The mad man of money: Jim Cramer says jump into stocks, carefully
01/26/2014 12:00 AM
01/25/2014 8:48 PM
Living up to his “Mad Money” moniker, Jim Cramer has made a living the last eight years talking – and yelling – about stocks. As the flamboyant, crazily enthusiastic stock picker on CNBC, he dishes up daily pronouncements of what’s good, what’s hot, what’s not.
With two Harvard degrees, the 58-year-old investor-turned-TV-host is bright, opinionated, animated. In a tie and rolled-up shirt sleeves, he peppers his daily, hourlong cable TV show with rapid-fire chatter about stock companies and interviews with CEOs. A former newspaper reporter, he ran a successful hedge fund that boasted annual profits of 24 percent before he shut it down in 2001, largely for stress-related reasons.
In a new book – “Jim Cramer’s Get Rich Carefully,” his first book in five years – Cramer isn’t shying away from any of the topics that have repeatedly put him in the critics’ dunk tank. We talked with him by phone from his office at TheStreet.com in downtown Manhattan.
Last year was off the charts for the stock market. Are we in for another blockbuster year in 2014?
No. I’ve been saying that we could be up about half of what we were last year. We’ve had a very big move. If the economy doesn’t pick up from here, we will not be able to make a lot of headway. It’s gotta continue and it’s not clear to me that it will. It should. We’re on the right course.
In your book, you vividly describe the financial meltdown that drove many out of the stock market. You criticize Wall Street’s “machine gun bandits” whose reliance on high-frequency trading can distort the market, as well as the “wealth-destroying flash crashes, flash freezes and Facebook fiascoes” that have shaken investor confidence. “The losses were so extreme, the trust so despoiled and the risks so outrageously imbalanced against the rewards, that I blame no one for fleeing these pieces of paper (stocks)” ... Despite all that, you’re still encouraging Americans to embrace the stock market?
Carefully. Your first $10,000 should be in an index fund, so you’re diversified. Only after that should you be investing in a portfolio of your own. Index funds are great because of their low fees. The book is how you can invest wisely if you spend the time. If you try to do it quickly, you’ll lose money.
During Jerry Brown’s first tenure as governor, you covered him as a reporter for the L.A. Herald Examiner. What was that like?
Jerry was very combative with me (in interviews). I loved California and Sacramento but it was a horrendous time. In Los Angeles, my apartment was broken into and everything was gone. They even looted my bank account, so I had no money. I was evicted from my apartment. I lived in my car for a third of my time. One reason I was sent to Sacramento (in 1979) is that an editor felt bad for me and assigned me to the Capitol Bureau, so at least I’d have an expense account. … The paper wanted me to go with Brown (and then-girlfriend Linda Ronstadt) to Africa but I was so sick (mono and a jaundiced liver) that I never got to go. I didn’t have health care, so I would drive to a farmworkers’ health clinic in Yuba City. It’s one of the multiple reasons I’m sympathetic to the president’s stance on health care. It’s still frightening to remember what it’s like to not have health care …
You took a lot of heat in 2009 for calling President Obama “the greatest destroyer of wealth” you’d ever seen. Yet the opening of your new book repeatedly castigates politicians – of both parties – for “bankrupting us slowly.” I take it you’re not backing off your contention that government and political leaders aren’t helping individual investors?
The president came in with very little understanding of how the stock market worked. I felt he had it wrong with a failed stimulus plan to try and get the country back economically. I felt job creation was the No. 1 priority ... Most of what we’ve seen in terms of the recovery is from Ben Bernanke. The Federal Reserve has been fabulous. The Democrats and Republicans are the economy’s worst enemy because they have no ability to see through partisanship. Coming out of the recession, the government has been a major impediment to where we should be with more robust growth … There are people who call me a tea partyer and there are people who call me a Trotskyite. So I must be doing something right.
You also had a memorable appearance in 2009 on Jon Stewart’s “Daily Show,” where he pilloried you as something of a poster kid for Wall Street greed.
