be the august and patrician Louis Rukeyser. He is not the genial and folksy Warren Buffett and he knows it. He goes with what he has, manic enthusiasm and a near-autistic recollection of stocks. To this he adds sound effects. The show is not completely worthless fluff. Cramer's critics need to look past the buffoonery for just a minute. Cramer is one of the rare celebrities whose detractors' efforts to expose him only make him more popular. So just get over it.

James Altucher defends his friend and business partner Jim Cramer

On Wednesday, James Altucher, founder of Stockpickr, and an insider at TheStreet.com wrote a piece for the website defending Jim Cramer against this week's damaging Barron's article. He sets out to answer two questions:


1. Do Cramer's picks make money?
2. Does Cramer outperform the market?


He even goes so far to test Barron's picks during this time period.

He lays out a couple of rules. First, he recommends that you wait a week before buying Cramer's picks. In his book, Jim Cramer's Mad Money: Watch TV, Get Rich Cramer says to wait 5-10 days in order to avoid buying at an inflated price, something he calls the Cramer Effect. Altucher conducted this study by buying the stocks after 5 days. When it comes to selling, he tests the results after one month and then two months.
You can probably guess what the results were. Still its worth reading the piece. Altucher is kind enough to provide details about his methodology and the specific picks.

Barron's gives Jim Cramer a "don't buy!"

Jim Cramer was featured in the cover story of Barron's this week. The coverage wasn't flattering. Bill Alpert's depicts portrays Cramer as a manic-depressive clown. Based on a database compiled YourMoneyWatch.com by Michael McGown, a former stock analyst, Cramer's picks have trailed the market by 10% since the show began. These totals include picks made during the "Lighting Round" and MadMoney says that they shouldn't count as part of his record. Also, this analysis doesn't follow Cramer's caveat to buy on the second day after the recommendation, not the next day.
Alpert also examined a database compiled by TheStreet.com that covers the last six months. These picks were about even with the market, including commissions you'd be down if you followed Cramer's suggestions.
Overall, the piece is fairly evenhanded and reasonable. The writer merely wants Jim Cramer to be accountable for the picks he makes.

Part I & II of "Shorting Cramer".