Thursday, June 11, 2009

Jim Cramer = Mr. Market

Jim Cramer just announced that housing has bottomed. Now, while I personally hope that he is correct, my gut instinct is to say 'look out below!'... at least when it comes to real dollar stabilization. Though, as I just said, nothing would thrill me more than to have real estate prices shoot though the roof.

Historically, our 'friendemy' Jim (who I love to hate), has been really good at... well, not timing the markets very well. For example, in the edition of The Intelligent Investor with commentary by Jason Zwieg, Cramer trumpets that the 'old economy' stocks and 'value metrics' are dead. Later, he says that you should be fully invested in tech (and pokes fun at Buffett over not drinking the tech kool-aid). A person that would have taken his advice would have seen their holdings precipitously fall by well over 90% in price. As I have said before, who can blame them for getting caught up in the bubble if they had no understanding of price and value?

Cramer also was good at saying 'Bear Sterns is fine', while he may now say that it was in reference to deposits (which, I still think him twisting some vague wording); Jon Stewart, of all people, did a good job of schooling him. I enjoy how Cramer said towards the end of the video 'anytime that you recommend a stock that goes down, you've made a mistake...' well, maybe not. Practically speaking, market fluctuations have nothing to do with the underlying value of a company. Let alone what the market will send the price of the security to, after it has fallen.

Certainly, Cramer may be right in his housing prediction in nominal dollars, but, where I have my doubts are in real dollars; I have long said that I think the Federal Reserve is trying to print enough money to raise the price of everything, so that prices as a whole can catch up with the inflated cost of housing.

While I certainly hope that olde' Jimmy boy is right (both in real and nominal dollars), I generally feel safer doing the opposite of what he says. To me, Jim Cramer is the epitome of Mr. Market. Don't get me wrong, this truly is a great thing for us. While I have little regard for the guy, I certainly appreciate that he has attempted to make the masses feel like they can invest on their own and trade their way to financial independence. In addition, we get to see him on TV after he drinks a few to many red bulls, goes nuts on the air, and adds to the manic depressive sentiment of the markets... making securities more attractive to buy/sell for us value investors.

Now that I think of it, maybe I should support the guy, by buying his books. I certainly don't want to see him go away.


Joshua Wallis said...

No joke...Cramer makes my blood go through rapid apoptosis. I guess if it wasn't Cramer being a complete toon, it would be somebody else.

I remembering seeing an inflation adjusted housing-price chart, somewhere in fairfax's presentation. At least on that metric, prices had room to fall since they were 20-30% still over the median inflation adjusted prices. /shrug

I wonder about world-wide real estate prices as well... this is anectdotal but in taipei...there are loads of apartments up for rent, loads of condos have just been completed and there still some nearing completion. All while, real estate agencies have been closing up shop because of lack of customers.

The Political and Financial Markets Commentator said...

The guy is full of crap like any other "analyst".

His show last night where he talked about how seeing a chart Saturday let him know the market was going down Monday (after it had already been down 180 points)put him firmly in the group of just another worthless analyst.

I wrote about it at The Political and Financial Markets Commentator (