In August of 2007, at the same time Jim was ranting about impending financial Armageddon if the Federal Reserve didn't get its act together and slash rates, we also spent about three weeks bending over backwards to accommodate a reporter from Barron's who seemed determined to write a story panning the "performance" of Jim's "stock picks" on the show. The reporter's name was Bill Alpert, he published his story, and we thought that was the end of it.
Then this weekend, I look in Barron's and there's the same story all over again. As always, we're happy about all the attention that's being lavished on us by Barron's, but we do disagree with their conclusions about our performance.
For an investor, performance is easy to establish. Keep a running tally of profit and loss on all the trades you do, and you have it. Jim Cramer's performance when he was in the game is a matter of record, and was outstanding by any measure. But for a public "advisor" like Jim is now, and anybody else in Jim's position, if there even is anyone else, it's not easy at all. Actually buying and selling a stock is a clear, unambiguous marker of intent. Mentioning a stock on the air? Not the same thing. In evaluating Jim, the hypothetical nature of "his" performance is something that we've never seen handled in any way that approaches being reasonable, or even informed by basic common sense.
For starters, it's an enormous challenge to even make an accurate tally of Jim's "recommendations." Some stocks are chosen for intense focus. Some, like the Four Horsemen of Tech –Apple, Research in Motion, Google and Amazon – are repeated over and over again. Some are mentioned more in passing. Others are reacted to. Many recommendations are qualified: Wait for Caterpillar to pull back to $40 before you buy, take a pass if it doesn't drop below a certain price, don't chase Nucor once its yield drops below 4%. It's an hour-long show, not an investing newsletter that specifically highlights a small select portfolio of stocks, although Jim does run one of those, his charitable trust, www.actionalertsplus.com, and that has outperformed the S&P 500, the metric Alpert considers most important for comparison, since its inception.
After the tally problem, you have to deal with the even more significant difficulties of weighting and timing. A list of stocks is not a trading portfolio. Again, these things are self-evident in a real portfolio. You know how much the trader chose to buy, and when. If you want to "assume" equal weighting among all stocks, and some arbitrary measure of trading timing, assume away, but do be careful of what happens when you assume. That, however, is starting to get rather far afield from what's actually happening on Mad Money.
This is just my initial reaction, but I'll have a whole lot more to say later.
Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.
Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.
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