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Jim Cramer Deconstructed

| Last Updated: June 15, 2009 | Posted in: Individual Gurus

Guru Accuracy Rating
This is about average. Current guru average is 47%

We evaluate here the New York Metro “Bottom Line” commentary of Jim Cramer regarding the stock market via his archived articles since May 2000. Jim Cramer is among the most visible and prolific members of the financial media. He is Director, Co-founder and ubiquitous contributor at TheStreet.com, where he offers his ActionAlertsPlus service. He is also the host of Mad Money on CNBC. He makes hundreds of buy-hold-sell recommendations on individual stocks each month via these channels. We use here his New York Metro commentary because of its lengthy archive and manageable pace. We selected from that commentary all articles which address the future direction of the overall stock market, using the subsequent behavior of the S&P 500 index to judge accuracy. The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that:

  • Jim Cramer’s predictions sometimes swing dramatically from optimistic to pessimistic, and back again, over short periods. It is difficult to infer his guiding valuation theory.
  • Investor sentiment is sometimes an important contrarian indicator for him. When he sees most investors leaning one way, he advises to go the other way.
  • He sometimes anchors on historical analogies (samples of one), such as: “it’s ’91 all over again” or “I’m placing my bets for 2004 strictly using 1994’s tip sheet.”
  • He is prone more to headline hyperbole than equivocation. For example, from 1/21/01: “This is the lowest-risk, highest-reward environment possible.” And from 3/24/03: “…the risks of owning stocks are as high as I have ever seen them, and the rewards the least certain.”
  • Jim Cramer’s sample is moderate, as confidence in the measurement of his accuracy.

Note that newyorkmetro.com post-dates their issues, meaning that Mr. Cramer must prepare columns at least one week before the publication date.

See also:

Jim Cramer’s comments on our evaluations of his advice;

“Investing in Jim Cramer’s Money Madness” summarizing research on the short-term impact and intermediate-term performance of Mr. Cramer’s buy and sell recommendations;

“Jim Cramer’s Gaps and Reversals” summarizing research on short-term and intermediate-term performance of Mr. Cramer’s buy and sell recommendations;

“Jim Cramer’s Mad, Mad, Mad, Mad Market?” summarizing research on the short-term market reaction to Mr. Cramer’s buy recommendations; and,

“Cramer Offers You His Protection?” examining the performance of 149 buy recommendations and 108 sell recommendations made by Jim Cramer on Mad Money’s “Lightning Round”.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.

