Tuesday, July 18, 2006
Cramer Getting Smoked

Amongst his biggest losers are: AMTD (-16.4%), NBR (-15.8%) and QCOM (-14.23%). As a matter of fact, out of 24 stocks in Cramer's AAP only 4 are up-- one is BUD +0.7%.
Obviously, Cramer is not known for losing money in the market. However, due to his compliance restrictions, coupled with his inability to short stocks (I assume for legal reasons), Cramer is getting smoked--wholesale.
Despite his lackluster performance, Cramer has been extremely active blogging-- trying to guide his readers the best he can.
Its worth noting that fellow Realmoney.com blogger, Rev Shark, has been stumbling along-- insulting his readers and sounding bitter over betting on a bounce in the market for the better half of three weeks. Rev is regarded by many as Cramer best financial blogger.
Comments:
<< Home
This post says a lot. Subscribers to Action Alert+ will never trade like Cramer. Why? Cramer can't be himself under the restrictions of AA+. Not only would Cramer short stocks, he'd used options too. His biggest move was buying a ton of calls on MRCK before people realized what anti-cholesterol drugs would mean to medicine. The Spitfire-like posts he makes on the RealMoney blog are closer to the real Cramer - grabbing 2-3 points here & there all day. Only potential full-time traders will find that format beneficial. Nevertheless, people will drag his face through the mud.
True. Cramer knew what he was getting into. Its unfortunate that he cannot recommend short sales or more aggressive hedging strategies.
Its like his legal handcuffs are breaking his performance.
Its like his legal handcuffs are breaking his performance.
I forgot to mention that on Cramer's radio show he once mentioned why he no longer recommends shorts. Someone calls the SEC and the SEC then calls him. He told listeners his legal fees were too much to bare. The SEC was behind the ball on Worldcom, Enron, etc, but they dutifully stifle the market's way of exposing frauds.
As I understand it, Cramer's restrictions against shorting are threefold:
1. The image of impropriety--it's OK to say good things about a stock and make money, but it's not OK to say bad things about a stock and make money.
2. Difficulty of being short--it's much more painful to be wrong on a short position than it is to be wrong on a long position. People bitch and moan right now--imagine the wailing and gnashing of teeth we'd hear if people were shorting on Cramer's recommendation.
3. Shorting is inherently riskier--As Cramer explains in his book, shorting is much riskier than is being long. If you're wrong about a long position, the most you can lose is the initial investment (if the company goes to zero). If you're wrong about a short position, your losses are unlimited.
You have to think of AAP and Mad Money as products. Who are the target audiences? It's not daytraders or folks investing for retirement; it's the average joe investor who has a few extra bucks on his hands and wants to try to make it grow. The type of investor who can afford to lose the money and may make a few trades a month.
I'd say the restrictions make a lot of sense in this product.
1. The image of impropriety--it's OK to say good things about a stock and make money, but it's not OK to say bad things about a stock and make money.
2. Difficulty of being short--it's much more painful to be wrong on a short position than it is to be wrong on a long position. People bitch and moan right now--imagine the wailing and gnashing of teeth we'd hear if people were shorting on Cramer's recommendation.
3. Shorting is inherently riskier--As Cramer explains in his book, shorting is much riskier than is being long. If you're wrong about a long position, the most you can lose is the initial investment (if the company goes to zero). If you're wrong about a short position, your losses are unlimited.
You have to think of AAP and Mad Money as products. Who are the target audiences? It's not daytraders or folks investing for retirement; it's the average joe investor who has a few extra bucks on his hands and wants to try to make it grow. The type of investor who can afford to lose the money and may make a few trades a month.
I'd say the restrictions make a lot of sense in this product.
If all the right people would all get scared at just the right time, I could get rich off of day trader!
Post a Comment
<< Home