Jim Cramer is an eccentric personality that can always be found on his show “Mad Money” and is usually rumbling around the CNBC studios during the day. His show is fairly simple and captures the attention of a few hundred thousand people every night. Viewers call in with questions about specific companies, Cramer offers advice usually in the form of “buy” or “sell” but occasionally goes a little deeper. Anyone that invests for the long term avoids his recommendations like the plague, but nevertheless his viewership is strong.
There is no shortage of research out there that shows Cramer gives poor advice. Here and here are a few examples, and you can track his advice day to day here. But the problem with all this tracking and research is that you have to make assumptions.
Say Cramer thinks a certain stock, call it Weak Inc (ticker: WEAK), is going to do great. He calls for a buy. That’s fine, the stock may or may not do well over the next month. But he doesn’t say when you should sell. If someone never follows up on when they recommend a buy on when to sell, then it isn’t advice. It’s commentary.
I could say I think the Patriots (that’s football) are great, and my advice will be measured by their performance in the current season. But if I think WEAK is a good stock, there is no time frame to measure that. Unless the company literally goes under, WEAK will probably do well in the long run.
Jim’s advice can therefore not be called good or bad. It isn’t advice. If he followed up with each pick saying when it’s time to sell, then it’s advice.
There is another problem with Cramer’s financial advice that reiterates it’s not advice at all. Cramer might tell you to sell WEAK, but he doesn’t tell you what to do with the cash then. Should you hold it? Invest in bonds? Buy WEAK’s competitor? The advice doesn’t go that far.
Again, this is commentary. He is offering a singular opinion at a singular moment in time. For an investment, that is not enough to be advice. To reiterate: Jim Cramer doesn’t give bad financial advice because he isn’t giving advice at all.