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

  • WillyGeorge

    September 21, 2007

    If Cramer were living in his car like he should be, EMC would be much higher. MKhan is 100% right. I cringe when callers ask about stocks that I own - fortunately, most often Cramer pans them.

  • Richard

    September 28, 2007

    I agree with WillyGeorge;
    I have pretty much stopped watching Cramer as I feel he is only out to sell his show and his books, nothing more, I also CRINGE when callers ask about stock I own, I wish he would not even mention them.
    I have two imitation portfolios set up with ten stocks Cramer highly tauted and ten stocks he said were either sells or don't buys, one on that listed he termed "A worst of a breed" well the worst of a breed is up over 50% since he said that and I'm glad I bought more of it after he said that. His Buy ortfolio as I call it is just about even and the sell portfolio is up around $1,000
    So much for the loud mouth Cramer

  • Richard

    September 28, 2007

    As much as dislike Mr. Cramer as a phoney, the other "Expert" who is a phoney and I cannot imagine why CNBC keeps him is Mr. Juback, back when the techs were running up huge gains before the bubble burst, I read his stuff religously, He had reccomended just about every High tech stock strickly on momentum and many of the ones I bought I lost a small fortune on and they have never come back.
    The man is a real loser and I have completely stopped watching CNBC because of him.

  • Carey Richardson

    October 11, 2007

    Cramer and all of these guys are cheerleaders. They however are smart to be pushing EMC. It was kind of a no-brainer.

  • travelman45

    October 22, 2007

    cramer is like greenspan in is way of doing it. there are the right way's of doing things then there are there's with a lot more people losing than winning. That' why both are airhead's. when there right they blow there own horn, when it turn's wrong they say you should not listen to everything I say.

  • Ted Mattheny

    November 01, 2007

    Cramer was right about EMC and VMware. He is also right about Google and Apple. Wrong about everything else. I'd stick with EMC. It will explode higher still a few weeks after Cramer tells his followers to take profits, and he will.

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