Mad Money

Jim Cramer: Worst Time of Year to Make Money?

Mad Money Markets: Earnings Info Overload
Mad Money Markets: Earnings Info Overload

If there's ever a time when the market is just fraught with calamity Jim Cramer said it's now.

"The couple of weeks during the heart of earnings season are the worst times of the year to attempt to make money," insisted the Mad Money host. " It's because of the tsunami of incomplete information coupled with the need by traders to trade every data point, even if the data points are meaningless."

In other words, Cramer thinks putting money to work right now could be perilous because stocks will often experience fits and starts as pros parse through earnings reports – and sometimes jump to the wrong conclusion!

That's precisely what Cramer thinks happened on Tuesday in the case of Verizon, Johnson and DuPont.


"This morning Verizon reported at 6:29 AM. The company sent out a release and as I expected, the release was filled with positives," Cramer explained.

Verizon is considered a bellwether by the Street – it shows the formation of small businesses via new landline numbers, it shows how FiOS is doing as a competitor to cable and it can even provide clues to what Apple might earn when it reports later this week.

Cramer's gut response was positive – "I have always been a Verizon fan," he said.

"But then I looked at the pre-market reading on my Reuters screen and the darned stock was down 30 cents. There's got to be something wrong with Verizon that I don't see," Cramer thought.

"By the time I open my P.C. the judgment had been pronounced. It's a much worse than expected quarter. "Verizon EPS misses," reads the headline.

No sooner had Cramer embraced the stock's decline when it reversed course and traded higher.

"Verizon CFO, Frank Shammo, said on the earnings conference call that he was confident the margins would improve in 2013. After all that, Verizon started trading higher and stayed higher the rest of the day."

Lesson: Had you embraced the negativity in the market between the earnings release and the conference call and sold short – you'd be sorry.

Dave and Les Jacobs | Blend Images | Getty Images

Johnson & Johnson

Trading Johnson & Johnson on Tuesday was also fraught with peril.

"Here's one where the earnings were definitely better than expected, a buck 19 versus a buck 16, and it looked like it was off to the races. But wait a second, the guidance streamed over and it was $5.35 to $5.45. "The Street" was at $5.49," Cramer said.

Immediately the stock started dropping like a stone, down 80 cents from Friday's close.

"Street chatter suggested Johnson & Johnson outlook was a problem," Cramer explained.

However, the Mad Money host added, a dominant thesis for owning this stock is that JNJ could be a break-up story – therefore the guidance just doesn't play that big a role.

"Sure enough, we learned JNJ is exploring options for its diagnostics unit, and the stock flies right back up, to where it was Friday, before shading down a tad in the afternoon," said Cramer.

Lesson: If you had sold into the weakness, you'd probably be kicking yourself.

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The price action in DuPont, Cramer said, was nothing short of wild.

"Dupont, which had so disappointed last quarter, came out with a stellar 11-cent number, versus the 7-cents the Street was expecting. It looked like a major comeback."

Meanwhile, DuPont CEO, Ellen Kullman made some concerning comments on CNBC's Squawk Box.

"I think 2013, is setting up to be a cautious year, the question is how will the US economy respond," said Kullman.

The stock slipped in pre-market trading.

"However, within a few minutes I'm hearing that all anyone's really focused on is how the company's doing in agriculture, which turned out to be pretty darned good, especially in Latin America. And the latest DuPont earnings showed that margins have troughed with the commodity in question," Cramer said.

As a result, the stock – which had been sinking – reversed and started to fly again. Lesson: Shorting this stock would have hurt.

What's the bottom line?

"Believe me, if these were isolated examples, I would be fine with them. But they are par for the course and there are so many that are like these that you can see why I regard all of this trading off of headlines without knowing what people are really looking at to be just fraught with calamity and chances to lose money with almost every twist and turn," said Cramer

Call Cramer: 1-800-743-CNBC

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