I just finished reading a copy of Jim Cramer’s new Mad Money book that I got for Christmas. I haven’t watched Jim Cramer’s show on CNBC in quite a while, but I know he is high energy, knowledgable, and eclectic. I had high hopes for the book, but I have to say I found it slightly disappointing. I mainly got the feel that his book was there to promote his show on CNBC and, more specifically, to promote and reaffirm the show’s value to its existing viewers.
To his credit, he did disclose his interest in TheStreet.com, Mad Money, CNBC, his hedge fund, his other books, etc so it didn’t come off as though he was trying to trick anyone, but it seemed like his book catered to folks that already know about him and his show, and served less of a purpose as a general investment advice/trading philosophy sort of book.
There were some highlights for sure, he has an interesting way of viewing the market which, I can only assume, comes from his many years as a trader, hedge fund manager, and main figure of several different shows on CNBC. A couple unique points that interested me were:
- It is just as important to pick good stocks as it is to pick stocks that the large money managers will like. Cramer’s idea and observation is that even if you have a stock that is great, if the large buyers don’t like it, it isn’t going anywhere in the near future. He did make a point to say that there is a place for speculative plays on undiscovered stocks, but he stressed the fact that the money managers rule the market and its better to invest with them then to try to fight the trend. For what its worth, I agree. Most times that I try to buy something because I consider it undiscovered or undervalued, the stock languishes for quite a spell before it goes up. Its not to say that buying undervalued stocks is bad, it just may not be the fastest way to make a good return.
- There are supply and demand forces in play on types of stocks. Cramer’s idea is that because there are only a few big players that really control the market (large banks/investment houses/mutual funds), there is limited demand for certain types of stocks. The example Cramer uses is IPOs. If there are a lot of IPOs coming out, Cramer says to be weary as the large players only want to expose themselves to a limited amount of IPOs. If they have already filled out the IPO positions in their portfolios, they may be less likely to buy future IPOs. He says the same thing about the dotcom Internet stocks several years ago; there were so many on the market that it saturated demand for internet stocks and nobody wanted any more internet plays in their portfolio. Its an interesting idea, I’ll definetely keep it in mind going forward.
- Sell your winners, sell your losers. Instead of preaching to the “Cut your losses and let your winners run” philosophy, Cramer advocates selling part or all of your position when it has had a serious run up. He says to do otherwise is greedy. If you’ve had a significant run up in your stock, sell part of your position. If you’ve had a really significant run up, sell more of it, or all of it, if it has reached your targets. He says the same thing about loser stocks. Basically he is saying to protect your capital. Don’t be emotional and hang on to stocks past their prime. If the situation has changed causing you to probably not want to buy the stock at the current levels, liquidate your position.
Overall, I’d say to read this book if you want to get a few good ideas to strengthen your trading/investment philosophy, want a fresh perspective on things, and look forward to a little comic relief in your reading. Jim Cramer is entertaining to read and even more entertaining to watch. If you have a chance, try to catch his show on CNBC.
Resources:
- Link to the book on Amazon
- Mad Money show’s page on CNBC
- TheStreet.com, owned partially by Jim Cramer, contains a lot of great articles.
0 Comments on “Review of Jim Cramer’s book: Mad Money”
Leave a Comment