Barron’s reporter Bill Alpert has written another lengthy critique of Jim Cramer’s stock tips. In August 2007, Alpert wrote this piece on the CNBC host.
This time, he concludes Cramer’s “recommendations underperform the market by most measures.” Alpert mentions parenthetically that Barron’s is owned by News Corp. News Corp. also owns the Fox News and Fox Business networks. That point was brought up twice during Alpert’s email interview with CNBC VP of public relations Brian Steel. “You wrote a premeditated hatchet job to curry favor with your new bosses at News Corp.,” said CNBC’s Steel in the article. “[Cramer] doesn’t consider you a journalist.”
Fox Business Network has also criticized Cramer’s stock picks, even creating an ad campaign around them.
We asked Steel for a response to the story after publication, and he gave us his take, but also forwarded the complete question-and-answer email exchange he had with Alpert for the story (the full exchange is after the jump). One of the points seen from the initial questions relates to the idea there may be “leaks” from inside CNBC — an idea raised in the Barron’s article and picked up by several financial bloggers.
“Our research reveals that the stocks Cramer picks as Buys have been rising versus the market for several days in advance of his show, while his Sells have been falling. This doesn’t prove there is a leak in the tight security surrounding CNBC’s show. It could merely mean that Cramer and his staff are heavy-footed in their research. Or it could mean that his stocks are primarily momentum plays.”
But Alpert discounts the idea of leaks in his original question to CNBC: “We believe — and stipulate, to avoid repetition — everything that CNBC told us before about how tightly it secures the show on the day of broadcast.”
“Their ‘analysis’ is faulty on numerous levels, not the least of which is their completely arbitrary and never-before-used 7 month and 1 week timeline,” Steel tells TVNewser. “However their transparent attempt to discount Jim’s two cash calls is actually quite cunning and manipulative as by their own admission Jim outperforms the market by double digits when those two historic calls are included.”
Also, as briefly mentioned in the article, Barron’s own stock picks performed approximately 5% worse than the S&P 500.
Click continued to see the full email exchange between CNBC’s Steel and Barron’s Alpert…
1) Do his recommendations beat the market?
Jim Cramer gives incredibly insightful advice on thousands of investments every year. Most of it is qualified, complex and nuanced. Up until now, no one has disputed that Jim made two calls in particular in 2008 that saved viewers millions of dollars. On September 19th, when the Dow Jones Industrial Average was hovering above 11,000, Jim urged “Mad Money” viewers to go to cash for at least 20% of their total net worth. Less than one month later on October 6th, when the Dow dipped to 10,000, first on the “Today” show and later on “Mad Money,” Jim once again exhorted viewers to sell all stock needed to cover any expenses in the next five years. The Dow closed the year just over 8,700 and has since drifted back down towards 8,000. Measured against the S & P, viewers who followed Jimâ€™s call to go to cash the first time avoided a 28% decline and those who heeded his advice the second time avoided a 14% loss. Any attempt to measure Jim’s performance in 2008, without including those two historic calls, or that fails to recognize the asset allocation, diversification and dividend strategies that Jim regularly stresses is another targeted hatchet job on Jim Cramer masquerading as a piece of quantitative analysis. We, at CNBC, know that Jim is one of the most brilliant market commentators in the world today, but perhaps more importantly, hundreds if not thousands of viewers have thanked Jim for saving them millions in 2008.
2) Why did his prepared bullish recommendations go down more than his prepared bearish recommendations…or his unprepared bullish recommendations (all adjusted for the market)?
Once again, given that Jim made two of the greatest prepared bearish calls of all time, first on “Mad Money” on September 19th, and later on October 6th on both the “Today” show and “Mad Money,” each time urging viewers to go to cash, it is hard to imagine any credible publication or journalist suggesting that his prepared buy recommendations went down more than his prepared sell recommendations. We have repeatedly offered Barron’s the opportunity to review all of Jim’s calls from 5/27/2008 to 12/24/2008 but strangely enough, Barron’s refused all offers.
3) Why do the subjects of his recommendations move so much before the broadcast? We believe — and stipulate, to avoid repetition — everything that CNBC told us before about how tightly it secures the show on the day of broadcast. The (market-adjusted) moves start a week before the broadcast, however, and are strikingly larger for the prepared recommendations than for the unprepared “lightning round” recommendations.
