People Profile: Jim Cramer

a post dedicated to the Beyoncé of CNBC

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Quick summary: a profile on popular financial guru Jim Cramer (5 minute read)

Jim Cramer is an investor turned stock-evangelist who has probably reached a wider audience with his financial advice than anyone in human history. Unless you consider the biblical forbearance on lending to be financial advice, in which case the list goes: Jesus, Cramer. Or maybe Mohammed, Jesus, Cramer. Regardless, it’s rarified air.

If you aren’t familiar with Cramer’s long standing CNBC show Mad Money, you might want to watch a few seconds of this video to get a feel for his shtick. And if you think that video is aggressive, consider that it’s a highlight reel released by CNBC; it’s supposed to show his best side.

What’s Cramer’s story?

Harvard, Harvard Law, Goldman Sachs, launched his own hedge fund, founded a publicly traded media site wwww.thestreet.com, wrote six books on investing, and of course, in year 17 of hosting Mad Money. On paper, Cramer’s the wet dream of compensating parents everywhere. I raised a winner, a winner! 

What’s to like about Cramer

He’s fun. He’s like the cool teacher from high school but for stocks. You learn about business, but you also learn about life, and he just gets it the way your parents never could. Sure, his histrionics get annoying, and are possibly a cry for help, but he’s knowledgeable, contagiously passionate, and his show is an entertaining way to keep in touch with the financial markets.

What’s Not to Like 

A lot of what Cramer does is a disservice to his viewers. He promotes excessive risk-taking under the guise of public education. Cramer purports to be all about empowering Middle America by preaching advanced stock-picking techniques, but he knows the vast majority of his viewers have no chance to beat the market, and those that stand a chance don’t need him anyway. Viewers would be better off with 60 minutes of a blank screen with the words “buy index funds.” What he really does is gamify investing. Cramer is to stocks what Sherlock Holmes is to police work, what Grey’s Anatomy is to medicine, what Dog is to Bounty Hunting. He turns a profession into entertainment. There’s nothing inherently wrong with that, there’s just nothing particularly useful about it. Speculating on stocks is like collecting shot glasses. It’s a hobby (I guess). Just don’t plan on cashing out and retiring. Cramer knows this, he even tells his viewers this, but that message is drowned in a tsunami of ticker-tape and sensationalized minutiae that turns irrelevant ten seconds after Cramer feigns a stroke at hearing it.

The second thing some people don’t like about Cramer is his personality. Haters find Cramer jockish, overconfident, condescending, inauthentic, greedy, and creepy. All of those accusations have merit. Cramer is one of the old guard, a veteran of the investing era before personal computers, when the most confident personalities made the most money.

Lastly, Cramer has a habit of making absurd, disturbing headlines, including but not limited to:

• Repeatedly calling Lenny Dykstra (who Bleacher Report named one of professional baseball’s 25 biggest Sleazeballs) “the greatest mind on Wall Street.” (Spoiler, he isn’t). Dykstra was awarded his own column on Cramer’s TheStreet.com, which was revoked after Dykstra was busted by the SEC for fraud.

• Martin Shkreli, famed “pharma-bro” who is currently serving a sentence for securities fraud, revealed in an interview that Cramer gave him his first job. Shkreli recalled: “Jim interviewed me and he asked what I did, I said I played guitar. And he asked me to come and play guitar to prove it. And I played all these wedding songs and I started work at Cramer Berkowitz’s hedge fund March1, 2000, when I was 16.”

• Cramer apparently admitted to securities fraud, although he later clarified he was speaking hypothetically about the behavior of others. Jon Stewart interrogated him on the matter and it’s must-see TV. 

In Cramer’s defense, he has a target on his back (that he put there) and sometimes gets unfair criticism. During the midst of the financial crisis, he encouraged viewers not to withdraw their Bear Sterns savings accounts. Bear Sterns went bankrupt and the press excoriated him, but his advice was spot-on: the savings accounts were FDIC insured.

Why does this matter?

Cramer’s influence is undeniable, but what’s really worth thinking about is the philosophy he represents. Cramer believes that the investor’s obligation is to maximize profits within the constraints of the law. If you think tobacco is bad, but think it will be profitable, then buy Philip Morris stock and donate the profits to anti-tobacco organizations. Change isn’t made by action, it’s made by altering the system, which is done by redirecting resources. Weirdly, this law only applies to profit seeking. Nobody ever says, hey look, pollution happens whether you personally pollute or not. If you’re really an environmentalist then you should go find a bunch of coal, sell it, and then pay people not to buy coal.

This philosophy can explain Cramer’s behavior – the end justifies the mean. At his hedge fund, ethically questionable trading tactics made him millions and, so he often brags, he donates a lot of that to progressive charities. Had he joined the Peace Corps, those charities wouldn’t have benefitted. On his show, he doesn’t waste airtime on prudent investment management, he sells get-rich-quick schemes – but again, the proceeds go to good causes (which is to say, causes Cramer deems good). If he lectured his audience about cutting wasteful spending, he’d lose his show, be replaced by a day-trading shock-jock, and how would that benefit society? This logic may sound like it belongs on political fringe, but it’s actually mainstream. Hilary Clintold told young activists “I don’t believe you change hearts…I believe you change laws, you change allocation of resources, you change the way systems operate.” That’s what’s worth thinking about: does Cramer’s philosophy have merit, to what extent does it apply, and to what perverse outcomes can it lead to?

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Additional Reading

The Good, Bad and Ugly of Jim Cramer - 20 Something Finance (Blog)

2006 Article from the New Yorker on Cramer

Cramerwatcher: A Website That Tracks Cramer's Stock Picks (Spoiler: He Doesn't Make You Money)

2007 Barron's Editorial on Cramer