Why You Shouldn’t Listen to Jim Cramer

Whatever money you may need for the next five years, please take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market right now."
-- Jim Cramer, Oct. 6, 2008, S&P 500 at 1,056.89

Nearly eight months ago and thanks in no small part to the statement above, I concluded that Jim Cramer was a menace to investors.

It only took a few months for the rest of the nation to catch on. The Daily Show's Jon Stewart finally jumped on the bandwagon in March, exposing the man for what I think he really is: an entertaining (if not, irritating) media personality, but certainly not the champion of the individual shareholder that he often claims to be.

In fact, I consider him to be the closest thing there is to a walking, talking hazard for the individual investor. Now, Jon Stewart may have the jokes, but I have the real reasons why Cramer is precisely that -- and why you should take a pass on any investment advice he tries to give you.

Thank you, Jon!
I continue to fully applaud Cramer's stated goal -- help people make money by investing in the stock market. But Cramer’s outburst in October was a mistake -- plain and simple. And as Mr. Stewart so kindly illustrated, it wasn’t his first time.

You see, when someone issues panic-inducing market calls (as Cramer does from time to time) – and urges investors to avoid long-term strategies to buy and hold good companies – the average investor simply gets crushed.

Now, Cramer's Today show plea was grounded in a sound reality -- Fools should never have money they need during the next five years in the market. But by advising people to indiscriminately sell, he helps contribute to exactly the thing that he’s trying to avoid: losing money.

Chances are, most viewers were petrified before Cramer even spoke -- the market's been up and down more times than a yo-yo lately. Even a very small push these days is likely to convince investors to join the terrified herds pulling their money out of the market.

And half a year later, Jim Cramer appears to be the next Oracle at Delphi as we sit in a market priced below his initial call -- though by only 12% or so. Though I’m happy for those who were able to pull themselves out—and many did—it’s a disturbing trend to witness.

Between October and the end of November, investors pulled out a whopping $140 billion from U.S. equity funds. Based on what these funds were holding, they were indirectly pulling out of mutual fund mainstays like Pfizer (NYSE: PFE  ) , Anheuser-Busch (NYSE: BUD  ) , IBM (NYSE: IBM  ) , Chesapeake Energy (NYSE: CHK  ) , and US Bank (NYSE: USB  ) -- hammering share prices, many of which had already been hammered.

Cramer might’ve saved people some money in the short term -- and I’m pleased for that. But in order to complete the circle, he’d have to tell these people precisely when to get back in. I’m not sure how loudly I heard him yelling on March 6 when we reached that recent market low. Those people who convinced us to run for the hills in at the end of January and February just missed out on one of the biggest market rallies ever -- that no one saw coming.

And instead of holding on to the steady blue-chip stocks that have historically provided investors with some of the strongest long-term returns, many investors were progressively selling at historic lows ... thereby ignoring the sound and sage advice from names like Buffett, Lynch, Graham, Munger, and Bogle. That’s the larger point.

You don't need a weatherman ...
I'll admit that Cramer is entertaining, but no one can consistently forecast the direction of the market as he pretends to be able to do. I repeat: No one can consistently forecast the direction of the market.

It moves completely randomly and unpredictably over the short-term -- and therefore trying to make a "call" on the market won't consistently work out for you. Pick a direction (up or down), and there's a 50% chance of being right -- even though the prediction is rather meaningless.

It's like Punxsutawney Phil. The furry little critter climbs out of his hole and either sees his shadow or he doesn't. Whichever it is, the result has nothing to do with whether winter is over -- just like a stock market prediction has nothing to do with the market's movements.

The scary part is that Cramer flip-flopped numerous times in 2008, trying to call the bottom at various points throughout the year. While CNBC may gloss over this fact, I've taken careful notice. Don't forget about his theory that 2008 would be the year of natural gas. Ouch.

The talking heads on TV get paid to put on a song-and-dance show and attract viewers. It’s entertainment, folks. Your education or your personal success, as Jon Stewart as kindly brought to light, is a secondary priority (or not a consideration at all).

Whether Cramer turns out to be right or wrong in the end just isn't the point. The point is that no one can claim to predict the short-term direction of the markets -- no one. If you follow the advice of those that say they can, it's likely to cost you thousands (if not more).

Here's the real problem
In the real world, there are commission costs, taxes, and opportunity costs -- all of which have a tremendous impact on the returns that you're likely to experience.

Every time you pull the trigger in your account, think about your broker and the tax-man doing a little touchdown dance. Much of their income is predicated on you transacting as much as possible.

Take a hint from someone who knows a lot about the hidden costs of investing: John Bogle, the founder of Vanguard Investments. He writes: "No matter how efficient or inefficient markets may be, the returns earned by investors as a group must fall short of the market returns by precisely the amount of the aggregate costs they incur. It is the central fact of investing."

Think about that the next time you hear "Buy, Buy, Buy" or "Sell, Sell, Sell."

And for those who listened to Mr. Cramer on his recent market call, don't forget that he has quite a monumental task in front of him: he has to precisely tell you when to get back in.

