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A 'Careful, Honest Examination'?

I have one more point about the bogus attempt by Barron's to "measure" Jim's performance, and then I'll leave that publication alone, at least for now. Bill Alpert's claim that Jim underperforms the market, beyond all of the other problems I identified with it in previous posts, rests on yet one more incredibly bizarre assumption.



Alpert (or rather, the gnomes who did his arithmetic for him) seems to have decided that we should score a sell by reference to how it performed versus the broader market. Maybe they've done something more clever than that, but if they did they didn't bother with any explanation of their method.

Assuming that's what they did, how does that make sense?

Scenario A: Jim says to buy a stock. Then it's not unreasonable to compare how it does against the S&P 500, or some other broad index. Say the stock up 35%, but the S&P is also up 35%. Everyone made money. Arguably, there's not much value added. Perhaps a tie for Jim versus the market. So far so good.

Now Scenario B: Jim says sell a stock. The stock falls 35%. So does the S&P. Alpert seems to say that here too Jim only "tied" the market. Really? The market loses 35%. Viewers who listened to Jim didn't lose 35%. How is that a tie?

But wait, there's more. Alpert seems to score both Scenario A and Scenario B as ties for Jim versus the S&P. So is he saying it made no difference whether Jim said buy or sell? I thought the odds were stacked against John Henry, but this is...fascinating. I have to say, I admire Alpert's notion of a "careful, honest examination."

There's a good case to be made that we should measure the performance of a portfolio of buy recommendations against a broader index. For example, measuring Jim's Dow all-stars portfolio of Hewlett-Packard, Verizon Communications, Johnson & Johnson, Caterpillar and Home Depot , against an index makes sense. But how do you measure sell calls against an index and score them the way Alpert seems to be doing?

Maybe there's a way to justify this. I'm having trouble conjuring one up, but maybe. Maybe Alpert made yet another assumption, like there's an implicit "double secret" Cramer rule to be all in all the time, so that any sale immediately triggers a viewer to buy something else. Maybe. Of course, we've never said anything like that on the show. In fact, we've said the very opposite, arguing that it makes a lot of sense to have a good chunk of your portfolio in cash. These assumptions are starting to look like the bridges at Arnhem, with Jim trapped behind enemy lines beside Gene Hackman and Sean Connery.

Unless there's more to this than meets the eye, I'm left grasping for the proper adjective to characterize it. Questionable? Unsound? Slipshod? Tendentious? Risible? Demented?




Cramer's charitable trust owns Hewlett-Packard.


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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