Thierry Martin
07-25-2005, 11:28 AM
Here is an excerpt of a very good article posted at the Optionetics web site. (http://www.myaffiliateprogram.com/u/options/t.asp?id=1011)
MARKET RANT: Cramer Part Dos
By Chris Tyler, Optionetics.com
7/24/2005 11:45 PM EST
I recently wrote about James Cramer, the host of CNBC’s “Mad Money†talk show. Jimbo is the ex-hedge fund manager who rants and raves about the market five nights a week to those willing to listen. And apparently folks are doing just that, as Jim’s influence on many individual stocks puts the old E.F. Hutton commercial to shame. On any given show, Jimbo’s seal of approval or contempt for a stock will have a measurable short term price impact, generally in the form of a substantial price gap. Even more incredible is that we’re not just talking thinly traded, Small or Mid Caps either. When a person starts moving household names with market caps of $35, $50, or even $150 billion, like Cramer routinely does, it’s quite obviously people are doing a whole lot more than just listening. ‘Booyah, Jimbo!’
Personally speaking, it’s all become rather scary to think how powerful his words have become. I typically listen in to the show while doing research, as sometimes the show can be a source of a fresh idea. If it turns out there’s nothing being torpedoed or embraced like the second coming of Jesus Christ, I’ll turn down the volume and get back to focusing on the work at hand. I personally believe in approaching the market based on doing my own homework. By combining the technical and fundamental picture into something that I can appreciate on a risk to reward basis, I feel that if applied consistently, there’s a trade or investment worth pursuing.
Amazingly though, my occasional note-taking as it relates to potential trades based on his ideas is that of the minority. It’s become more and more obvious as of late that plenty of folks have decided that Cramer is the final word and no homework of their own is needed. Whatever the flavor du jour on that evening’s show is, you can rest assured that his audience is more than happy to drink the Kool Aid being served. While it’s not quite like that at Mad Money just yet (and most of the disciples are still seemingly happy to chug down the happy juice), there are definite bouts of stomach churn for those that take in too much of what he’s serving.
If you listen to Reverend Jim and hear something like, “YOU MUST ABSOLUTELY OWN THIS STOCK!†or gospel themes such as, “BROADBAND REVOLUTION!†or “SECURITY STOCKS!†are unabashedly expounded upon like tomorrow is already too late to own the flavor of the moment, then you’ll have heard the market zealot at his over-emotional best. Now, while he might really be onto something when he starts foaming at the mouth and pounding the table, it’s also probably best to not get too worked up about missing the trade opportunity of your lifetime, if you don’t enter in the next twenty-four hours.
I’ll admit it—he’s a danged good interpreter of theme trading ideas and of individual stocks, and that’s why I do listen in most days. Admittedly, the short term results are often impressive; as the stock or group of stocks in question do invariably gap in the direction of his market call. But, if you get past the hype, nine out of ten times (I’m using a guesstimate on this folks) you’re better off taking notes on the ones that make sense to you and then wait for a better entry after the Cramer effect has worn off. Everybody probably knows what a PB & J is. It’s a Peanut Butter & Jelly Sandwich. My advice, when you hear something on his show that you just have to gobble up right then and there, is to give a few days. Remind yourself that those same three letters that represent the tasty treat might also be a well-served acronym for “Pull Back Jim.†It’s great to gain insight from the show, don’t get me wrong. However, it’s even better when you can apply your own money management and wait for the very, high-probability pullback.
Ultimately, the nine out of ten (the guesstimate) that do just that, gives you more than a fighting chance to appreciate his advice long after Jimbo has gone on to his next hot idea.
You can see the whole article here (http://www.optionetics.com/articles/article_full.asp?idNo=12890)
MARKET RANT: Cramer Part Dos
By Chris Tyler, Optionetics.com
7/24/2005 11:45 PM EST
I recently wrote about James Cramer, the host of CNBC’s “Mad Money†talk show. Jimbo is the ex-hedge fund manager who rants and raves about the market five nights a week to those willing to listen. And apparently folks are doing just that, as Jim’s influence on many individual stocks puts the old E.F. Hutton commercial to shame. On any given show, Jimbo’s seal of approval or contempt for a stock will have a measurable short term price impact, generally in the form of a substantial price gap. Even more incredible is that we’re not just talking thinly traded, Small or Mid Caps either. When a person starts moving household names with market caps of $35, $50, or even $150 billion, like Cramer routinely does, it’s quite obviously people are doing a whole lot more than just listening. ‘Booyah, Jimbo!’
Personally speaking, it’s all become rather scary to think how powerful his words have become. I typically listen in to the show while doing research, as sometimes the show can be a source of a fresh idea. If it turns out there’s nothing being torpedoed or embraced like the second coming of Jesus Christ, I’ll turn down the volume and get back to focusing on the work at hand. I personally believe in approaching the market based on doing my own homework. By combining the technical and fundamental picture into something that I can appreciate on a risk to reward basis, I feel that if applied consistently, there’s a trade or investment worth pursuing.
Amazingly though, my occasional note-taking as it relates to potential trades based on his ideas is that of the minority. It’s become more and more obvious as of late that plenty of folks have decided that Cramer is the final word and no homework of their own is needed. Whatever the flavor du jour on that evening’s show is, you can rest assured that his audience is more than happy to drink the Kool Aid being served. While it’s not quite like that at Mad Money just yet (and most of the disciples are still seemingly happy to chug down the happy juice), there are definite bouts of stomach churn for those that take in too much of what he’s serving.
If you listen to Reverend Jim and hear something like, “YOU MUST ABSOLUTELY OWN THIS STOCK!†or gospel themes such as, “BROADBAND REVOLUTION!†or “SECURITY STOCKS!†are unabashedly expounded upon like tomorrow is already too late to own the flavor of the moment, then you’ll have heard the market zealot at his over-emotional best. Now, while he might really be onto something when he starts foaming at the mouth and pounding the table, it’s also probably best to not get too worked up about missing the trade opportunity of your lifetime, if you don’t enter in the next twenty-four hours.
I’ll admit it—he’s a danged good interpreter of theme trading ideas and of individual stocks, and that’s why I do listen in most days. Admittedly, the short term results are often impressive; as the stock or group of stocks in question do invariably gap in the direction of his market call. But, if you get past the hype, nine out of ten times (I’m using a guesstimate on this folks) you’re better off taking notes on the ones that make sense to you and then wait for a better entry after the Cramer effect has worn off. Everybody probably knows what a PB & J is. It’s a Peanut Butter & Jelly Sandwich. My advice, when you hear something on his show that you just have to gobble up right then and there, is to give a few days. Remind yourself that those same three letters that represent the tasty treat might also be a well-served acronym for “Pull Back Jim.†It’s great to gain insight from the show, don’t get me wrong. However, it’s even better when you can apply your own money management and wait for the very, high-probability pullback.
Ultimately, the nine out of ten (the guesstimate) that do just that, gives you more than a fighting chance to appreciate his advice long after Jimbo has gone on to his next hot idea.
You can see the whole article here (http://www.optionetics.com/articles/article_full.asp?idNo=12890)