Trader’s Narrative

We’ve gone quite a while without a financial journalist or commentator taking a swipe at Jim Cramer. Before we get to the most recent one, lets not forget an earlier one.

Blodget vs. Cramer
At the beginning of the year Henry Blodget wrote a scathing article on Slate: Pay No Attention to That Crazy Man on TV. Yeah, that Henry Blodget (Amazon.com $400/share). Cramer, as you can imagine, didn’t agree and came out punching.

Blodget’s indictment of Cramer in sum:

..the essential conflict in the American financial industry: the war between intelligent investing (patient, scientific, boring) and successful investment media (frenetic, personality-driven, entertaining).

To be fair, Blodget did make a huge mistake but he also paid a dear price. In the end, he not only gained wisdom but also humility. Cramer on the other hand lives in a reality of his own making where by filtering and editing history, Cramer is always right.

It is easy to make fun of Blodget for believing the hype but if you think he was the only one who bought wholesale into the mania, take a look at this giddy speech that Cramer gave at the top of the bubble.

Farrell vs. Cramer
Farrell is a commentator on MarketWatch.com - he has wisened with age but sometimes can come across a tad cantankerous. His main critique is the frenetic pace of the “advice” that Cramer imparts (a staggering 3,000 in just the last 3 months) and the opportunity cost of researching stocks and trading (transaction costs plus taxation).

Cramer’s retort is flimsy:

What really gets to me is an assumption that Farrell made without any justification about the people who regularly watch “Mad Money,” although he’s hardly alone in this. It’s the idea that the people who watch the show are idiots who thoughtlessly buy the stocks I recommend without taking any of my actual advice to heart.

For one, Farrell is saying that following Cramer’s advice of “doing homework” simply isn’t practical for the average Joe. And even if he were to do it, the opportunity cost makes it a losing proposition.

But more importantly, how can Cramer not notice that whenever he mentions a stock his viewers causes a spike in its price? That many times people are so excitedly tripping over their keyboards that they sometimes transpose symbols or buy similar sounding stocks sending other companies’ stocks for a short and bumpy ride?

Shouldn’t they be frantically researching the stock instead? For an hour?