Jim Cramer is Scaring the Livid Daylights Out of Me

I am bullish on the market, and unabashedly so. Yet, when I see someone hype everything, it starts to remind me of 1999.

I watch Jim Cramer on CNBC from time to time - I am not a religious viewer and don't track all of his picks as I know that many do.  I know that his track record this year has been OK - much better than previous years - and those who have followed him would have caught the tail end of the Apple, RIMM, Google and Goldman Sachs.  They probably would have also caught some of his duds, but that is a risk that they should understand.

Rather than invest in momentum plays, I prefer to study stocks and pick them carefully based on valuation.  One stock that I have held for many years is EMC, and it has done well (I bought it in 2002 at 4, after it fell from over 1000 in 1999).  Where there have been long periods when watching this stock is like watching paint dry, it has recently done very well.  I continue to believe in EMC's strategy and that the stock represents good value for the long term.  

Last night, I was at the gym and I happened to catch the beginning gof Cramer's show.  I saw him explaining to his listeners and watchers why they need to get into EMC and need to get into it now.  He believes, as do I, that the long term prospects for the stock are good.  He however went on to say that VMWare, which EMC is partially spinning off, is the reason why the stock will go dramatically higher over the next several weeks.  He went on to basically say something like "VMWare is the next Google and EMC is the way to play it."

It seems to me that everyone has known about the VMWare spinoff for months - EMC was trading below 16 when it was revealed.  The stock has already seen a tremendous move of people piling in so that they will be in when the spinoff occurs.  It is no doubt possible that EMC's stock will go up another 30% on the spinoff as Cramer has suggested, but I think that the history of spinoffs show that the parent company falls as people who got in for the catalyst start to move out. 

In a stock market which is already way ahead of itself, I am concerned that Cramer is pushing the small guy into stocks and telling them to prepare for liftoff.  If things don't materialize the way that he is suggesting, these small investors will move out causing the stock to experience a dramatic and quick reversal.

While I'll stay long EMC for the long term, Cramer is making my stomach churn because I have seen this all before (like 1999).  I'd be much happier if I didn't see Cramer pushing unreasonable expectations on small investors and causing them to pile in right now.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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Comments

  • Anonymous

    July 13, 2007

    What's incredible is the hype that surrounds the same 50 companies. It's why I can't watch CNBC. There are thousands of good companies out there and I'd rather search for them myself then tune into CNBC. My father once told me that once something is public, the real opportunity is gone.

  • Anonymous

    July 13, 2007

    The short term opportunity with EMC is gone, but I would agree with the author that it still has decent long term prospects. It has been a very, very tough stock to own, unless you are fortune to get in like the author did at 4 in 2002 (somehow I am very skeptical when everyone says that they got in in 2002).

  • Anonymous

    July 13, 2007

    I saw this too. The funny thing is that he didn't have a clue what VMWare is or what it does. His just jumping on the boat.

  • Anonymous

    July 13, 2007

    I'll refrain from commenting on Cramer, but I've spoken to some people in the industry who say that VMWare is huge. What is interesting about this case is that usually the company spinning off isn't positively affected by the spinoff, but here EMC is still going to own most of the company post-IPO.

  • Anonymous

    July 15, 2007

    I love the way alot of people slam Jim Cramer. He's only made millions in the stock market. I guess he doesn't really know what he's talkin about.

  • Anonymous

    July 24, 2007

    Last night, the guy did the same thing with SanDisk. I own SanDisk and watched Cramer sit there destroying it on every chance for months at 40. He even brought the CEO in for an interview, then after hanging up said I wouldn't touch the stock until they report a good quarter. Now they reported a good quarter and the stock is 50% higher and he wants everyone in. His game is a momentum game and it is, as you suggest, very dangerous for the small investor (his audience).

  • Anonymous

    July 27, 2007

    This is exactly what I feared with Cramer. He got a lot of people in the market who didn't have the stomach. Now, EMC is already down a point. The stocks he recommended will overreact to the downside as people file out.

  • Anonymous

    July 27, 2007

    Here we (Jim Cramer) come a waffling on Microsoft (MSFT): http://www.stocktagger.com/2007/07/jim-cramer-microsoft-corporation-msft.html

  • felix1k

    August 09, 2007

    I made money with Cramer and this one is a hot one with a wild ride ahead

  • Gary Shepherd pipestr@hotmail.com

    September 19, 2007

    In a recent HardBall Interview 9-17-07 with Chris Mathews I was amazed at the absolute lack of depth of knowledge or blatant sellout on the part of Cramer regarding the reasoning for going to war...MWD's?

    Wake up Cramer!!! It really didn't sell and I can't begin to say how foolish an adult can appear when they outright attempt to lie about the war not being about oil throughout the interview. Good God man, you really need to go back and review that piece of work called a belief.

    It really wasn't even a good con job at best. Cramer, go back and watch that tape and see if you can believe yourself. I have really started seeing some of your veneer sluffing off lately.

    Maybe it's time to go back to living out of your car for a while so you can touch base with reality, big guy. You sure seem to be on a slippery slope lately. Like they have been asking Bush... Whiskey Tango Foxtrot?

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