The Foolish bottom line
If you want to make money in the stock market, you need to tune out the panic -- or the euphoria. You need to remember that no one has any idea where the market is going in the near or medium term. You need to buy shares of great, built-to-last businesses. You need to hold for the long term. And you need to keep as much money as you can from the tax man or your broker.

That's what we do at Motley Fool Stock Advisor, and it's paying off. Take two of our best stocks, Activision (Nasdaq: ATVI  ) and United Health (NYSE: UNH  ) . We first recommended buying shares of these stocks more than six years ago. Both have thrashed the market. I bet we'll continue to hold these two for a long time to come.

What was the cost of doing all this? Probably $24 in broker fees and $0 in taxes. That's a perfect example of what I'm talking about. In fact, our whole scorecard is beating the S&P 500 by 38 percentage points.

As for Cramer ... he undoubtedly has an uncanny knowledge of tickers, prices, and strange catch-phrases. But what he sorely lacks -- and what you must never forget in your investing days -- is temperament. It was Warren Buffett who once said that "the most important quality for an investor is temperament, not intellect."

Want to see what else we've recommended and what we're recommending now? Click here to get a free, 30-day trial to Stock Advisor -- there's no obligation to subscribe.

Nick Kapur owns shares of Activision. Activision and United Health are Motley Fool Stock Advisor selections. Chesapeake Energy, United Health and Pfizer are Inside Value picks. The Motley Fool's disclosure policy would never suggest it could predict or time the market.


Read/Post Comments (60) | Recommend This Article (75)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 31, 2009, at 8:00 AM, shark1001 wrote:

    I lost more money following the Fools than I did following Jim Cramer. This is the reason I will never subscribe to any of the fool's publication again. They must criticize their competition in order to gain readership by implying Cramer's routing caused people to take out $140 billion from the market which caused the downturn. How about the hedge funds, I guess they were innocent. Kapur should be fired.

  • Report this Comment On May 31, 2009, at 9:11 AM, bartedsall wrote:

    cramer did the right thing - enforced selling by decimated hedge funds would have generated the market lows. that selling was not finished until march 09 low -- since that time cramer has traded the 35% gain - cauiously warning viewers that the rise is uncertain, looking for stabilization in housing and financials before looking for a bull market.

    Even given a new bull the anticipated inflation cycle will require careful share selection --

    MF has been hugely helpful despite many errors -- pay attention to what MF does well -- forego critcizing others -- selling in oct and having that cash to deploy in march or even today at a -12% discount is huge!!

  • Report this Comment On May 31, 2009, at 9:23 AM, don2m wrote:

    I have subscribed to Cramer for over 4 years and have lost money with him overall. Natural gas was the biggest hype and also the biggest loser namely his hype of Cabot Oil and gas at $65. Then he bought a few shares at $40 on the way down and said he was taking some profits at $45. He never mentioned his $65 stock. His overall portfolio performance for 4 years has been less than or close to many of the benchmarks. He is a clown and you are right. One winner out of 10 is certainly not great stock picking !

  • Report this Comment On May 31, 2009, at 9:25 AM, ChilkatSally wrote:

    I can't agree at all with this article.

    Any money needed in five years should not be in the stock market. Period.

    If people were investing with money that was to go for college educations, or a down payment for a house, then the call to protect it is a valid call.

    Ignore Nicks advice. the number one rule is "dont lose money" when you need it in five years or less.

    Sally

  • Report this Comment On May 31, 2009, at 10:09 AM, skyliner500 wrote:

    This article is foolishly distasteful.

    Cramer -- Baaaaad.

    Me -- Gooood.

    You, don't give Cramer your subscription money, give me your subscription money.

    Cramer writes helpful and entertaining books that will put his show into perspective. I do not find any evidence that Mr Kapur has read "Real Money" and thus his negative opinion of Cramer has even less credibility.

  • Report this Comment On May 31, 2009, at 10:19 AM, NOTvuffett wrote:

    I am so tired of this debate on Cramer. He does a show where he expresses his OPINION. I like it because he may tell me about a stock or to get me to think about something I hadn't before.

    The Fool brings something to the table he can't in that format- hard numbers. I use them both in my decisions and i suspect many of my fellow fools do as well.

    booooyah fools

  • Report this Comment On May 31, 2009, at 10:27 AM, Dave0129 wrote:

    Completely agree with NOTvuffett above. I'm also tired of hearing it.

    It seems that the author has a history of bashing Jim Cramer. He must people will believe him the more he re-prints the same article. See below links

    http://www.fool.com/investing/general/2008/11/24/why-you-sho...

    http://www.fool.com/investing/general/2009/03/28/why-you-sho...

  • Report this Comment On May 31, 2009, at 11:03 AM, jasonjim wrote:

    All analysts without exception make mistakes, and that includes Jim Cramer and Motley Fool people. Many analysts have hidden agendas because they are really working for other wealthy clients not their small-time retail readers. They tell their readers to buy when their wealthy clients want to short, and vice versa.

    Retail investors should read the reviews but follow their own drummer and do their own research. The greatest value emanating from analysts is pointing investors in a certain direction, but in the final analysis the investor must make the decision. Don't follow these guys like blind sheep.

