Cramer’s ‘sell’ call still gets trashed, 1,500 Dow points later
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CNBC’s Jim Cramer is used to taking heat for wrong stock market calls.
This time, he turned out to be right. But he’s still getting skewered.
Cramer last Monday (Oct. 6) went on NBC’s ‘Today’ show and gave this advice to viewers:
‘Whatever money you may need for the next five years, please take it out of the stock market. Right now. This week. I do not believe that you should risk those assets in the stock market.’
He warned that the market could tumble an additional 20% because of fallout from the credit crunch.
The Dow Jones industrials fell as much as 800 points later that day, and closed with a loss of 369.88 points, or 3.6%, at 9,955.50.
The sell-off continued the rest of the week, leaving the Dow at 8,451 on Friday.
After Cramer’s sell signal, I and others raised the question of whether his call would be remembered as the moment of final capitulation in this bear market -- i.e., the bottom.
But as the math shows, Cramer actually saved investors some money if they sold on Monday as opposed to Friday. Using the Dow as a proxy, the market lost 15% from Monday’s close to Friday’s close.
That hasn’t stopped Fox Business News from mounting a vicious advertising campaign against Cramer -- naturally, hoping to steal viewer eyeballs from CNBC.
‘The last thing you need is bad advice. The last thing you need is CNBC’s Jim Cramer,’ Fox warned in TV and print ads late last week.
On the financial blog SeekingAlpha, Jason Schwarz of Lone Peak Asset Management asserted on Friday that ‘financial advisors across the nation have been trying to clean up the mess that Jim Cramer made. We had clients crying because of the panic he created.’
Cramer created the panic last week? Please. I have no doubt that he helped trigger more selling, but there was a tidal wave of it coming from cash-desperate hedge funds, mutual funds and margin-account investors with or without Cramer’s two cents.
Anyway, all Cramer did was state the obvious: Money that you’re going to need in the next five years probably doesn’t belong in stocks. We’re living through the worst financial-system bust since the Depression. Maybe the stock market overall will recover within five years, but if you really will need to tap your portfolio for expenses in that period, you’ll sleep better if the money is in a safer place. (And I realize that ‘safe’ is a relative term these days.)
Now, whether people who dumped stocks this week will bless or curse Cramer in the longer run, we’ll have to see. If the market is substantially higher in a few months, he’ll look like a goat for his call. If we’re going down 40% more, investors who pulled the plug based on his advice will probably forget every bum recommendation he has ever made.