Jim Cramer sent comments on our evaluations of his advice (“Jim Cramer Deconstructed” and “Cramer Offers You His Protection”). Because of the nature of Mr. Cramer’s initial message, we retain the personal nature of the subsequent exchange with slight editing (spacing and punctuation) for readability, and substitution of descriptive links for long URLs. The correspondence follows:
Mr. Cramer writes:
Subject: You have got to be kidding me
There have been so many numerous audits of me and I also have an extended audited track record that shows you could not be more wrong. But you know what? Let the market decide. Do you think if I were as bad as your records show, I would ever have been able to
a. make $100 million in the market investing for myself,
b.have a show that has gained in audience at the time when you say I have done poorly, and
c. started one of the few FINANCIALLY successful websites out there in part because of subscribers to my newsletter and columns?
Here’s where I think your methodology goes wrong. I repeatedly recommend the same stocks from my own recommended list: NYX, SHLD, GOOG, MA, TM, CSCO, AAPL, GS, BA, JNJ, MO. I do it every week. I am sure you give me credit only once for those.
I have bothered to take the time out to write you this because you worked with a man of honor, Admiral Rickover.
I know you won’t correct anything that’s not what people do in our business but I still feel the need to explain to you why a sucker is NOT born every minute and my popularity rides not on showmanship but on rigor on my part and success on the part of the viewers and readers who use my work.
No need to respond.
jjc
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I respond:
Jim,
Thanks for your note. I understand that you think CXOadvisory.com treats you unfairly.
I also understand that you may not be interested in a response, but…
I do not understand your comment about the methodology regarding your stock recommendations. If you read “Cramer Offers You His Protection”, you will see a list of “Lightning Round” buy recommendations. Whenever a buy recommendation appears more than once, that fact is so indicated in the list. Further, as stated there: “When Mr. Cramer mentions a stock more than once on different dates, we include returns for that stock multiple times using different start dates.”
If you are referring instead to the test of market-related forecasts featured in your NY Metro column at “Jim Cramer Deconstructed”, that evaluation is different, mostly covering “sense of the market” commentary and not specific stocks unless you devoted considerable commentary there to a single company. Admittedly, there is generally more judgment involved in that evaluation.
I will ensure correction of any errors identified in CXOadvisory.com, but you have not identified any errors. When you say that you “know I won’t correct any errors — that’s not what people do in our business,” you may speak for your approach to your “business” but not for the approach taken at cxoadvisory.com.
To address your opening question, you have an impressive record of accomplishment. However:
a. I think it was possible during the strong bull market in tech stocks of the late 1990s to amass considerable wealth by being leveraged long in many (almost any?) technology issues, many of which ultimately proved to have little intrinsic value. The exit point was critical. However, I am unfamiliar with your trading record for that period.
b. I think that it is possible to have a popular (on CNBC’s scale) investing television show based primarily on entertainment value rather than economic value.
c. Investors seek seers (see “Seer-Suckers, or the Efficient Everything Hypothesis” and “How Investors Do (or Don’t) Take Advice”). The investing newsletter industry has done pretty well, even though in aggregate the performance of newsletter recommendations does not beat the market (see “Any Excess Returns from Investment Newsletters?”). In other words, I think it is possible to have a successful publishing business related to investing without being a superior stock picker.
Admiral Rickover was a man of honor, also of competence. He is legendary for emphasis on attention to detail and enforcement of personal accountability.
I will include your message in the CXOadvisory.com blog, and in the section evaluating aspects of your advice, so that readers can understand that you think the work “could not be more wrong.” If you wish to elaborate, please let me know.
Regards,
Steve LeCompte
CXO Advisory Group LLC
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Mr. Cramer follows up:
It is obvious that there are three important blocks to the show, A, B and D. It is also obvious that the lightening round does not have the same homework-derived analysis of those three blocks.