  • Report this Comment On May 31, 2009, at 11:11 AM, JamesPPetersen wrote:

    Question: Was Cramer ever sanctioned for misleading the public in order to make personal gains for himself, or was that purely a rumor?

    Since I heard something to that effect, I've done exactly the opposite of what his suggestions may have been and have made a small sum of money as a result.

    Jim

  • Report this Comment On May 31, 2009, at 11:31 AM, wuff3t wrote:

    "I can't agree at all with this article.

    Any money needed in five years should not be in the stock market. Period."

    Sally, you need to re-read the article. The author says precisely that, so how can you criticise him for not saying it?

  • Report this Comment On May 31, 2009, at 11:35 AM, thedivot wrote:

    How about spelling Jon Stewart's name right?

  • Report this Comment On May 31, 2009, at 12:41 PM, kamuirei wrote:

    Sally is emphasizing that Cramer was right to say what he did. I don't personally follow Cramer much, but he is entertaining on occasion. Cramer is simply an easy target because he frequently makes calls publicly.

    The fool is just as guilty, it hypes certain stocks, bashes others, and... sometimes... is... wrong. But it's harder to attack an abstract organization than a polarizing individual like Cramer. I loved it when Stewart took him down, but you have to recall that Stewart's intent wasn't to blast Cramer, it was aimed at the industry and media.

    Knowing what the hype is can help you be a better investor, Cramer provides this. He also gives genuine opinions openly, unlike certain services that republish the same articles month after month. Articles that repeat common sense, attack easy targets, and cherry pick recommendations. Like every bit of investment advice you get, the ultimate responsibility is yours.

  • Report this Comment On May 31, 2009, at 1:04 PM, ChilkatSally wrote:

    I did read the article carefully , thank you very much. And I quote :

    " But by advising people to indiscriminately sell, he helps contribute to exactly the thing that he’s trying to avoid ".

    The suggestion is that there is a "good time" to sell, is market timing by any other name.

    The oddest thing about his argument was " don't forget that he has quite a monumental task in front of him: he has to precisely tell you when to get back in."

    The reason you would take the money out was because you needed it in five years.

    I also would argue that advising people to sell money they need in five years is not indiscriminately selling but instead, a good idea.

  • Report this Comment On May 31, 2009, at 3:11 PM, hamopr8r wrote:

    I kept tabs on Cramers every day picks in early 2008 and found they were no better than 50%. Most irritating was picking a stock one day with GREAT fanfare then on a chance viewer call advising a caller he decided it was not a good choice a week or so later. Quit watching but ocassionaly when I stumble across the show can hear some interesting observations. Are you willing to trust your $$$ to someone who yells and screams like a circus barker and puts on such a juvenile act?

  • Report this Comment On May 31, 2009, at 4:23 PM, Varchild2008 wrote:

    I didn't listen to Jim Cramer when he told everyone to sell and inspite of losing $15,000 in 2008, I am sitting on roughly a $4,000 or more stock market gain in my portfolio (not counting dividend payments).

  • Report this Comment On May 31, 2009, at 4:29 PM, masterN17 wrote:

    Jim Cramer is cute.

  • Report this Comment On May 31, 2009, at 4:29 PM, NOTvuffett wrote:

    truth, at&t is one of those 'safe' stocks i bought with a good dividend. bought it at 33, sold it for 30 and it is currently trading for 24+. I had to bite the bullet and free up cash so that I could trade. It was hard but I am up. If I sat on it, my account balance would be little comfort and the divi checks just a reminder of the bad investment I made. The cash i freed up from that i have multiplied in other things.

  • Report this Comment On May 31, 2009, at 5:20 PM, NOTvuffett wrote:

    truth, nothing wrong with collecting dividend checks, as a matter of fact that is the way i thought i would do things. I am just saying we are not in a 'normal' period of the market.

  • Report this Comment On May 31, 2009, at 5:37 PM, FreeTruth wrote:

    Truth, I would like to hear about your real portfolio and how you line up dividends weekly.

  • Report this Comment On May 31, 2009, at 6:03 PM, sentinelbrit wrote:

    I take my hat off to the guy. He gets paid to voice his opinion. People are free to take it or not. If you want to pay for it, so be it. As far as his market predictions go, so far he's got this rally right - unlike the MF crowd.

  • Report this Comment On May 31, 2009, at 6:43 PM, mnadel wrote:

    "I’m not sure how loudly I heard him yelling on March 6 when we reached that recent market low."

    Perhaps this is something you *should* be sure of, given that your thesis is that a call to get out is only valuable if you are told when to get again at the right time (a questionable assumption in itself, given that those who followed the October call are *still* better off than they would be if they had just held -- and given that you agree that no money needed in the next five years should have been in the stock market).

    The answer is that Cramer pretty well called the bottom. And in the weeks immediately following, well before the 20+% run-up had been missed, Cramer was screaming *buy* -- but, more importantly, he was calmly and reasonably explaining *why* the run-up would continue as it has: big money was fleeing hedge funds for long mutual funds.