He meant to hurt me and he hurt me. He meant to humiliate me and he humiliated me. I didn’t believe that someone would try to destroy me on national TV, but he gave it his best shot. I didn’t expect to be viewed as such a villain of the times. I didn’t fight back because I wasn’t there to fight back. I was there to talk about the issues. I wasn’t gonna throw a chair at him … He apologized to me right after, off the air. … I don’t worry about it for myself but it was very hard on my kids. My eldest was really hurt by it. That’s what you think about.
You emphasize your investing mistakes, such as being too emotionally invested in a stock, which can blind investors to knowing when it’s time to buy or sell. Specifically, you cite your love affairs with Apple and Chipotle.
You just fall in love with a stock and that’s a terrible thing. If I can’t tell people I’ve made mistakes and learned from them, I’m not doing my job. I’ve made good calls and bad calls. The good picks take care of themselves. The bad picks ... if you don’t study and learn from the mistakes, they can overwhelm the good ideas.
Your book lists the 21 “bankable” CEOs, company leaders who can “transcend the (current) toxic environment” and “inspire their companies to thrive, no matter what.” What makes them different?
In more than 2,000 shows, I’ve interviewed some (CEOs) over and over and have seen how they’ve been able to triumph over different scenarios. They’re basically head coaches who run NFL-like teams. They’ve won more than they’ve lost. Leadership does matter, but it tends to be underrated … We accept it in sports and we should accept it in business.
Some of your critics say you’re an experienced insider exhorting mere mortals into buying/selling stocks in ways that can be dangerous, if not downright destructive, to their financial well-being. Are you encouraging day trading or reckless investing?
Day trading is the biggest sucker game in the world. I hate day trading. I want people to have a five- to seven-year horizon on investing, showing great discipline ... It’s a sobering time. But there’s a longer-term approach that you can profit from. You have to do some homework and not do it blindly.
In the book, you mention how your daughters’ insights have influenced some of your stock picks, such as Apple. How often do you glean ideas on investments through younger eyes?
A tremendous amount. I’ve taught in high schools and (appeared) at 17 colleges. You sit and listen to what (young people) think is going to happen, what devices they use, how they view the world. It’s been very valuable. My daughters are 19 and 22. They got me into Dominos, Facebook, Yahoo, Google, Netflix … all very powerful trends that my kids turned me on to.
What are some of your must-follow stock categories?
Social, mobile and cloud companies (Facebook, Google, LinkedIn); biotech (Celgene, Gilead, Regeneron); healthy foods (Whole Foods, Panera, Chipotle); value retailers (T.J. Maxx, Priceline); energy (Schlumberger, Anadarko).
You’re known for your on-air antics, like tossing plastic bulls into a frying pan. Any plans to change your style?
The topic (stock investing) itself does not lend itself to drawing people in. When I look back at my college and law school classes, the professors who did the most to enthrall and entertain me are the ones I remember. The ones who took a dry subject and kept it dry are forgettable. I’ve adopted the strategy of my professors who made their subject matter come alive.
What’s a typical Cramer day?
Today, I had a trainer come at 4 a.m. and had a two-hour workout. I wrote a piece about PPG (Pittsburgh Plate Glass) for my RealMoney blog. Then prepped for two hours for (CNBC’s) morning show, “Squawk on the Street.” Then came back here and started on another piece for The Street.com. After we hang up, I’ll be looking at my game plan for the afternoon show. Ordering lunch. I’ll write three pieces with my nephew who’s my head writer. The (“Mad Money”) show starts around 4:15, finishes up at 6. And then I’ll collapse. That’s my day.
Any plans to tape a “Mad Money” episode in Sacramento?
I would love to do a show in Sacramento. If Jerry Brown wanted me to do a show with him, that would be terrific. I find him fascinating. He’s done a fantastic job of bringing the budget deficit under control. And what he’s accomplished vs. what Arnold Schwarzenegger accomplished is remarkable. His dad would have been very proud.
About This BlogClaudia Buck is the Personal Finance columnist and business editor at The Sacramento Bee. She's worked at The Bee since 2005. Amid the financial turmoil of the recent recession, she became the personal finance writer, helping readers cope with some of the confusing, daunting and perplexing aspects of managing our financial lives. She serves on the journalism advisory board of her alma mater, Cal Poly State University, San Luis Obispo. Reach her at firstname.lastname@example.org or 916-321-1968. Twitter: @Claudia_Buck.
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