The Cramer Effect

Please don’t take me wrong, I am not picking on Jim Cramer here. In fact, I admire his transition from money manager to TV entertainer.  I am embarrassed to admit but I do find him entertaining. If you dig beyond the entertainment factor the success of his calls and recommendations has been less than what you would experience by just flipping a coin as you can read here.  An example of one of his less than successful calls was on Zulilly (ZU) just after their IPO last year.  We saw a nice initial “Cramer effect” when his disciples followed his recommendation pushing the stock immediately higher only to be left holding the bag as it plummeted nearly 80% (from peak to trough).   

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One of the things I learned years ago is to not listen to others, even those with Jim’s credentials, but rather, rely on your own research and hard work. The second important take away here is that no matter where you get your ideas, it is critical to have an exit plan in case you are wrong.  No one gets them all right but long term investing success comes not only from your “win” percentage but keeping the loss on your “losers” to a minimum.