Mad Money with Jim Cramer: A User’s Manual
Plus, Why No One Should Take Stock Recommendations
CNBC’s Mad Money just marked its 20th anniversary, and host Jim Cramer has become an influencer on U.S. markets and a bestselling author. Investment professionals think it's cool to mock him, and I know no fund manager who admits to watching and learning from his show — yet over 125,000 households do so daily. Presumably they derive some entertainment and investment value from it.
I tune in to Mad Money every weeknight at 6, despite my wife’s complaint that she “can’t stand the sound of his voice.” I watch the first segment at least, usually with a glass of brown spirits in hand, and always find it interesting. I met Jim once, at a lunch given by one of my clients, and found him a likeable fount of market knowledge, just as he seems on TV.
Most of my subscribers probably have seen the show, but for those who haven’t, it’s recorded at a post in the New York Stock Exchange soon after regular trading ends. Cramer, a one-man band in rolled-up shirtsleeves, begins by reviewing the day’s market, punctuated by sound effects including bull and bear noises, a Hallejujah chorus, a ringing cash register, and a crying baby. (Wife wants me to note that “no woman who screamed like he does would be allowed on TV.”)
After the intro, he takes viewer calls, many shouting “Booyah!” before asking about a stock. Though the most obscure stocks are likely screened by the producers, Cramer is impressive, with a view on virtually every listing.1 It’s hard to believe that all his many opinions are well-considered, yet he gives them anyway, with a sound effect. (Example: “We’re sick of [company name]!” (baby cry) “We’re switching to [company name]!” (bellow of bull) His clownish attitude may be what causes pros to dismiss him, but it’s cable TV after all.
Cramer will then discuss two or three companies or sectors, often interviewing a CEO. At the end is the “Lightning Round,” with more callers and quick stock takes. Other occasional segments include “Am I Diversified?” in which he judges a viewer’s portfolio, and “Off the Charts,” technical analysis of markets and sectors.
How Are Cramer’s Picks?
People have tried to evaluate Cramer’s stock recommendations, of which there are hundreds in a year of shows. They’ve found that while the buys tend to outperform and the sells underperform over one day, presumably affected by the very mention on Mad Money, within a few weeks they converge with the market.
Why is it then that callers are always saying that Cramer’s advice got them rich, enabled them to retire, made their lives worth living? Well, if he’s right half the time, then the people who have acted on those picks are happy, and as for the other half, they either don’t call in, or if they do, rarely get on air. Even if he’s right 60% of the time, which would be considered a great hit rate for any investor, that still leaves 40% of viewers who followed him taking a loss.
Since I assume there’s almost no one who mechanically implements every Cramer idea, unless a viewer does his own research, it comes down to luck whether they’ve chosen the right or wrong idea. If they bought Nvidia when Cramer first recommended it, then yes, they could say he helped them retire rich. But if, say, they bought United Healthcare when he said it was safe and saw it crash 20% the very next day, their retirement date would not have been brought forward.
Don’t Take Stock Recommendations
This leads to a general observation. Blindly taking stock recommendations, even from someone brilliant, is bad, because you’re not going to act on or know about all the other trades he may be doing.2 Once a fellow parent in my kid’s school, rated the top industrials analyst on Wall Street, told me at dinner that his favorite stock was 3M. I bought it without any research, it went down, and I finally gave up on it a decade later with a 30% loss. From this I did not conclude that the guy was a bad analyst, but only that the one pick he gave me happened to be. (P.S. I never got an idea from a fellow schoolparent that wasn’t bad.)
If you come across a hedge fund’s quarterly letter and buy one of the stocks featured, don’t complain if it goes down. If you really like the manager, you’re better off investing in the fund and getting all his ideas. I myself rarely recommend a stock and never to civilians: I’ve found that if they make money, they may not remember it was me who suggested it, but if they lose money, they never forget. I do comment on markets or sectors generally — as in this Substack.
So Why Watch Cramer?
I’ve written before here that making consistently accurate investment predictions is impossible, but if you’re an expert and think very hard you may be able to make sense of things that are happening now.
In the first segment of Mad Money, Cramer recaps the trading day. Given the network he has from his time at Goldman Sachs, as a hedge fund manager, and a journalist, plus a line he seems to have into the U.S. government, he’s got as good a chance as anyone to explain things. He does it again the next morning on CNBC’s Squawk on the Street.
Cramer’s interviews with CEOs are worthwhile, especially if it’s a stock you already hold. But no one should buy a stock just because “the CEO talked smart” (as my dad would’ve put it). CEOs are some of the world’s best talkers, and I say this as someone who’s fallen for many a line of personally bestowed bullshit.3 No, if you want to buy an individual stock you have to do your own research and, as Peter Lynch said, not less than you would shopping for a car.
Maybe because he’s more informed than 99% of investors, Cramer never panics, always maintaining a long-term perspective. Probably the best advice he’s ever given viewers is to “stay in the game” and avoid trying to time the market. And on the few occasions when he has sounded a big alarm, he’s had good reason, as in 2008 when he recommended selling stock to raise any cash you might need for a while.
Cramer also calls out the U.S. financial authorities when they’re screwing up, as in his famous “They know nothing!” rant as the Global Financial Crisis unfolded. Recently, he’s been acerbic about the Trump tariffs, while offering suggestions for the president to avoid doing more damage. It seems that Treasury Secretary Bessent, at least, is aware of Cramer’s takes. Jim’s possible impact on policy is another reason to watch.
When Cramer goes on vacation, Mad Money airs his prerecorded primers on investing, which are valuable, especially for novices. Much of this advice can also be found in his books, e.g., Jim Cramer’s Real Money.
Don’t Bet Against Jim
Market pros can snicker at Cramer’s on-air persona if they want, but they bet against him at their peril. That lesson was learned the hard way by Tuttle Capital and their Inverse Jim Cramer ETF, a 2023 fund designed to do the opposite of anything he recommended. It sported the cute ticker symbol SJIM and liquidated in less than a year.4
In this he reminds me of the late “A-Maz-in” Bill Mazer, who used to appear on local TV and was impossible to stump on sports trivia.
I exclude tips that are or may be inside information, which you shouldn’t act on anyway.
I was impervious to attempted cons by Russian CEOs, because my guard was up. It was the Brits and Canadians who could take me for a ride.
I have however traded and made money on Tuttle’s SARK, an ETF designed to short the holdings of Ark Innovation, an ETF run by possibly the most overrated fund manager in America.