Thursday, August 11, 2005

On Jim Cramer

There's a lot of Cramer bashing on message boards and blogs. Stephen Vita at the Alchemy of Trading calls him the perfect fade of all time, and Roberto at Roberto's Nasdaq Trader just pointed out that some of Cramer's recent picks have bombed. But I have to say, after seeing his special on speculation yesterday I really think he understands how to play the game.

I don't pay any attention to Cramer's picks or take the time to track the performance of his picks. What does interest me is talk about strategy, speculation, and money management. I almost taped his special last night when it re-ran because I thought he did a great job of covering a lot of basics in speculating in the sub-$10 space. What caught my attention is when he said, "sell when volume expands because that is profit taking." He was talking about low-float stocks in particular and it makes a lot of sense if you consider a stock with a 2 million float that trades 5 million in a day. There HAS to be profit taking going on no matter which way the stock is moving. The savvy know this, but rookie momo's think its time to buy at any price when the stock is racing up on ballooning volume. This is great speculation advice from Cramer. When the volume expands and the stock moves in either direction, it's often time to take some off the table and wait for a better entry when the volume has dried up.

He also did very well addressing the difficult topic of when to take a profit (not too late, but not too soon) and when to take a loss (not too late, but not too soon). When he is educating his audience like this, I think he's being a real hero. Does his often biased stock specific advice negate this? Maybe. But this is how I look at it: if you're savvy then he's helping you round up the sheep. If you see it another way then you might be a sheep. Cramer is on your side either way, and that is a quality I can appreciate.

2 Comments:

At 5:15 PM, Blogger Frank Chiu said...

He definitely knows his stuff. He's definitely a good help for most newbies. But again, a lot of his picks tank. By that, I mean he is dead-wrong. However, that's how the business of speculation works. People force him to speculate on stocks right on earnings and I think that's tough. A lot of new investors are great stock tip takers and they follow whatever Cramer says and they end up losing hard earned money. So, as long as they followed Cramer's calls on DELL, CSCO, AAPL (2 quarters ago), LEN, GOOG, YHOO, and like 10 others, you would have lost 5-10% on each stock. That gives you a permanent dent on your portfolio. And if you are new to investing, I don't know how you can make up all that. I'm sure if you read investing books, you will find out that taking tips blindly is the one of the best way to lose money (also averaging down a position).

Cramer's picks...when he's right, the picks are almost always obvious. When he's wrong, you can look back and know why he called on them: It was the market sentiment.

What he's good for is to gather a lot of information for the viewers. It saves you some research, and other times he gets to talk with CEOs and whatnot.

I used to listen to him before the TV show (radio show at thestreet.com) when I was new to investing. Now, I think I can make a judgements that are the same, if not better, than Cramer.

 
At 6:12 PM, Blogger Gordengekko said...

The way to play Cramer is to follow his most popular picks. Make a list.
The key is buy these stocks when they pullback. Cramer has a huge following and will mention them again. I did this with ELOS once and it worked.

Gekko

 

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