    S&P 500 Index  
Date Comments from:  Jim Cramer via New York Metro 21-Day Return 63-Day Return 126-Day Return 254-Day Return  
6/15/09 …when we look back at the beginning of the new bull market of 2009, …Monday morning, March 16…was a seminal day. …The moment of crisis has passed, the parallels to the Great Depression are gone. 1.0% 9.1% 19.3% 20.8% +
11/30/08 …it would be…reckless to stay so negative now…it’s worth taking some sidelined money (note that I said some) and putting it back to work again. 10.7% -14.7% 15.7% 34.8% +
10/13/08 At this time next year, I could see the Dow as low as 8,300. -10.4% -13.3% -16.1% 9.3%
3/21/08 I call it a bottom. Not just for the stock itself, which happens to be the venerable Bear Stearns, but for the whole stock market. Mind you, I don’t think we’ll have a meaningful rally up from the current levels until we’re closer to the election. 1.9% -0.5% -10.6% -39.7%
1/7/08 …the average stock will find it tough sledding for a while, and, unless the Fed starts waking up, you may be better off waiting to buy until we see lower prices later in the year. …But if Bernanke or a future Fed chair does cut rates meaningfully, here’s a sure bet: That’s the time to start buying. -6.3% -3.1% -11.6% -35.8% +
10/1/07 I’m now confident that what would have been a given in 2008, a brutal recession…will now be avoided and prosperity assured. -1.0% -4.4% -11.4% -28.0%
8/20/07 You’re losing money if you own an apartment. You’re losing money if you own a country home. You’re losing money if you own a stock or bond mutual fund. You’re losing money if you have a pension plan. …with the worst, much worse, yet to come. 5.8% 0.4% 0.4% -11.6%
3/12/07 …what’s really happening is that the economy peaked and started heading south in the last quarter of last year. It continues to do so this quarter…I don’t think we are headed into a recession. 2.3% 7.2% 3.3% -6.5%
1/8/07 …2007 will be even bigger than 2006…the S&P 500 could rise as much as 15 percent. 2.6% 2.2% 8.4% 0.5%
12/25/06 Usually good things have a habit of not lasting, but I think this latest boom will continue for a while. The atmosphere is perfect for the investing casino. 0.3% 0.0% 6.3% 3.6% +
11/6/06 As the market’s gale-force momentum continues to build, the public, which has just started embracing this rally, will be sure to take stock prices even higher. …I can see the headline this time next year: DOW BREAKS 13,000. 2.4% 5.1% 8.1% 5.4% +
8/28/06 You should act now before the delicious free ride of corporate hegemony ends, and the Democrats, once again, decide you’ve made too much money in the stock market. 2.7% 7.6% 8.1% 13.2%
7/17/06 My bet? …stocks have finished their painful retreat. 4.1% 10.4% 16.0% 24.3% +
1/9/06 …our clueless president, huge deficits, and the like will act as an anchor, as they did in 2005, on U.S. stock averages. …you’ll do better to just pick among the potential takeovers with good fundamentals and keep the rest in cash, earning 4.5 percent by the time the Fed’s done lifting rates. -1.9% 0.4% -1.8% 10.9% +
10/28/05 ..our country’s finances are a shambles compared with just about everyone else’s. …I expect the U.S. stock market’s underperformance versus the rest of the world’s equity markets to last not just to the end of 2005, but through 2006. 4.9% 7.2% 8.9% 14.1%
10/10/05 But in a year or two or maybe less, …the government will throw a bond auction and nobody will show, including the Chinese, until rates shoot up dramatically. …When paper gets debased, you can’t have enough minerals, gold or otherwise, in your stock basket. 2.6% 8.7% 9.2% 14.8%
5/2/05 …go to work buying stocks for the inevitable snapback that occurs whenever we plunge for psychology, not facts. 3.4% 6.2% 1.4% 12.9% +
4/4/05 Resistance to owning oil remains way too high. I would buy…and own the stocks until oil represents more than 10 percent of the S&P. -1.3% 1.3% 4.4% 11.5% +
1/3/05 Overall, we’re in for another good year, with 3 percent to 4 percent GDP growth and little inflation. That will translate into higher stock prices, with the S&P gaining 8 percent to 10 percent, a pattern not dissimilar to 2004. -0.7% -2.2% -0.6% 5.9%
9/13/04 …if we can get through the election without a major terrorist incident, we could see a 10 percent rally in the S&P no matter who wins come November. -0.4% 5.6% 6.6% 9.0% +
5/24/04 …the patient is too far gone to resuscitate; the steep recent declines signal that rigor mortis beckons. …Maybe, after Wall Street marks all the merchandise down far enough, someone will be interested in buying something. 4.1% 0.0% 7.5% 9.3%
1/5/04 …we have more room to go, maybe even much more, as the country’s economy shakes off three years of contraction and begins to grow again. …Good enough to make me wish that I could un-retire and go back into that trading turret I left at the end of 2000.  …I’m placing my bets for 2004 strictly using 1994’s tip sheet. 0.4% 1.7% -0.3% 5.9%
