Thursday, March 5, 2009

Jim Cramer Puts Foot In Mouth Again!

Jim Cramer is at it again -speaking before thinking and pontificating on a subject he knows very little about.

Before we get to another Jim Cramer "moment" let me state that I have no personal axe to grind with him, and in fact, as a former contributor to TheStreet.com, I am indebted to Jim Cramer for giving me a start and some credibility in the financial publishing business. I don't know the man, and I doubt he is even aware of my existence. I think he is genuine about helping investors, but I guess his downfall is that he must be a entertainer first and an analyst second. It is a tough job.

Where I take umbrage with Mr. Cramer is in the following CNBC "Mad Money" segment shown on March 3, 2009. Cramer calls technical analysis "hocus pocus", "voo doo" and "mumbo jumbo".













Gee, now I know why I don't get it right all the time. I was practicing "voo doo". I should have paid more attention to fundamentals. Not!


While I am not here to defend the art/ science of technical analysis, I believe folks have difficulty with TA because they expect it to be a science, but they really practice it like an art because they haven't done the homework to find what works and what doesn't. In my opinion, using tools and indicators that work fair at best will yield fair results. Using tools that you have no idea how they work is definitely a recipe for disaster. I suspect a lot of people use TA in this fashion.

The study of price movements (i.e., technical analysis) is the purest form of fundamental research. After all, everything that is known about an equity or an asset should be reflected in the price. Technical analysis also lends itself to rigorous analysis. One can easily quantify -if they do the homework - the significance of certain price movements. This doesn't mean that TA is always right, but it can easily improve the odds for success.

9 comments:

Panama said...

Really, I get tired of hearing Jim Cramer bashed. He isn't worth the time and doesn't deserve any attention. As for CNBC or Fox I wouldn't watch it if I were waiting in an waiting room with it on the incessant monitor. Recognize propaganda and give it the attention it's due.

Anonymous said...

Guy: You gotta love Cramer calling tech analysis 'hocus pocus' while TheStreet.com has many technicians on staff selling PREMIUM services ala Meisler,Farley,Fitzpatrick etc..
He should then stop selling those no? Shareholders would like that. ;)

"The study of price movements (i.e., technical analysis) is the purest form of fundamental research."

So true, so true! Keep on charting I say! :D
Pete from InVivo

Guy M. Lerner said...

Pete: I am honored!

Personally, I am an old school kind of person; I have trained as a physician in many of the top institutions/ university in the country; the system has always been one of mentoring and respect for those who have come before you no matter how much you despised someone; I am not much of a gunslinger (which is probably a bad thing when it comes to the markets). In any case, I am not about bashing Cramer and I am grateful how our paths have intersected (old school); I just thought his comments were of interest and a good way for me to state what I find appealing about TA

Anonymous said...

LOL....on Realmoney, Cramer often refers to various technical indicators and uses various technical analysis jargon.

Now I understand that on Mad Money his audience is completely different from Realmoney, however you gotta call shenanigans when you see it. Even Cramer isn't immune to cognitive dissonance.

BTW, I 100% admire the man and have read most of his books.

TraderD said...

Separating TA art from science has been my primary concern, started reading Dave Aronson's book (http://www.evidencebasedta.com/aboutAronson.html) which provides a comprehensive quantitative approach to the subject.

Guy M. Lerner said...

Aronson's book should have been better received; in many ways it should have been viewed as the gopel but it wasn't; I am not sure why; maybe folks don't want know that most things don't work in the market....

Guy M. Lerner said...

Aronson's book should have been better received; in many ways it should have been viewed as the gopel but it wasn't; I am not sure why; maybe folks don't want know that most things don't work in the market....

Anonymous said...

It is unfortunate that efficient market ideas have pervaded into everything, even TA. One would be best served by completely ignoring EM hypotheses. Price movements are important, but not because they say something about the knowledge about a company (as if it is even possible to quantify what knowledge about a company exists and whether that is "correctly" incorporated in the price -- someone else can spend a few lifetimes on that question).

Instead, prices tell about the psychology of the market participants. When recast in this light, TA becomes useful. Extremes in psychology are usually temporary, and these can be taken advantage of. Trends in psychology tend to persist (behavioral econ, etc.)

But prices always incorporate all knowledge? Not a chance, even if anyone could dtermine what "all knowledge" even meant. Markets are human social creations, and are best analyzed as such.

Anonymous said...

Jim Cramer's Getting Back to Even
by James J. Cramer
Edition: Hardcover
Price: $15.60
Availability: In Stock

24 used & new from $15.05


0 of 2 people found the following review helpful:
2.0 out of 5 stars I am already even, but thanks anyway Jimbo, October 16, 2009

This "author" is a world-wide joke, if he is such a good hedge fund manager what is he doing hosting a monologue show and pumping out books? Personification of greed, yep.
Anyway I am up 6 percent over the past 18 months even though I had 50 percent of my portfolio in equities. You see my pappy didnt raise no turnip farmer! I traded corporate bonds no thanks to Jimbo, who is a speculator and a day trader. The market is meant to take the retail "investor" for a ride, its craps game and the house usually wins my friends.
I am a professional bonds trader and I dont listen to amateurish advice from self proclaimed experts who dont even know how to use a computer!
I feel sorry for the audience this babbling brook has garnered, but you know what they say, "there is one born every minute and two to take him", and Jim is one of those "two". Jim most likely has an arrangement with the NYSE and he gets kickbacks for increased trading volume, as the senseless morons who watch his show rush to their computers to execute a trade. He is all about trading volume!un