The fact that you weight the lightening round equally to those more thought-out blocks to me evaluates the show unfairly.
So be it. I can easily produce four or five other studies that show I am performing much better than the averages, including studies by the USA Today and Business Week. But why bother. Lies and stats.
I guess my point is that, once again, I am trivialized by some pro who wants nothing more than to make me look like a joker.
So be it.
Be my guest. I know you could weight it another way and have me look like a genius.
But you know what? I think, given what I have accomplished and how often my viewers and readers and listeners tell me that I make them money and given that I don’t select them, I figure I must be doing something right.
Our correspondence was fun.
jj
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I respond:
Jim,
Thanks for your reply.
I am puzzled why you have included the “Lightning Round” on the show if you do not regard it as well thought-out.
CXOadvisory.com does not “weight” the “Lightning Round.” It simply presents an evaluation of recommendations from that feature over a specific period, without preconception regarding whether these recommendations represent your strongest or weakest work.
If you believe that there are any “lies” on CXOadvisory.com, please advise so that I can ensure their correction.
The objective of the Guru Grades section of CXOadvisory.com is not to make experts look like jokers or geniuses, but rather to portray their outputs as they are.
If there is anything else you would like the readers of CXOadvisory.com to be aware of, please let me know.
Regards,
Steve LeCompte
CXO Advisory Group LLC
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End of correspondence. We verified the sender’s identity based primarily on ownership of the base URL in the sender’s email address, detailed email header information and success in replying to the email address.
Note that the Wikipedia entry for Mad Money refers to the “Lightning Round” segment of the show as “…by far the most popular…”
Note that items addressing Mr. Cramer’s investing advice represent less than 1% of the content of CXOadvisory.com.
Frequently Asked Questions
What is the Lightning Round on Jim Cramer's Mad Money show?
The Lightning Round is a segment of Jim Cramer's Mad Money television show in which he gives quick buy or sell recommendations on individual stocks. Cramer says it lacks the homework-derived analysis of the show's main blocks (A, B and D), while Wikipedia describes it as by far the show's most popular segment.
Does Jim Cramer's stock advice actually beat the market?
Jim Cramer's stock advice is disputed in this exchange: CXO Advisory's evaluations portrayed his recommendations as poor, while Cramer says audited track records and other studies (USA Today, Business Week) show he beats market averages. CXO Advisory's evaluations covered Lightning Round buy recommendations and market-related forecasts from his NY Metro column, and it notes that a successful investing publishing business does not require superior stock picking.
How are Jim Cramer's Lightning Round stock picks evaluated?
CXO Advisory evaluates Jim Cramer's Lightning Round picks by computing returns for each buy recommendation over a specific period. When he mentions a stock more than once on different dates, returns for that stock are included multiple times using different start dates. CXO Advisory says it does not weight the Lightning Round, and that its separate evaluation of his NY Metro market forecasts involves more judgment because it mostly covers 'sense of the market' commentary.
Does a successful investing show or newsletter mean the host is a good stock picker?
A successful investing show or newsletter does not necessarily mean the host is a superior stock picker, according to CXO Advisory's reply to Jim Cramer. It argues a popular television show can rest on entertainment value rather than economic value, and that the investing newsletter industry has done well even though newsletter recommendations in aggregate do not beat the market. It also suggests that great personal wealth, such as that made in the late-1990s tech bull market, may reflect leveraged long exposure and exit timing rather than stock-picking skill.
What are the criticisms of evaluating Jim Cramer's stock picks?
Jim Cramer criticizes the evaluations of his picks for treating the Lightning Round equally with his more researched show segments, and says repeated recommendations of the same stocks (e.g., NYX, SHLD, GOOG, AAPL) may be credited only once. CXO Advisory responds that repeat mentions are counted multiple times with different start dates and that it applies no weighting. It also acknowledges that its evaluation of his market-related forecasts involves more judgment, and Cramer says different weightings could make his record look better.