Posted by
Merrill Bronnenberg on Thursday, August 23, 2007 10:40:39 AM
I do not buy Mr. Elder's comments or summation!
First off, Mr. Cramer's main objective for his show is not to pick stocks for his viewers, but to educate! He overtly states that at each programs opening. He spends a good portion of his show to educate the audience on the methodology to stock picking. He continually voices that the individual investor needs to spend time to do their "homework". This "homework" exercise needs to involve at least one hour per stock that entails research, listening to the corporate annual meetings, and do some number crunching, etc. Secondly, he spends time on his show, through examples of stocks that he would pick that is then accompanied by a lengthy dialogue as to why he thinks they should be selected. Again, he emphasizes the importance of doing "your" own research, and then makes your own picks.
Furthermore, as the title of his program states "Mad Money". The "mad money" concept he suggest is a separate account that the investor plays with that is outside of their main retirement account - he recommends five stocks but not more than ten. He does not purport wanton, wild or speculative or undisciplined approached to stock selection. As for retirement accounts (wealth building), he strongly urges the investor still use the traditional and disciplined approach through a recognized broker that has a proven track record to build their "nest egg". I know people who have lost thousands to millions investing with the Merrill Lynch's, and the broker did nothing to educate their investor other than expose them to "churned of their accounts" to line their own pockets.
The thing that irritates the main street financial guru's is that Cramer is educating the "John Doe's". Having educated investors places many brokers in the position to provide more for clients than simply collect commissions. He has pulled back the mystical curtain of investing that is clouded by specialized jargon and gives the common guy the tools to do some investing on their own. Additionally, he arms the novice investor to know more about investing, thus they are an educated investor. As for his 12 percent return on his Street.com these critics are looking at a total array of stocks that he recommends, but again he recommends that you have not more than five to ten stocks in your "mad money" account, and those also need to be diversified. Besides, most mutual funds (80% of them) under perform the market per year which it averages 12 percent per year over the last fifty years. So what's the beef?
It appears Mr. Elder jumped on the Barrons' article band-wagon too quick!