    Ultimately, Cramer and The Motley Fool both have things to teach, and I learn from both of them. They are also both selling themselves to the public to make money -- Cramer through his on-air buffoonery (sometimes) and The Motley Fool through articles list these.

  • Report this Comment On May 31, 2009, at 7:14 PM, Ewellone wrote:

    what Steward did to Cramer was awful. I thought he traded in funny, I was a fan but now I don't watch him. Cramer is more entertaining any day.

  • Report this Comment On May 31, 2009, at 8:04 PM, BlazeTime wrote:

    I stopped watching Jon Stewart regularly after the Cramer interview. I find Jim Cramer entertaining and insightful. And who cares what Jon Stewart has to say about the markets? Cramer does give too many signals and not enough followup, but I make my own decisions

    Nick, you are lost.

    If Cramer's call to exit the market with the funds you need for the next five years is bad, why do you also say it is "grounded in a sound reality"? Any good financial advisor would say the same thing. Another Foolish tenant is to not time the market. If you should be out of the market, do it now.

    Nick, envy is one of the seven deadly sins.

  • Report this Comment On June 01, 2009, at 12:02 AM, bobbye64 wrote:

    Just a few seconds of Jim Cramer is enough! I have watched CNBC since the beginning of the show and have always gained knowledge from their commentary.

    When Jim Cramer got his one hour show, I could and did change the channel. Now he is on several times per day and often with others who are speaking at the same time. Not a pretty scenario! I do not remember seeing you "Fool's" there.. Perhaps you should try for Kramer's Slot?? BB

  • Report this Comment On June 01, 2009, at 7:12 AM, Beatemup wrote:

    There is no question Cramer is a jerk.

  • Report this Comment On June 01, 2009, at 8:54 AM, maxwellgs wrote:

    I thought it was Jon, not John, Stewart.

  • Report this Comment On June 01, 2009, at 9:05 AM, Nigel1234 wrote:

    Cramer did the right thing and it was not fear mongering. Listen, the underlying fundamentals of this recent rally are lacking. Banks are insolvent, the nations debt has exploded, and the government is printing endless "monopoly" money. How can people look at this and think things are back to normal? Nothing has changed in the housing industry and a great deal of those stocks SA will recommend will be consumer disrcetionary. You will NOT see those stocks rise like they did prior to 2007 because folks were using home equity to make buy their plasma TV or crap from China. America is not in a growth stage anymore and Buffet is a VALUE investor now. Following him now is not what I want to do, although I dod want to buy what he would if he were a YOUNG growth investor today.

  • Report this Comment On June 01, 2009, at 10:37 AM, retry77 wrote:

    Of course the FOOL is wrong again. Cramer admits it when he plugs a loser, while fool only admits to selling a winner.

    The fool makes pitches based on others opinion, while Cramer asks you to think about what you're buying.

  • Report this Comment On June 01, 2009, at 10:46 AM, fstop22 wrote:

    What a cheap Monday morning call! Like the FOOL called the bottom. Cramer is far less self-serving than this article. His knowledge of the workings of the market are great lessons everyday. BOYAH!

  • Report this Comment On June 01, 2009, at 10:59 AM, lejones22 wrote:

    j c is the worst - over dramatic, horns, voice, & other loud things.....how about a more mature approach for a very important subject - one's finances ? !!

    his advice is 50/50 @best...after watching 2 shows, quit watching. cnn has definitely 'missed the boat' w/him. he truly not as cute as he thinks he is....wonder what his wife & children think of him.

    do prefer your advice....been following you for many, many years - keep up the good work !!

  • Report this Comment On June 01, 2009, at 12:03 PM, flyyoufools wrote:

    @Nick Kapur

    You're right on Cramer (if late to that party). Cramer's show is entertainment for people who like investing, and only a "small-f" fool would treat it as the sole source for investment decisions. Like everything else hyped at TMF, you have to do your own research. And no, you can't count on Cramer to tell you to get back into a stock you sold, because he can't possibly be expected to follow every recommendation he's made and try to predict the new peak or trough. You missed one key point in this case, however.

    *******

    My argument about realistic expectations aside, he didn't tell people when to get back in, and never will -- because that money shouldn't ever go back in. By definition, it was money you needed in the next 5 years, for a new roof, or whatever, and never belonged in the market in the first place. So, telling people to get out then was spot-on - doubly so given that the market went down from there.

    *******

    The only mistake Cramer made on THAT point was that he didn't highlight the underlying rationale for those who didn't already know it -- that this money shouldn't have been in the market in the first place. (He knows this, he's stated it before, but omitted it on that show - I remember, because I happened to be watching that day and I thought the same thing then.)

  • Report this Comment On June 01, 2009, at 3:22 PM, wuff3t wrote:

    Sally,

    Respectfully, I think you have missed the point of the article when you respond by saying: "The suggestion is that there is a "good time" to sell, is market timing by any other name."

    That's not at all the point the author is making. He says: "Now, Cramer's Today show plea was grounded in a sound reality -- Fools should never have money they need during the next five years in the market."