Jim has a well-documented history of being a momentum trader, which has repeatedly been supported by thorough and exhaustive analysis. Jim likes to recommend “what is working” as buys, for reasons such as recent analyst reports and calls, company news and investor relations calls, or sector and market events. So, it is no surprise that there would be movement in these stocks prior to Jim mentioning them on “Mad Money.” Lightning round callers, on the other hand, ask about stocks that are germane to them and their strategies.
4) Why shouldn’t we rely on the Mad Money database at TheStreet.com, which Jim unequivocally endorses as a record of what he recommends on his show (please review that endorsement, below) ? I’m happy learn of any specific errors you believe it contains. I have compared it against the show and other records of Mad Money and found no errors.
There is no single authoritative “Mad Money” database. They are all unofficial and all of them draw different conclusions on Jim’s performance. As for TheStreet.com, in addition to the omission of Jim’s cash calls on both September 19th and October 6th, we found 7 different instances where TheStreet.com inaccurately recorded Jim’s comments in a review we conducted of “Mad Money” episodes that aired on 9-18, 10-10, 10-27 and 12-16. However, in fairness to TheStreet.com and to Barron’s, who seems to care little about either fairness or fundamental journalistic integrity, “Mad Money” was not created to be a mutual fund. It is clear to anybody who has actually watched the show, and we have seen no evidence that Bill Alpert at Barron’s ever has, that Jim’s advice is nuanced, complex and often qualified on either a future price or a specific market event, neither of which is captured by TheStreet.com. Many of the recorded calls on TheStreet.com are actually possible put recommendations rather than advice to buy a stock at the current price. And of course, TheStreet.com does not take into account Jimâ€™s asset allocation, diversification or dividend strategies. Based on overwhelming viewer feedback, both on TV and online, “Mad Money” watchers understand how to use Jim’s advice and oft-repeated ground rules as a tool to help them earn greater returns.
5) If CNBC disagrees with Jim’s endorsed record, does it have its own non-hindsight database of his picks? If not, why isn’t that something an audience should expect from a financial news show whose value proposition consists — to a great extent– of Jim’s recommendations ?
Barron’s misinterprets Jim’s value proposition which actually goes a long way in explaining why Barron’s and Newcorp’s repeated attempts to take Jim down have been a complete and utter failure and probably offers some insight into why Newscorp’s business channel has been a disaster. The value proposition of “Mad Money” is to put viewers inside the mind of one of the great traders of our time. Jim’s record as a hedge fund manager, where he produced a 24% post tax annualized return over ten years is almost unmatched. Jim goes into every show with the goal of both educating and entertaining viewers and with the hope that by showing viewers how he values stock and laying out ground rules on how to use that information, viewers will learn to be better evaluators and investors themselves. And as those who actually watch the show know, Jim repeatedly urges viewers to work with a professional financial consultant to customize their investment strategy if they are unable to dedicate sufficient time to doing so on their own.
6) You seem to be saying that even if one had a reliable record of Jim’s recommendations, that it would be inappropriate to measure their performance. Is that really CNBC’s view ?
What I am really saying is that you should actually watch “Mad Money” so you have some understanding of the subject you are writing about, which is why I repeatedly offered you the chance to watch the entire 4th quarter of the show with me. I am still shocked that you would decline my offer to validate your data. I am also shocked that any journalist would write not one, but two stories on a program that he has admitted he rarely, if ever watches. “Mad Money” is not a mutual fund and Jim is no longer a money manager. Portfolio managers review their holdings every single day and make adjustments accordingly. Given that Jim talks about thousands of stocks and he only has 44 minutes of air-time a day it would be impossible for him to follow every stock he talks about on every show. The show as it is currently produced is not set up to track every stock Jim mentions every day as if it was a fund. If the show were to be reformatted we would certainly try to find the most accurate way to measure Jim’s recommendations. Given that “Mad Money” is more popular than ever it is unlikely that we will reformat the show anytime soon. Ultimately our goal is to produce a program that our viewers value and all of our research shows that viewers love Jim.
7) You won’t let me speak with Jim, so when you answer us please tell me whether he shares the views you’re expressing.
Despite the fact that Jim personally spent hours with you answering your questions the last time, you wrote a premeditated hatchet job to curry favor with your new bosses at Newscorp, and as a result, he understandably refused to engage on any level this time. You completely ignored everything he said and your first piece was full of factual inaccuracies, including underreporting “Mad Money’s” measured ratings numbers by a factor of three and misstating personal information; he does not consider you a journalist.