Jim Cramer, star of CNBC's "Mad Money," says financial
reporters engage in "fakery" to explain the stock market's
ups and downs.
The hyper-kinetic Cramer, whose show has an audience of a million viewers,
told me reporters arbitrarily cite any piece of news, like an earnings report
from a single company, to account for the market's daily fluctuations.
"The market is much more complex than that, and reporters always want
to ascribe a particular bit of detail and extrapolate," Cramer said in
a NewsMax interview.
Then there is the reporters' trick of ascribing a down day in the
market to assumed "profit-taking."
"I think there is so much written about the market now that you tend to
get people fighting over each other to come up with the quick caption for why
it went up or down, and it's just often incorrect," Cramer said.
"So you end up with a lot of people being confused by the media."
Is it fakery?
"Yes . . .," said Cramer. "But yet I don't think
it's malevolent; I just think it's lazy."
On the other hand, Cramer thinks reporters who are overly negative have an
agenda.
"I find there's an undercurrent among some of the larger media
organizations who cover business, that business is somehow not good in the
sense that the people who run businesses are corrupt, or the process itself
is," Cramer said. "They're overly skeptical. Now, I am by
no means a pollyanna, but I am far more willing to see the positives of
business than most people I see on air. And it's upsetting to me,
because business is the way that we can grow the country, and business people
for the most part come to work every day to try to do a really good job. And
it galls me to see people presented as if everybody is out to steal.
It's just not true."
Cramer's advice on learning about business: Read the front page more
and the business section less.
"The front page is often a tremendous clue to what the government might
want to do, or to regulation, or to a sense of competition; and I feel like
you need to know more than just what you can read about in the business
press," he said. "Oftentimes, you could be blind sided. And when
you're blind sided, it's really difficult to get back in the
game. I want to keep people in the game at all costs."
Humble Beginnings
Cramer, who is about to turn 52, wound up with his own show on CNBC after a
lot of twists and turns. He graduated from Harvard, where he was editor in
chief of the Harvard Crimson, then tried to find a job as a reporter. When I
was a guest on CNBC's "Kudlow & Cramer" show, Cramer credited
me with getting him his first interview for a newspaper job with Donald
Graham, then publisher of The Washington Post and now CEO of The Washington
Post Co.
"Mr. Kessler, thank you, and also thank you for 26 years ago giving me
my first interview outside of college. I'll never forget it," Cramer
said.
While the interview with Graham did not lead to a job at the paper, where I
was then a reporter, it gave him hope and a psychological boost, Cramer told
me. According to Cramer, when applying to other papers, he cited the fact
that he had interviewed at the Post. He wound up at the Tallahassee Democrat;
then, he migrated to California, where he worked at the Los Angeles Herald
Examiner.
While working for the paper, he was burglarized four times in four days.
"It was like a Three Bears situation," Cramer said. "I
would come home from work each day, and someone had obviously been in my
house, making meals, using the bathroom, stealing a little bit each night.
And then I went to cover a sniper — a woman who shot a bunch of people
in San Diego at an elementary school — I covered that story for a
couple of days down in San Diego. And when I got back, everything I owned was
gone. And my checks had been stolen and written on, and I literally had no
money."
Striking Rock
Bottom With a ‘Thud'
Cramer's parents, who lived in a suburb of Philadelphia, wanted him to
come home to straighten out his life. Instead, he began living in his car.
"You can live in your car much more easily when you're a general
assignment reporter covering homicide," he said. "You're
kind of in your car all the time. I would take showers at friends'
houses. But after a while, I'd gone through all my friends. And
that's when I really had to hit the road. I was kind of embarrassed
that I was such a moocher. People felt bad for me; but at a certain point,
you know, they said, ‘Hey Jim, go get a life.'"
After five months in Los Angeles, the paper assigned Cramer to Sacramento,
where he had an expense account. While that helped, what came next blind
sided him. He became sick with a jaundiced liver and mononucleosis. His
health insurance was with an HMO that only had clinics in Los Angeles and did
not cover bills outside the area. Desperate, he wound up routinely driving to
a farm workers' clinic 70 miles from Sacramento. Finally, bedridden, he
couldn't do his job.
"I ended up just saying, you know what? I've just got to give up,
stop digging in my heels, and go back home," Cramer said. He ended up
sleeping on the floor of his sister's Greenwich Village apartment.
Things started to look up when Cramer helped found American Lawyer magazine
in 1979 with Steve Brill. Finally, he decided to go to Harvard Law School.
After graduating and joining the bar, he applied for a job at Goldman, Sachs
& Co.
Cramer had always been interested in stocks. As a child in Philadelphia, he
would run a fantasy portfolio, memorizing ticker symbols from business pages
that he spread across the living room floor.
Since he had not attended business school, Cramer was not an ideal candidate
for the investment banking firm. But in his job interview, he named five
stocks that he thought would do well. Four turned out to be winners, and he
was hired.
"I made a lot of money for people, and then I was able to take that
money, or at least a percentage of it, and start my own hedge fund,"
Cramer said.
He routinely took home $10 million a year or more.