    ...and that's the point. You should not have had that money in the market in the first place, and therefore should not have been in a position where you felt forced to sell. This is one of the main tenets of TMF investing philosophy. The author's article is entirely consistent on that point. If you buy shares with money you might need in the near future you're exposing yourself to the risk of having to sell at (possibly very large) losses.

    It might sound harsh but I find it difficult to have much sympathy for anyone who placed themselves in that position...

  • Report this Comment On June 01, 2009, at 3:57 PM, Northern7 wrote:

    Little Jonny Stewart is an idiot.

  • Report this Comment On June 01, 2009, at 4:28 PM, MzAfrika wrote:

    If someone reccomends a stock or forecasts the direction the market will take, whether Jim Cramer of Fool.com, it is up to the individual investor to do the research in order to be able to make an educated decision either for or against the prediction. Anyone who moves money based on heresay and conducts no research is taking a major risk. It is up to the individual investor to know what type of investment personality they have. Whether they like to buy and hold or to make quick money or both. By doing your homework regularly and staying on top of the headlines you maximize your gains and minimize your losses and it does not have to take more than an hour or so of your day. Your investments should be worth the time.

  • Report this Comment On June 01, 2009, at 4:40 PM, bernbern0 wrote:

    The best advice always seems to come from truthisntstupid. Even though I re-invest my dividends in what I hope are solid companies, I think truthisntstupid's

    advice is great, especially for the volatile and uncertain times we're going through. In my opinion, truthisntstupid should be one of the Motley Fool writers.

  • Report this Comment On June 01, 2009, at 7:36 PM, membar wrote:

    >The best advice always seems to come

    >from truthisntstupid. Even though I re-invest

    >my dividends in what I hope are solid companies,

    >I think truthisntstupid's advice is great...

    I'm missing something here. truthisntstupid says that he doesn't reinvest his dividends in order to get an income stream, but from what I understand, you should try to accumulate shares of dividend-producing stocks (presumably by purchasing them with income, of which his dividends are a source).

    How is this not the same as reinvesting the dividends (unless you want to purchase shares of other dividend-producing companies)? What am I missing here?

  • Report this Comment On June 02, 2009, at 12:59 AM, NOTvuffett wrote:

    Truth you seem awfully defensive. In my experience almost all people here just here to help others or to get help from others. Also there seems to be a wide range of income ranges. I am just a middle class guy and I have only been investing in individual stocks for about a year. My real portfolio is up almost 16% right now in part from using the Fool as a source of information, I know lots of people that have lost 6 or 7 figures in that same time.

  • Report this Comment On June 02, 2009, at 1:08 AM, NOTvuffett wrote:

    P.S. Maybe I should write a blog about all the mistakes I made as a new investor to help the other people that are just starting out like I was, but most of the people here seem to have had much more experience than I have.

  • Report this Comment On June 02, 2009, at 12:44 PM, PetRock235 wrote:

    The only problem with dividend stocks is that dividends aren't guaranteed. Most of the financial giants like C and BAC cut their dividend way down, and the stock price tumbled before the dividend cut because earnings were down. 0

  • Report this Comment On June 02, 2009, at 2:37 PM, keywestcorona wrote:

    This again? This is a recycled article. So you can see the strategy here. People like Cramer...Blast Cramer and it brings more traffic to your site. It doesn't matter if you have no credible argument. You can resubmit the same article...it won't matter. That's how it is when you want to get attention...Attack an attention getter.

  • Report this Comment On June 02, 2009, at 5:19 PM, synergyatl wrote:

    I can't believe it. This again? I signed up for the SA last December, and canceled in January, mostly because I saw this same article back then and got very mad. It seems now that every time I actually come and give fool.com a look, here is this article again. Well, I picked 5 Cramer recs from watching his show on January 15th for my ROTH, and to date I'm up 25.4%. S&P 500 was 843 on Jan 15th, and today it's at 944, for a 11.9% gain over the same time frame. So put that in your bull and smoke it. :)

  • Report this Comment On June 03, 2009, at 5:08 AM, membar wrote:

    truthisntstupid wrote:

    > I hope I can answer you without sounding sarcastic because I really don't wish to.

    > But...

    I wasn't trying to provoke sarcasm - I was just asking a simple mathematical question. I now understand that you want the dividends paid out to you so you can reinvest them as you choose. Thanks for the clarification.

  • Report this Comment On June 03, 2009, at 11:51 AM, windjmr43 wrote:

    Choosing CHK as a prime example of Cramer stupidity was just plain stupid. The Chart shows that Cramer said sell @ $24 and buy at $16. Seems like somebody is ready to make $10 a share.

    I've been a fool since 1995, and a Cramer watcher since 2007. You make a good team, and I make good money when you are on the same page.

    If you supported the uptick rule, today's blog about the banks, and how easily the presodent can hurt the market with his random comments, I think it would help the small investor more than mud slinging.

    Thank you, dogmapowder

  • Report this Comment On June 03, 2009, at 2:32 PM, retiredpharma wrote:

    I have done well listening to both MF and JC!

    Cramer is a showman but he makes very useful broad market calls! His call in 2008 on the market in general was nothing more than a "confirmation" to many of us that the market was in SERIOUS trouble.