11/17/03 …the single most unlikely scenario, the one nobody’s predicting, might be about to occur: the massive melt-up, the upside blow-off that lifts the Dow a thousand points between here and year-end. …don’t forget to hit the eject button the moment we get there. 3.1% 10.4% 4.3% 12.1% +
7/21/03 …I am still buying, still putting money to work, even at these levels, because I see so much more upside ahead. …do some buying and participate in the next leg up. 2.4% 7.3% 16.3% 11.0% +
6/2/03 If I didn’t know better, I would be trumpeting that we are in a New Bull Market, with Dow 9500…up 800 points from here…soon beckoning. …it all seems too good to believe, except for the ever-expanding list of new highs, which, by their nature, can’t lie. 1.6% 3.7% 9.4% 15.5% +
4/28/03 …only a few sectors will truly benefit postwar. …Tons of individual stocks remain cheap these days. But a like number, particularly in tech and telecom, remain far too expensive. 4.2% 9.2% 12.5% 21.8%
3/24/03 Stocks, all stocks, are now equally dangerous. The bear market, which began in technology, has now extended to every single sector. …In short, the risks of owning stocks are as high as I have ever seen them, and the rewards the least certain. The wounds, self-inflicted or otherwise, are too deep to fix, even with a successfully prosecuted war. …If you want safety, go buy a bond. 6.3% 15.2% 18.4% 28.3%
2/17/03 I am betting that once the war is over, the pent-up demand to buy stocks connected with consumer spending…the group that rocketed after Iraq I…astounds even the great optimists of the time. …the time to buy is, alas, upon us. 2.7% 10.9% 17.5% 34.4% +
12/9/02 The market’s not going to roar back to new highs anytime soon. In fact, much of the move has occurred already. But I don’t think we will revisit those lows, either, because the economy, after deteriorating for three straight years, has at last stabilized. …the market will mark time until the Iraq situation clarifies itself. If we move into Iraq, look initially for a decline that still doesn’t exceed those we saw at the beginning of October, and then, if the war goes well, a resumption of the advance that we saw this fall. 4.0% -10.2% 11.8% 20.1% +
11/11/02 Amazon, eBay, USA Interactive, and Yahoo — have broken out. …Perhaps…it’s still not too late to get in. 3.3% -5.4% 7.2% 20.8% +
10/28/02 Last week’s sweet little bull run was, unfortunately, all form and no substance. … would anyone be surprised to see us back to Dow 5,000, its stamping grounds from a decade ago? 2.6% -3.6% 3.0% 17.6%
7/29/02 …the investor class has simply given up on the markets entirely. …even way down here, I’m not sure that you should put money into this market. 4.0% -1.8% -4.5% 10.2% +
7/15/02 …there are now two more variables in the equation, and both are serving as a ceiling, an invisible barrier on all stock prices: terror and ethics. …the pleasure of at last jettisoning [tech stocks] may be overshadowed by the potential, if there is any at all, of a turn sometime in the next decade. -3.7% -12.4% 0.9% 7.0%
6/3/02 [Chuck] Clough, [David] Rocker, and [Doug] Kass, three towering stock-market intellects…now all…acknowledge that things have gotten too cheap to bet against the market… My money’s on the bulls. For the first time in two years, they’re running..It’s time to start running with them. Stop fighting it. The bottom, at last, is at hand. -8.9% -11.8% -10.0% -4.9%
4/22/02 …2002 is simply year three of a tech bear market. -2.5% -23.5% -20.2% -17.7% +
3/25/02 …what’s left of the old industrial economy is again ready to roar. Don’t forget to sell them after they have doubled. -3.4% -12.6% -26.3% -23.3%
1/7/02 By this time next year, things will be fairly booming in this country, with jobs being created and earnings per share looking terrific versus what they are now. -7.0% -3.4% -18.2% -20.4%
12/10/01 …she [his wife] said calmly. “Probably goes higher.” …Then I realized, Of course, it’s ’91 all over again! We have that same combustible combination of lowered interest rates, tons of sidelined cash, and a wartime catalyst that could bring a tremendous surge of confidence. 1.5% 2.3% -10.5% -20.9%
11/26/01 …I think the market is poised to go higher — perhaps dramatically so. And if the market really begins to roar, Microsoft could trade up to 100, Cisco to 30, and IBM up to 140. -0.7% -4.2% -7.8% -18.9%
10/22/01 One day, when rates get to 2 percent, people will start buying more cyclical stocks again. But until then, leave the rest of the market to those who don’t mind taking a real economic beating. 4.8% 2.7% 0.3% -19.0%
