If you have never watched Jim Cramer’s Mad Money you may want to view a clip before your read the rest of this post. http://www.youtube.com/watch?v=iIUPItnMOSQ
Jim Cramer appears every weekday evening on CNBC’s Mad Money. I won’t comment on Cramer’s manic style but I will comment on Cramer’s hubris. Ask Cramer his view on just about any stock and he has one. What is astonishing though is the popularity of the show. Why would any viewer assume that Cramer could possible have the knowledge he claims he does?
If he was able to forecast stocks with the acumen he claims he could be trading stocks 15 minutes a day and living his life in leisure. He claims he wants to make the public money. I leave you to evaluate his claim.
When the Dow Jones Averages fell 416 points on 2/27 the pundits had to give an explanation. Among their favorites was the prior plunge in Chinese shares and concern over subprime mortgage loans.
But wait, concern over subprime mortgage loans were there when we went the bed night before the mini stock market meltdown. If they were the cause why didn’t the pundits forecast the stock debacle.
The day of the stock meltdown, Cramer pronounced in an CNBC interview that concern over subprime mortgage loans was an attack on the workingman. He advised that the Fed needed to cut rates to help the workingman.
Subprime loans are loans that were given to borrowers without documentation of employment and income and/or to borrowers with less than good credit ratings. Borrowers were frequently lent more than they could afford to borrow.
Despite Cramer’s demagoguery these loans have nothing to do with the borrower being a workingman or not. Cramer’s statement is an attack on every frugal hard-working worker who saved for his home and borrowed prudently.
The subprime loan market exploded because the Fed opened the monetary spigots and banks were only too eager to lend. Advising the Fed to open the spigots again, as Cramer has done, is like advising a fireman to pour gasoline on a raging fire.
If housing prices are not affordable for households of modest means it is because the flood of credit has encouraged prices to be bid up. Honest hard –working households need sound money not cheap credit. Cheap credit encourages speculation, bid-ups prices and erodes savings via inflation.
We watch so called experts like Cramer because we want to believe that there is an expert out there who understands the problem. If they understand the problem we reason they can solve the problem. If they can solve the problem we can control the consequences of our past foolishness.
A pundit who speaks in 30 second sound bites likes Cramer usually understands very little. Their believers want a quick fix. “Why doesn’t someone do something about it” is their motto.
It is principle of life that a reactive fix that comes from a lack of understanding will almost always make the problem worse.