    I sold my entire 401-K into cash about 1 month earlier when I realized the Housing Market was truly dead! I personally had a home for sale in Montgomery County,Md.that is historically bullett-proof and I waited 10 months to get a sale and at $100,000 lower than a bank refi appraisal! That was my tip off and best ever call!

    I went to cash and waited till March 2009 to go back in selectively. I own MF stars AMAG and JNJ for example and Cramers call on ALTH! (by the way he said buy in the 5's and I did)!

    You both have many neat themes! The trick is to pick which ones and when to buy/sell! Same old story!

    glta

  • Report this Comment On June 03, 2009, at 8:59 PM, MD2003XLT wrote:

    w

  • Report this Comment On June 03, 2009, at 9:36 PM, robstuck wrote:

    this article is horrible. "Cramer is bad, we are good... give us your subscription money!" why does every article end with subscription stock picks. get real. the subscriptions at the end of the articles are the real scams- not cramer.

  • Report this Comment On June 03, 2009, at 10:25 PM, anyraver wrote:

    Obviously, the writer doesn't understand the premise of the show. The show is about making money,buy and homework and don't be scared to take a profit. Anyone stupid enough to bet their shirt deserves to lose it. After watching many of these investing shows NO ONE can call anything till after it's happened. Brokers will tell you to buy GM tomorrow too even though the stock is less useful than toilet paper. Cramer's warnings were right on though I will disagree about the housing boom. In my view something stunk about that scenario(the banks and the SEC)long before the events we witnessed. Finally, the author must read Jim Cramer's Mad Money Sane Investing in an Insane World, there are rules for investing that must be followed by Mad Men and Motley Fools alike.

  • Report this Comment On June 03, 2009, at 10:57 PM, MD2003XLT wrote:

    Wow this reads like a regular catfight! However, since I can identify with most of it from my own experiences I will chime in with my novella as well.

    I used to work for JNJ & knew how the company operated. Given that, I broke one of the cardinal rules of investing in that 85% of everything I had invested was in JNJ stock alone. I had been unemployed for two extended periods and JNJ stock gave me a very nice quarterly income, also to enhance my unemployment. Once back on my feet, I reinvested the dividends, all into JNJ.

    Now JNJ is a “family” of ~350 companies which, for the most part, operate independently from the “parent company.” So in order for JNJ to crash, MOST of its companies would have to crash at the same time. Unlikely given the breadth of products and companies in question. Remember the Tylenol issues and just how fast the stock recovered?

    Some say I am too attached to my JNJ stock but when Cramer was telling people to bail on the market, I held on…just a bit longer than I should have. I started scaling out of JNJ around $72, then $68 then $65 and so on until @ $55 I was all the way out! I hated to do it but that freed up a huge amount of capital and I eventually began scaling back into JNJ. Now I still have a nice rounded out number of sJNJ hares but my new basis is under $50 and it is only about 40% of my current holdings. That gave me the opportunity to look into other investments that have done very well @ like Goog, Rimm, GE and AXTI at bargain basement prices. Notice how I missed Apple even though everyone recommended it? I missed it, My bad! Full disclosure; I had a few big losers too and frankly, they were mostly from TIPS that I didn’t do my own research on so can I fault CNBC or The Fool for MY foolishness? I learned that getting advice from ANY source is like taking advice from movie critics like Roper & Ebert. I can tell if I would like a movie or not by what they say or don’t say, not by what they recommend. We usually don’t agree but watching them gives me an edge so I rarely waste money on a movie I won’t like.

    So if TRUTHISNTSTUPID broke another “rule” of investing by not always reinvesting his dividends! So what? I applaud him for saving anything at all since most of America doesn’t seem to AND for taking the time to find a system that works so well for himself. I say bravo!

    As for Cramer: He’s a showman no doubt but who else would you have doing a show like that? Doesn’t he always qualify his position at the beginning of each show by SAYING “I’m not here to make friends but to make money AND TO ENTERTAIN YOU?” How can you have a legitimate argument with that? What gets me about this part of the arguing here is that some people have added what John [or Jon, whichever you may feel important enough to correct] Stewart had to say. Right or wrong Stewart is the first to tell you he is amazed that such a large number of Americans actually get their news FROM HIS SHOW! “Don’t they know we are FAKE news?” Although with more than a grain of truth at times. It’s up to YOU to figure it out.

    And The Fool? Well if you do your homework you will eventually find that there are a lot of recycled articles here and they seem to do exactly what any marketer would want. I read it AGAIN and decided to read the comments this time as well. They are here to make money and why not? Aren’t all of you? And by the way, have any of you noticed what is part of The Fools logo? “…To Educate, Amuse and Enrich” Sounds a lot like what Cramer says doesn’t it?

    Is one better than the other? I can’t say because I use them both, along with probably a dozen other inputs from web sites to news articles and other sources.

    Should you find a source that offers you 8%+ gains year after year then thank God that you didn’t have the kind of money investors GAVE to Bernie Madoff! Very few, if any get that lucky.