10/1/01 All my indicators tell me that you have to buy, not sell — too many bears, too many people capitulating, too many funds redeeming, too many people heading one way… So I am going against my own gloom and putting money to work in some solid blue chips. 2.0% 11.8% 8.4% -21.1% +
7/30/01 But don’t look for the companies that took part in the huge stock-led boom to come back anytime soon. Even if interest rates went to zero, these companies wouldn’t go much higher. -3.6% -12.0% -9.1% -27.2% +
6/11/01 Wall Street’s Pearl Harbor has come and gone, and the tide has turned…the April-May rally — a rally that took everyone by surprise — will morph into a terrific summer explosion. -5.9% -13.4% -10.8% -18.7%
5/21/01 …I’m still watching and waiting. But the time to boo the dot-commers off the stage has come and gone. The survivors deserve the spotlight again. -6.8% -11.5% -12.4% -19.3%
5/7/01 Not only is the economy going to rebound, but some of the best stock buys right now can be found in the much-despised tech sector. …reposition into saner, safer tech for the rest of what will now turn out to be a very good year for equities. 0.5% -3.9% -11.5% -13.6%
4/23/01 …the market’s latest bout of pessimism has created some extraordinary values, particularly in those companies that have nothing to do with technology. 6.9% -1.1% -10.1% -11.3% +
3/12/01 …the roaring market of the late nineties has vanished and isn’t coming back. …the [tech] winnings of 1998 will get repealed this year before we see an end to the bloodletting. -1.0% 7.2% -7.4% -2.4% +
2/19/01 …the worst is probably already over, just when the gloom is most pervasive. S&P 500 names over the tech-heavy NASDAQ. -12.3% 1.0% -8.4% -13.5%
2/5/01 Tech, because of the worldwide information-technology slowdown, may barely eke out gains in the coming months. But the cyclicals, once the Fed cuts rates, could show the kind of monster improvement that money managers go googly-eyed for. -6.8% -6.5% -11.4% -17.4%
1/22/01 This is the lowest-risk, highest-reward environment possible. You have the Fed — and history — totally on your side. It doesn’t get any better than that. That’s why I insist on finding stocks to buy and own right now. -6.5% -7.4% -11.3% -17.1%
12/18/00 There is not much to buy. Tech companies’ fundamentals continue to deteriorate. The possibility of putting money to work in a stock that might “blow up” on an earnings disappointment has never been greater. 1.5% -13.6% -7.5% -12.5% +
12/4/00 …a recession seems to be looming before us… I’ll be riding out the storm by staying liquid, keeping my powder dry for when the Fed comes to its senses. That’s when you’ll need every penny, because that’s when fortunes will be made in a very short time. 0.6% -5.4% -4.1% -14.2% +
11/27/00 …we are using any strength to sell our remaining tech cyclicals. -1.5% -6.7% -7.5% -13.2% +
11/6/00 …I have seen the market bottom in October so many times that I can’t help myself. I don’t think this October will be any different. …fund managers will be pulling out all the stops and buying like crazy. -5.6% -5.6% -12.3% -20.3%
10/23/00 This market will get worse before it gets better, and the smart thing to do is just sit it out. -3.5% -2.5% -12.0% -24.1% +
10/9/00 Maybe we own enough tech already. I am still an Intel-aholic. It’s an incurable condition. And I am confident that by this time next year, our baby could return to the highs it saw five weeks ago. 2.1% -7.6% -16.7% -23.2%
8/7/00 The Fed will land the airplane safely, just as it did in 1994. We think individual stocks have plenty of room to romp once the soft landing is complete, just as they did in 1995, one of the biggest years in the market in recent memory. So it would be wrong to sit out the market until the all-clear is sounded by the Fed. 0.9% -3.4% -8.6% -20.0%
6/26/00 …for those of us with a taste for the downside, good times are back. Right now, the pain on the short side is virtually nonexistent. -0.2% -0.5% -10.3% -15.7% +
6/12/00 …there are a few bull markets that are alive and well right now…three months from now we will want to jump back into tech. 3.2% 3.4% -5.3% -15.6%
5/29/00 …the Fed still hasn’t quenched people’s zeal for stocks. In the wake of higher interest rates, they’re simply switching sectors. Many portfolio managers used last week’s hike to begin buying stocks that should do well even if we do get a recession. 2.3% 5.9% -5.2% -11.4% +
5/15/00 …the public will happily buy every dip the professionals give them. 1.3% 1.3% -5.9% -11.3%
5/1/00 …there’s just not enough money out there to absorb the wall of supply issued by the investment banks and their venture-capitalist allies. The dot-com gold rush is over. -3.2% -3.3% -6.0% -15.0% +
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