...is Jim Cramer's response to CXO Advisory Group's evaluation of the methodology employed in his stock recommendations. We're paraphrasing, of course, but that's essentially the gist of it. CXOAG does a pretty nice job of getting under JC's skin, but our one gripe with their end of the e-mail correspondence brouhaha is the fact that they don't site Leonard the Wonder Monkey in their argument that Cramer's "stock market calls since May 2000 have low consistency and an accuracy just south of coin-flipping (just below average)." We don't think we would be too far off base in saying that we could all benefit from a little hirsute wisdom every now and then. There, piece said. Enjoy:
Subject: You have got to be kidding me
There have been so many numerous audits of me and I also have an extended audited track record that shows you could not be more wrong. But you know what? Let the market decide. Do you think if I were as bad as your records show, I would ever have been able to
a. make $100 million in the market investing for myself,
b.have a show that has gained in audience at the time when you say I have done poorly, and
c. started one of the few FINANCIALLY successful websites out there in part because of subscribers to my newsletter and columns?
Here’s where I think your methodology goes wrong. I repeatedly recommend the same stocks from my own recommended list: NYX, SHLD, GOOG, MA, TM, CSCO, AAPL, GS, BA, JNJ, MO. I do it every week. I am sure you give me credit only once for those.
I have bothered to take the time out to write you this because you worked with a man of honor, Admiral Rickover.
I know you won’t correct anything—that’s not what people do in our business—but I still feel the need to explain to you why a sucker is NOT born every minute and my popularity rides not on showmanship but on rigor on my part and success on the part of the viewers and readers who use my work.
No need to respond.
Guru Grades: Jim Cramer Comments on Our Evaluations of His Advice (All from 11/25/06) [cxoadvisory .com]
[correspondence continues after the jump]
I [Steve LeCompte] respond:
Thanks for your note. I understand that you think cxoadvisory.com treats you unfairly.
I also understand that you may not be interested in a response, but...
I do not understand your comment about the methodology regarding your stock recommendations. If you read "Cramer Offers You His Protection", you will see a list of "Lightning Round" buy recommendations. Whenever a buy recommendation appears more than once, that fact is so indicated in the list. Further, as stated there: "When Mr. Cramer mentions a stock more than once on different dates, we include returns for that stock multiple times using different start dates."
If you are referring instead to the test of market-related forecasts featured in your NY Metro column at "Jim Cramer Deconstructed", that evaluation is different, mostly covering "sense of the market" commentary and not specific stocks unless you devoted considerable commentary there to a single company. Admittedly, there is generally more judgment involved in that evaluation.
I will ensure correction of any errors identified in cxoadvisory.com, but you have not identified any errors. When you say that you "know I won't correct any errors -- that's not what people do in our business," you may speak for your approach to your "business" but not for the approach taken at cxoadvisory.com.
To address your opening question, you have an impressive record of accomplishment. However:
a. I think it was possible during the strong bull market in tech stocks of the late 1990s to amass considerable wealth by being leveraged long in many (almost any?) technology issues, many of which ultimately proved to have little intrinsic value. The exit point was critical. However, I am unfamiliar with your trading record for that period.
b. I think that it is possible to have a popular (on CNBC's scale) investing television show based primarily on entertainment value rather than economic value.
c. Investors seek seers (see "Seer-Suckers, or the Efficient Everything Hypothesis" and "How Investors Do (or Don't) Take Advice"). The investing newsletter industry has done pretty well, even though in aggregate the performance of newsletter recommendations does not beat the market (see "Any Excess Returns from Investment Newsletters?"). In other words, I think it is possible to have a successful publishing business related to investing without being a superior stock picker.
Admiral Rickover was a man of honor, also of competence. He is legendary for emphasis on attention to detail and enforcement of personal accountability.
I will include your message in the cxoadvisory.com blog, and in the section evaluating aspects of your advice, so that readers can understand that you think the work "could not be more wrong." If you wish to elaborate, please let me know.
CXO Advisory Group LLC
Mr. Cramer follows up:
It is obvious that there are three important blocks to the show, A, B and D. It is also obvious that the lightening round does not have the same homework-derived analysis of those three blocks.
The fact that you weight the lightening round equally to those more thought-out blocks to me evaluates the show unfairly.
So be it. I can easily produce four or five other studies that show I am performing much better than the averages, including studies by the USA Today and Business Week. But why bother. Lies and stats.
I guess my point is that, once again, I am trivialized by some pro who wants nothing more than to make me look like a joker.
So be it.
Be my guest. I know you could weight it another way and have me look like a genius.
But you know what? I think, given what I have accomplished and how often my viewers and readers and listeners tell me that I make them money—and given that I don’t select them, I figure I must be doing something right.
Our correspondence was fun.
Thanks for your reply.
I am puzzled why you have included the "Lightning Round" on the show if you do not regard it as well thought-out.
The site cxoadvisory.com does not "weight" the "Lightning Round." It simply presents an evaluation of recommendations from that feature over a specific period, without preconception regarding whether these recommendations represent your strongest or weakest work.
If you believe that there are any "lies" on cxoadvisory.com, please advise so that I can ensure their correction.
The objective of the Guru Grades section of cxoadvisory.com is not to make experts look like jokers or geniuses, but rather to portray their outputs as they are.
If there is anything else you would like the readers of cxoadvisory.com to be aware of, please let me know.
CXO Advisory Group LLC
End of correspondence. We verified the sender's identity based primarily on ownership of the base URL in the sender's email address, detailed email header information and success in replying to the email address.
Note that the Wikipedia entry for Mad Money refers to the "Lightning Round" segment of the show as "...by far the most popular..."
Note that items addressing Mr. Cramer's investing advice represent less than 1% of the content of this site, as follows:
Analysis of Mr. Cramer's market timing ability, which concludes that he has no special talent for forecasting the behavior of the overall stock market;
Examination of the performance of 149 buy recommendations and 108 sell recommendations made by Mr. Cramer on Mad Money's "Lightning Round";
Blog entry of 8/15/06 on an academic study examining the short-term market reaction to Mr. Cramer's buy recommendations (with CNBC's response in our blog entry of 8/17/06).
As always, we suggest readers decide for themselves which sources have value, and which do not.