    Bottom line? Gather info from as many sources as you feel comfortable with & learn the cues they give you. Not to decide when or which stocks to buy or sell but rather which ones deserve a closer look on YOUR part so you can make a decision YOU feel comfortable with. After all, it’s YOUR money!

  • Report this Comment On June 04, 2009, at 4:16 AM, dtox420 wrote:

    And if I followed MF's advice??? Where would I be? Take a look back at 2008 and tell me how many times an MF article says.....seriously, now's the time to get back in. If I followed any of that advice, I would have lost the farm. My advice to everyone is to listen to Cramer and MF and then do the opposite of what they say.

  • Report this Comment On June 04, 2009, at 12:48 PM, oghowie wrote:

    I've done pretty well with some of Cramer's recent tech specs. Just don't buy everything he recommends and do some research.

    He's only a guide, not a psychic.

  • Report this Comment On June 04, 2009, at 7:10 PM, Darrencardinal wrote:

    truthisntstupid: you keep it up. I think your ideas are some of the best I have heard on the MF for a long time. I have read Motley Fool on and off for years, and it seems like they have sold out.

    I mean, it seems like David and Tom Gardner never post anything here anymore. They used to warn you away from newsletters, now every article tries to get you to subscribe to one.

    I don't make much money either, and I like dividend payers too. Have you taken a look at Phillip Morris? It pays a nice fat dividend.

  • Report this Comment On June 06, 2009, at 12:00 AM, HarryCarysGhost wrote:

    The only problem I have with J.C is he seems to be a month late on his picks. Otherwise I find his show entertaining. Much better then the fear mongering on fox.

    When Cramer finally gets around to picking one of my stocks I always cringe because i know it's going down in the short term.

    To Truth is'nt stupid I agree that you could make a nice supplemental income on divs.

    But have you ever researched the power of compound interest. Depending on your time frame you could retire a millionare.

    Check out ETP or DMLP.

    By law limited partnerships must pay most of the profits to shareholders

  • Report this Comment On June 06, 2009, at 5:13 AM, trythisntstupid wrote:

    msftgev

    Yes, I agree that compound interst is very powerful. I just think some of us living on $16-18,000 a year might stand a better chance of keeping any savings we have if we first build our present income up some. Then at least we're a little more insulated from life's smaller disasters causing us to have to raid our savings.

    I used to think maybe I would reach a certain "comfort zone" income-wise then start reivesting some of my dividends. I don't really think so any more. This is working TOO good. When a person reaches a point that their income far exceeds their living expenses they have achieved financial independence anyway. This has become my ultimate goal.

  • Report this Comment On June 07, 2009, at 8:18 AM, dtox420 wrote:

    truth,

    I hear you on dividends but I'm a bit confused why taking the payout is better than reinvesting them. Why wouldn't you want to compound your reinvestment? $1000 per month of dividends would be nice, but if they're reinvested, that 1k could turn into 2k 5-10 years down the line (with no other purchases). I'm just throwing out hypothetical numbers btw. Plus with the market tanking this past year, you'd be reinvesting at discount prices. Plus reinvesting is free. If you buy more shares on your own, you have to pay a fee. I'm just curious why you feel the way you do about taking the check.

    I'm 100% a dividend investor these days. I like the fact that even if the stock goes down, I'm still getting paid and the shares I'm accruing, are being bought at even lower prices. If you really want to tap into some nice dividend paying options, go to etfconnect.com. There are some nice funds out there that pay healthy dividends on a monthly basis.

    peace

  • Report this Comment On June 07, 2009, at 8:23 AM, dtox420 wrote:

    I just want to add that I think my strategy is more long term. I'm only 32 but I'm setting myself up nicely for retirement. If you're taking all your dividend payouts, then I don't think you can fully realize your investments potential. If it's money you never had to begin with, then it's money you won't miss. Why not make it work for you? How do you think credit card company's make their money.....compounded interest.

  • Report this Comment On June 07, 2009, at 12:45 PM, NOTvuffett wrote:

    dtox, truthisntstupid doesn't make lots of money and his work is seasonal. His goal is for the dividend checks to pick up the slack when he needs it. It sounds like he is very frugal and invests when he can. I have a lot of respect for this guy.

  • Report this Comment On June 07, 2009, at 1:32 PM, LastOne2Know wrote:

    If you are watching/reading/listening to Cramer for his stock picks you are missing the point. I have never chased any of his picks but I watch/read/listen religiously for his insights, market knowledge, and cryptic cultural references. I apply that knowledge to my own work, which is really what Cramer suggests.

  • Report this Comment On June 07, 2009, at 7:48 PM, MD2003XLT wrote:

    Hey I know what it's like to rely on the dividends and boy is it nice to have them when you need them. I've had to tap into mine twice and I don't regret it one bit. Once I was back on my feet, I resumed reinvesting them but by then I could AFFORD to so I know what you are talking about Truth. The fact that you are able to save at all is commendable. Keep it up!

  • Report this Comment On June 09, 2009, at 9:00 PM, tk45 wrote:

    Hmm... I guess nobody posts on Mondays... or maybe I'm just late to the conversation.

