written by: Tyler Banfield

June 25, 2006

the jim cramer phenomena
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Whether you love his antics and in your face attitude, or absolutely loathe the sound of his demanding voice, Jim Cramer has established himself as a major presence in the financial world and is known by legions of fans for his famous "Booyah" catch phrase. With the creation of his own hedge fund company in 1987, Cramer slowly worked his way up through the ranks of the financial food chain. On March 14, 2005, Cramer debuted as the single host of CNBC's Mad Money. Mad Money was a runaway hit, and has remained one of CNBC's top rated television shows.

mad money ~ the show

Mad Money is a one-hour long program which airs Monday through Friday. It consists of Cramer giving investing advice to his viewers. The show begins with Cramer recommending a stock that fits into the theme of his show for that day. The show continues with segments such as "Am I Diversified" (Cramer evaluates how balanced a viewers' portfolio is) or "Mad Mail" (Cramer answers questions via e-mail). Cramer normally specifically highlights three to ten stocks per show, and incorporates viewers calls about the stocks he is recommending throughout the show.

The most popular and only daily segment of Mad Money is the "Lightning Round." During the "Lightning Round", Cramer takes ten to fifteen calls from viewers asking what they should do with a particular stock. Cramer states that he does not know the stocks ahead of time, and evaluates whether the caller should buy, sell or hold the stock within thirty minutes with only a chart and his knowledge of the stock/industry. The "Lightning Round" exemplifies the basic structure of Mad Money. It is filled with sound effects (bulls, buzzers, axes, etc.), flashing lights and erratic behavior by Cramer (yelling, throwing chairs and rubber bulls/bears). These distractions make it difficult for many viewers to focus on the actual financial information Cramer is providing. Web sites such as madmoneyrecap.com and investing1848.blogspot.com offer text recaps of the show for individuals who may be interested in the advice Cramer has to offer, but unwilling to tolerate watching his eccentric antics.

other cramer accomplishments

In addition to Mad Money, Cramer has several other accomplishments under his belt. Before Mad Money, Cramer appeared on CNBC on the shows America Now and Kudlow & Cramer. Cramer was responsible for co-founding TheStreet.com, a in-depth resource for financial information. Cramer has also authored three books, all of which have been extremely successful. Cramer can often be seen plugging his most recent book, Jim Cramer's Real Money, on his television show.

Cramer also boasts an impressive investing record. According to most reports, Cramer achieved a twenty-four percent compounded return between 1987 and 2000. During his last year, Cramer's fund recorded an astounding thirty-six percent gain. This was an amazing accomplishment due to the fact that both the Dow and S&P finished with losses in the same year. Since the advent of the show, Cramer has had a solid track record overall (with the occasional disaster such as KRY and NMTI).

not everyone is a fan

Since his recent rise to celebrity status popularity, Cramer has been subjected to severe criticism. He is commonly referred to as the "Weathervane," a nickname which refers to his tendency to change his market outlook from bearish to bullish and back quite often. Cramer has also been criticized for using his show as a platform to pump his own stocks (which is why he is constantly forced to say and show legal disclaimers throughout the course of his show). Earlier in his career, he was accused of having an extremely bad temper problem. The biggest source of complaints against Cramer have to do with his on camera character. His attitude and actions make him completely unbearable to many financial experts and normal individuals. Because of his popularity, Cramer is the target of many web sites and blogs. Each time he makes a recommendation which is wrong, there is a strong backlash from these internet mediums.

jim cramer's stock picking approach

Although his percentage of right to wrong is very good, Cramer will take responsibility on air for any picks which are wrong. He normally explains how he came to the wrong conclusion about that specific stock. For the show, Cramer manages a charitable portfolio through Mad Money. Many of the picks he shares during the course of the show are a part of his charitable portfolio (a disclaimer is shown each time this happens). In addition to owning up to his mistakes, Cramer consistently emphasizes that people should not go out and buy a stock just because he recommends it. This event/phenomenon has actually earned a nickname. It is known by fans and critics alike as the Cramer bounce. In reality, Cramer stresses that his viewers should spend two hours per week researching and evaluating each stock they own or are considering purchasing.

Unlike the majority of Wall Street, Cramer consistently stresses to his viewers that they should create a portfolio that is strongly diversified. Cramer recommends that every person should own five stocks, because it is hard for an average person to manage more than five at a time. Cramer also preaches that twenty percent of every portfolio should be based solely on pure speculation. His theory is that one big stock hit will cover up any other losses.

bottom line

In the end, how you feel about Jim Cramer comes down to personal preference. Everyone that is involved in investing has their own opinion about him as a person, his investing style and his ideas. As most experts (and even Cramer himself) say, the most effective way to use Mad Money and the rest of the information that Cramer provides is to listen to what he has to say, and then use that information as the basis for your own research. By doing this, you will be able to control your own financial destiny and avoid the pitfalls that come along with blindly following advice from any individual.