Q&A: The mad man of money: Jim Cramer says jump into stocks, carefully

The Sacramento BeeFebruary 9, 2014 

Super Bowl Business Panel

Jim Cramer, host of NBC's Mad Money, urges investors to start with index funds because they are diversified and have low fees.

JEFF LEWIS — AP Images for The Legacy Agency

Living up to his Mad Money moniker, Jim Cramer has made a living the last eight years talking — and yelling — about stocks. As the flamboyant, crazily enthusiastic stock picker on CNBC, he dishes up daily pronouncements of what's good, what's hot, what's not.

With two Harvard degrees, the 58-year-old investor-turned-TV-host is bright, opinionated, animated. In a tie and rolled-up shirt sleeves, he peppers his daily, hourlong cable TV show with rapid-fire chatter about stock companies and interviews with CEOs. A former newspaper reporter, he ran a successful hedge fund that boasted annual profits of 24 percent before he shut it down in 2001, largely for stress-related reasons.

In a new book — Jim Cramer's Get Rich Carefully, his first book in five years — Cramer isn't shying away from any of the topics that have repeatedly put him in the critics' dunk tank.

Question: Last year was off the charts for the stock market. Are we in for another blockbuster year in 2014?

Answer: No. I've been saying that we could be up about half of what we were last year. We've had a very big move. If the economy doesn't pick up from here, we will not be able to make a lot of headway. It's gotta continue and it's not clear to me that it will. It should. We're on the right course.

Q: In your book, you vividly describe the financial meltdown that drove many out of the stock market. You criticize Wall Street's "machine gun bandits" whose reliance on high-frequency trading can distort the market, as well as the "wealth-destroying flash crashes, flash freezes and Facebook fiascoes" that have shaken investor confidence. "The losses were so extreme, the trust so despoiled and the risks so outrageously imbalanced against the rewards, that I blame no one for fleeing these pieces of paper (stocks)" ... Despite all that, you're still encouraging Americans to embrace the stock market?

A: Carefully. Your first $10,000 should be in an index fund, so you're diversified. Only after that should you be investing in a portfolio of your own. Index funds are great because of their low fees. The book is how you can invest wisely if you spend the time. If you try to do it quickly, you'll lose money.

Q: You took a lot of heat in 2009 for calling President Obama "the greatest destroyer of wealth" you'd ever seen. Yet the opening of your new book repeatedly castigates politicians — of both parties — for "bankrupting us slowly." I take it you're not backing off your contention that government and political leaders aren't helping individual investors?

A: The president came in with very little understanding of how the stock market worked. I felt he had it wrong with a failed stimulus plan to try and get the country back economically. I felt job creation was the No. 1 priority ... Most of what we've seen in terms of the recovery is from Ben Bernanke. The Federal Reserve has been fabulous. The Democrats and Republicans are the economy's worst enemy because they have no ability to see through partisanship. Coming out of the recession, the government has been a major impediment to where we should be with more robust growth. ... There are people who call me a tea partyer and there are people who call me a Trotskyite. So I must be doing something right.

Q: You emphasize your investing mistakes, such as being too emotionally invested in a stock, which can blind investors to knowing when it's time to buy or sell. Specifically, you cite your love affairs with Apple and Chipotle.

A: You just fall in love with a stock and that's a terrible thing. If I can't tell people I've made mistakes and learned from them, I'm not doing my job. I've made good calls and bad calls. The good picks take care of themselves. The bad picks ... if you don't study and learn from the mistakes, they can overwhelm the good ideas.

Q: Your book lists the 21 "bankable" CEOs, company leaders who can "transcend the (current) toxic environment" and "inspire their companies to thrive, no matter what." What makes them different?

A: In more than 2,000 shows, I've interviewed some (CEOs) over and over and have seen how they've been able to triumph over different scenarios. They're basically head coaches who run NFL-like teams. They've won more than they've lost. Leadership does matter, but it tends to be underrated. ... We accept it in sports and we should accept it in business.

Q: Some of your critics say you're an experienced insider exhorting mere mortals into buying/selling stocks in ways that can be dangerous, if not downright destructive, to their financial well-being. Are you encouraging day trading or reckless investing?

A: Day trading is the biggest sucker game in the world. I hate day trading. I want people to have a five- to seven-year horizon on investing, showing great discipline. ... It's a sobering time. But there's a longer-term approach that you can profit from. You have to do some homework and not do it blindly.

Q: In the book, you mention how your daughters' insights have influenced some of your stock picks, such as Apple. How often do you glean ideas on investments through younger eyes?

A: A tremendous amount. I've taught in high schools and (appeared) at 17 colleges. You sit and listen to what (young people) think is going to happen, what devices they use, how they view the world. It's been very valuable. My daughters are 19 and 22. They got me into Dominos, Facebook, Yahoo, Google, Netflix ... all very powerful trends that my kids turned me on to.

Q: What are some of your must-follow stock categories?

A: Social, mobile and cloud companies (Facebook, Google, LinkedIn); biotech (Celgene, Gilead, Regeneron); healthy foods (Whole Foods, Panera, Chipotle); value retailers (T.J. Maxx, Priceline); energy (Schlumberger, Anadarko).

Q: You're known for your on-air antics, like tossing plastic bulls into a frying pan. Any plans to change your style?