    Thanks truthisntstupid, this information is better than most paid information that I have come across... I was looking for even a little info about what or how lower income individuals were utilizing the stock market..

    I am currently in my quest of seriously looking for the same thing. Although I am only 26, I have been working many hours for the last 10 years and the last 5 years at a second job... I rarely get anywhere from 2 to 5 hrs of sleep a night, and every other weekend 2 - 2 day periods with no sleep... I grew up poor ...Dad disabled, Mom taking care of him... we were happy just getting $5 every once in a while... you can't believe how many ways we came up to stretch that $5

    Fast forward... no longer poor, but by whose standards? I work 2 jobs, I still live paycheck to paycheck, no savings, I have a mortgage on a house, I have 2 kids, I have a car that always seems to have a problem when you have any extra cash... It seems that the more money you make you can never get ahead...something always comes up each month... I work where the job is... 300+ miles from my house, so I pay rent also, gas - some weekends traveling home, 2nd job also 3 separate locations requires driving...etc I'm trying to keep this short... I could create a list of all the "costs of living"... but I'm not...

    The Issue: Need Income NOW, not only for me... everybody around me is in the same scenario and most much worse... I happen to be the one that is better off...they look at me as the rich person... sorry I don't know any rich people... In fact I don't know anybody who even has savings... I also give what little I have to help them out too...

    I've been looking and there really isn't any advice for lower income investors. In fact most resources won't offer any info unless you have thousands of dollars to invest... so much props to truthisntstupid

    I started to do the income/dividend investor thing, but I couldn't wait... I need to make money in days & weeks over the next 2 to 3 months... and I think I found the quickest way to do so.. And that is what I wanted to share...

    So I've been in training (on my own) for 2 months and (real) trading for 2 1/2 weeks... Talk about expert... :)

    But since then I have made $860 Day Trading and Semi-Day Trading with a little over $2,000 in capital. $700 of it in the last 3 days (because I finally got my account switched to a margin account). I will be looking into the Dividend Income again that truthisntstupid suggested but this is, I think, a great opportunity for the lower income to make money in the stock market... and i think I'm going to quote another post... "why did I have to figure this out on my own?"

    Basically I opened a margin account with the minimum $2000 required (took 2 months for me to get there). You want to take it to at least $2,025 to cover fees. Now since you need $25,000 minimum to be able to daytrade more then 3 times in a five day period... yeah right, not in my lifetime..or my past lifetime... So, I only day trade 3 times in a 5 day period. The other trades are buying low closer to the end of the day, then selling in the morning at opening (if going down) or let it rise and sell at peak. If you want to be more careful, wait to see if it is rising.. jump in...as soon as it turns jump out. Now the key (took about 4 to 5 trades for me to get this...) You are not going to make a lot of money on stocks probably costing over $10. Why, because you only have $2,000 and are limited to how many shares you can buy because of price. The more shares you have the more money you get for each $0.01 change. Example 50 shares at $0.05 change = $2.50, not even enough to cover your broker fee! So stick to stocks under $10. The stocks I have made money off in the last 3 day have all been under $3! Right now is a really good time because of the volatility. With a stock at $1.50, you can buy at least 1000 shares or more. 1000 shares at $0.05 change = $50! much better then $2.50. And that is with only a 5 cent change! I'm catching them at min $0.05 to $0.45. 1000 share at $0.30 change = $300

    I hope I have set off some light bulbs... and hope somebody finds this useful... I plan to keep going... and teaching the others... I'm thinking this may pay off more than dividends, but I still would like to know more about it... Note: yes you may lose a $100 here and there but you can quickly gain it back... and yes you will be taxed at a way higher rate than dividends... it just means you need to make more :) ...stimulating the economy... at least I'm not telling you to go buy a big screen TV to save the economy...

  • Report this Comment On June 11, 2009, at 7:38 AM, grickie wrote:

    This a great thread and has moved me to join and make my 1st post.

    I was a stock broker for many years. Left the market in the early 90's....the business model changed when all of the discount brokers appeared everywhere. I had many jobs I new I had the "skills" to make money in the market. Stayed away form the market mostly because life kept getting in the way.....lots of expenses without lots of income. I now have managed to get ahold of my IRA and have really done some disciplined trading with some great results.

    I have traded mostly banks as the prices rose and I do covered call selling to generate immediate income.

    I love truthisntstupid's approach and plan on moving into that mode of investing with a twist of using covered calls to build positions a little more aggressivley...actually trying to build the biggest bank positions that I can in this market as I believe they will eventually bring their dividends back.

    As far as Cramer goes, I love the show ( I'm a market nut anyway) I like to take notes and follow the trends and sometimes he helps shine light on a stock that I wouldn't look at, or if it's "bad" one look even closer ( because I can short too) but I never make investment descions soley on his advice because like most people trying to find winners everyday is really almost impossible...but I like the exposure and the ideas. also read Confessions of a Street Addict...gives you a great new light to see where he is coming from.

    Anyhow it would be great to hear from anyone using options as well as dividends to get monthly income, It has been very successful for me but I would like to hear some cons form those who have done this...as I don't have many..when it works, it works.

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