James Cramer, You Got Screwed! Why Wall Street Tanked and How You Can Prosper
I will admit, I was seriously put off Cramer by the antics I've witnessed on his CNBC show "Jim Cramer's Mad Money". Yet, in the essays and editorials I've read such as this one, he comes across as much more thoughtful, reasonable, and gives intelligent insights. There's almost a Jeckyll & Hyde phenomenon at work with Cramer: there's James, the smart guy who writes coherent, sensible essays on money management, and then there's Jim, the foaming-at-the-mouth, loud, obnoxious tv personality who makes stock reccomendations that are sometimes completely insane.
Cramer has been in the financial news quite a bit this week, after shooting his mouth off about doing things at his hedge fund in the 90's that might or might not have been illegal. As a result, I picked up You Got Screwed! out of curiosity. As I mentioned yesterday, I try to put my prejudices on hold sometimes, and expose myself to new sources of information.
You Got Screwed! is Cramer's second book, written in 2002, and he spends the first three quarters of the book dissecting the build-up and aftermath of the tech-boom of the 90's and the dot-com implosion of 2000. In what I now recognize as his signature style, he calls everyone in the financial industry an asshole; from notorious analyst Jack Grubman, to the money managers at Mutual Fund companies who he says oversold their clients on risky tech-sector equities. Villifying Wall Street is his primary marketing pitch, and how he attempts to build street cred with his target market: middle income workers who are concerned about their retirement savings.
Aside from the flagrant transparency of his marketing, his scandalous recounting of the disasters, irrational exuberance, and sometimes outright fraud of the tech boom makes for entertaining reading. I enjoyed it with the same sort of guilty pleasure I get from peeking at the tabloid headlines while in line at the supermarket. The conclusion, in which he outlines sensible, straightforward investment strategies for everyday people are about as safe and straightforward as you could expect. Nothing extraordinary or new, but still, advice that many people need to hear. Overall, You Got Screwed! is entertaining and reasonbly educational, and worth reading, if you are into this sort of thing.
Saturday, March 24, 2007
Reading List: James Cramer's You Got Screwed
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3 comments:
A word about Mr. Cramer: In February of 2000, just days before the Naz peak and a month or so after the S&P 500 had started to fall (companies that were actually profitable were falling out of favor with the dumb money well before that), Cramer had this to say:
"Internet-related companies are the only ones worth owning right now..." These "winners of the new world...are the only ones that are going higher consistently in good days and bad."
And get this: Here's Cramer again: "You have to throw out all the matrices and formulas and texts that existed before the Web...If we used any of what Graham and Dodd teach us, we wouldn't have a dime under management."
Well, Warren Buffett and Berkshire Hathaway did, indeed, retain a few dollars under management, and their investors got richer during the bear market.
Meanwhile, by year-end 2002, one of Cramer's top 10 picks from that time had already gone bankrupt and a $10,000 investment spread evenly among Cramer's top ten picks at that time would have left his investors with just $597.44.
The Street.com made a fortune off the craziness, and Cramer profited handsomely from the craze in income, if not in capital gains.
To be fair, I also remember seeing Cramer say "you don't love me if you're fully invested" around that time.
All in all, though, Cramer certainly did his part to feed the madness.
Jason, you're points about Cramer's hypocrisy are excellent. I steered away from making too much hay of it, since my book review would have veered into a tirade. Cramer's hatchet job on Wall Street in his book is doubly entertaining because of his tacit omission that he was one of the people responsible for overhyping the tech sector.
The most important piece of market wisdom hasn't changed since the days of Jesse Livermore: never, ever, ever take a stock tip from anyone.
I would take a stock tip from Warren Buffett if he told me to buy Berkshire Hathaway. Other than that, I think you're right.
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