A: The topic (stock investing) itself does not lend itself to drawing people in. When I look back at my college and law school classes, the professors who did the most to enthrall and entertain me are the ones I remember. The ones who took a dry subject and kept it dry are forgettable. I've adopted the strategy of my professors who made their subject matter come alive.

Living up to his Mad Money moniker, Jim Cramer has made a living the last eight years talking — and yelling — about stocks. As the flamboyant, crazily enthusiastic stock picker on CNBC, he dishes up daily pronouncements of what's good, what's hot, what's not.

With two Harvard degrees, the 58-year-old investor-turned-TV-host is bright, opinionated, animated. In a tie and rolled-up shirt sleeves, he peppers his daily, hourlong cable TV show with rapid-fire chatter about stock companies and interviews with CEOs. A former newspaper reporter, he ran a successful hedge fund that boasted annual profits of 24 percent before he shut it down in 2001, largely for stress-related reasons.

In a new book — Jim Cramer's Get Rich Carefully, his first book in five years — Cramer isn't shying away from any of the topics that have repeatedly put him in the critics' dunk tank.

Question: Last year was off the charts for the stock market. Are we in for another blockbuster year in 2014?

Answer: No. I've been saying that we could be up about half of what we were last year. We've had a very big move. If the economy doesn't pick up from here, we will not be able to make a lot of headway. It's gotta continue and it's not clear to me that it will. It should. We're on the right course.

Q: In your book, you vividly describe the financial meltdown that drove many out of the stock market. You criticize Wall Street's "machine gun bandits" whose reliance on high-frequency trading can distort the market, as well as the "wealth-destroying flash crashes, flash freezes and Facebook fiascoes" that have shaken investor confidence. "The losses were so extreme, the trust so despoiled and the risks so outrageously imbalanced against the rewards, that I blame no one for fleeing these pieces of paper (stocks)" ... Despite all that, you're still encouraging Americans to embrace the stock market?

A: Carefully. Your first $10,000 should be in an index fund, so you're diversified. Only after that should you be investing in a portfolio of your own. Index funds are great because of their low fees. The book is how you can invest wisely if you spend the time. If you try to do it quickly, you'll lose money.

Q: You took a lot of heat in 2009 for calling President Obama "the greatest destroyer of wealth" you'd ever seen. Yet the opening of your new book repeatedly castigates politicians — of both parties — for "bankrupting us slowly." I take it you're not backing off your contention that government and political leaders aren't helping individual investors?

A: The president came in with very little understanding of how the stock market worked. I felt he had it wrong with a failed stimulus plan to try and get the country back economically. I felt job creation was the No. 1 priority. ... Most of what we've seen in terms of the recovery is from Ben Bernanke. The Federal Reserve has been fabulous. The Democrats and Republicans are the economy's worst enemy because they have no ability to see through partisanship. Coming out of the recession, the government has been a major impediment to where we should be with more robust growth. ... There are people who call me a Tea Partier and there are people who call me a Trotskyite. So I must be doing something right.

Q: You emphasize your investing mistakes, such as being too emotionally invested in a stock, which can blind investors to knowing when it's time to buy or sell. Specifically, you cite your love affairs with Apple and Chipotle.

A: You just fall in love with a stock and that's a terrible thing. If I can't tell people I've made mistakes and learned from them, I'm not doing my job. I've made good calls and bad calls. The good picks take care of themselves. The bad picks ... if you don't study and learn from the mistakes, they can overwhelm the good ideas.

Q: Your book lists the 21 "bankable" CEOs, company leaders who can "transcend the (current) toxic environment" and "inspire their companies to thrive, no matter what." What makes them different?

A: In more than 2,000 shows, I've interviewed some (CEOs) over and over and have seen how they've been able to triumph over different scenarios. They're basically head coaches who run NFL-like teams. They've won more than they've lost. Leadership does matter, but it tends to be underrated. ... We accept it in sports and we should accept it in business.

Q: Some of your critics say you're an experienced insider exhorting mere mortals into buying/selling stocks in ways that can be dangerous, if not downright destructive, to their financial well-being. Are you encouraging day trading or reckless investing?

A: Day trading is the biggest sucker game in the world. I hate day trading. I want people to have a five- to seven-year horizon on investing, showing great discipline. ... It's a sobering time. But there's a longer-term approach that you can profit from. You have to do some homework and not do it blindly.

Q: In the book, you mention how your daughters' insights have influenced some of your stock picks, such as Apple. How often do you glean ideas on investments through younger eyes?

A: A tremendous amount. I've taught in high schools and (appeared) at 17 colleges. You sit and listen to what (young people) think is going to happen, what devices they use, how they view the world. It's been very valuable. My daughters are 19 and 22. They got me into Dominos, Facebook, Yahoo, Google, Netflix ... all very powerful trends that my kids turned me on to.

Q: What are some of your must-follow stock categories?

A: Social, mobile and cloud companies (Facebook, Google, LinkedIn); biotech (Celgene, Gilead, Regeneron); healthy foods (Whole Foods, Panera, Chipotle); value retailers (T.J. Maxx, Priceline); energy (Schlumberger, Anadarko).

Q: You're known for your on-air antics, like tossing plastic bulls into a frying pan. Any plans to change your style?

A: The topic (stock investing) itself does not lend itself to drawing people in. When I look back at my college and law school classes, the professors who did the most to enthrall and entertain me are the ones I remember. The ones who took a dry subject and kept it dry are forgettable. I've adopted the strategy of my professors who made their subject matter come alive.

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