In 1990, Cramer helped start SmartMoney. With his friend Marty Peretz of the
New Republic, he founded TheStreet.com, a financial news Web site, in 1996.
At the same time, he started his TV career.
Burned out, Cramer cashed out of his hedge fund at the end of 2000. That
year, his fund beat the Standard & Poor's 500-stock index by 38
percentage points.
Cramer's "Mad Money" first aired on March 14, 2005. Cramer
takes calls from around the country that usually begin with the greeting,
"Booyah, Jim!"
"Booyah, Bill!!!!" Cramer yells back, staring at the camera and
waiting for the caller to toss out the name of a favorite stock. The mention
of a freight-car maker elicits the sound of a locomotive on the air. When
Cramer recommends that viewers "come in" to a stock, he rings a
doorbell. Pre-recorded "oinking" of pigs accompanies a report on
a meat packer.
Adroitly, he manages to weave in a plug for his latest book, "Jim
Cramer's ‘Mad Money: Watch TV, Get Rich,'" which
has been on the Publishers Weekly hardcover non-fiction best-seller list for
five weeks.
The Clamoring
Cramer
During a typical segment, Mike from New York called in. After the usual
"booyahs," Mike asked about Daimler-Chrysler.
"Mike in New York!!!" Cramer bellowed as he paced in circles.
"Yeeeaaahhh! Daimler-Chrysler?! This is not the auto company you want to be in! I like General
Motoooors!"
Cramer followed that with bellowing: "I like to own best of
breed!"
It's all an act to get people's attention, Cramer admitted.
"I get up for it the way I think an actor has to get up for a
show," Cramer said. "At least I don't have to do the same
show every night. But I have a passion for what I do, which makes it a lot
easier."
Cramer has working knowledge of 1,000 companies. Like Donald Trump, he
generally sleeps only three hours a night. He thinks sleeping is a waste of
time.
"It's something I started by setting the alarm earlier and
earlier and earlier," he said. "It's not necessarily what
I'd advise others to do. Last night, I got 2˝ hours of sleep. I got up
and just decided to go work on Caterpillar."
Before going to work from his Summit, N.J., home, Cramer reads The New York
Times, The Washington Post, The Wall Street Journal, the Financial Times, USA
Today, and the New York Post, usually online.
"This is earnings period, so I will either be on conference calls or
read transcripts of the conference calls," he said. "This stuff
is a lot for me like the way some people view NFL football or basketball. I
have a predilection to the learning process here. And I think a lot of people
are bored silly with the stuff that I actually find fascinating."
In case a caller says something untoward, the show airs with a delay. At the
top of each show, Cramer says, "Other people want to make friends. I
just want to make money." But his larger purpose is to educate.
"I directed my show toward people who have been mystified by both the
investing process and by the day-to-day way that stocks go up and
down," Cramer said. "Using last night's show as a template,
I talked about how stocks got out of favor and therefore why they could get
in favor. I use the stocks themselves as more of an example, rather than
saying, ‘Go buy this.' The education component of this show is
really the key to its longevity, not the stock-picking component. The show has
not been what I would regard as a critical success as far as the media goes.
It's just been a commercial success."
Unearthing the
Diamond in the Rough
In general, Cramer looks for stocks that are undervalued relative to their
peers, but are performing in a superior fashion.
"Some of the things I look at are insider buying," Cramer said.
"I look at stocks that don't go down on bad news. I look for
companies that are involved in a broader trend —aerospace, defense, a
desire to have more energy-efficient entities. And I try to choose companies
that are as solid as possible, because I certainly don't want people to
go into high fliers."
To be discussed on the air, a company needs to have a capitalization of at
least $250 million. Comparisons of Cramer's picks have shown that he
outperforms the S&P 500. Because of his long-term approach to investing,
Cramer admires Warren Buffett.
"The whole process of day trading is something that is prohibitive for
all but the fastest and the guys with the most information," Cramer
said. "And that's very hard for a so-called retail investor to
get their arms around. I think a short-term outlook is good if you're a
hedge fund manager. I think that you could make more money if you find some
serious stocks you like and read about them, stay on top of them. I think
that's a better method to make money."
Cramer does not personally own stocks, but in a charitable trust that he
runs, he looks at an investing horizon of six to 18 months. People can follow
his moves in the charitable trust by subscribing to www.actionalertsplus.com,
part of TheStreet.com's family of newsletters.
Out of the Car,
Into the Green
Things have improved since Cramer lived in his car. Today, he is worth $50
million to $100 million. He has a charitable foundation with assets of $3
million. And he is sanguine about the direction of the market.
"I think that we're in a nice period where there's an awful
lot of pessimism based on people believing that you can't continue to
have a good thing like last year. That makes no sense to me," Cramer
said. "The recipe is there to have a good year — lower inflation,
OK interest rates. A lot of companies have too much cash, so they can buy
back stock. Other companies want in, and want to buy companies, private
equity mergers. These create a background that is quite positive for
equities."
Ronald Kessler is chief Washington correspondent of NewsMax.com. View his previous reports and get his dispatches sent to you FREE via e-mail Go Here Now.
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