Jim Cramer Is Not Your Financial Advisor.
“THEY KNOW NOTHING!”
- Famous Jim Cramer quote (rant) in regards to the Fed on the cusp of the great financial crisis of 2007-2009.
Jim Cramer. Smart guy. Successful money manager. Great TV personality. Not your Financial Advisor. He says it himself in so many words at the beginning of each show when he declares that he is there to entertain and to teach. But he KNOWS NOTHING when it comes to your particular financial situation. So, when viewers call in to his TV show Mad Money (which the name should raise flags in and of itself) and ask if they should buy/sell/hold company X or company Y, Cramer has zero sense if this is an appropriate investment for the person’s financial plan. Maybe they should not be in stocks at all given their financial phase of life, their net worth, their emotional make up, etc. Maybe Company X (lets use QCOM) is a great company and stock in and of itself, but the person works there and thus adding even more exposure to the stock is not in the person’s best interest (the very same stock can be a buy for one person and a sell for another. It might be entirely appropriate for Bill Gates to be selling shares in MSFT regularly for diversification purposes, but for someone with no tech exposure in his portfolio, adding MSFT could be a smart financial move). Simply put, without truly understanding myriad factors about an investor, there is simply no way you can provide good advice (which he never claims he is doing per se, although I am sure many viewers take his buy/sell/hold recommendations and apply them to their own situations).
Imagine if you walked into a gym and a personal trainer started having you lift weights and run on the treadmill without asking you anything about your physical history, current health, future goals, etc. Maybe your objective is to improve your swimming and allow your knee to recover from an injury. Some people are looking to gain weight in the form of muscle, while others seek to lose fat. The point is: everyone’s health situation and goals are entirely different and unique to them. The same goes with one’s fiscal health. Unless and until you have a deep understanding of the person’s past experiences (e.g. has the person sold stocks in a panic every time the market drops over 10% even though they don’t need the money for years? Then the advice is different), present situation (assets, liabilities, cash flows, etc.), and future goals (retirement, large purchases like a 2nd home, estate matters, funding kids’ college, etc.) then there is no way to give any advice on a particular asset class, let alone a security (e.g. a stock) within that asset class.
So if you watch Jim Cramer or other TV financial personalities, recognize that 1) they know nothing about your particular circumstances, and if they did they might recommend the exact opposite of what they just said on TV, and 2) even with all the necessary information to make such a recommendation, the security itself may change fundamentally such that it is no longer a buy/hold/sell, not to mention the investor’s circumstances are inevitably going to evolve leading to modified advice over time. Financial advice is specific, circumstance-driven, and ever evolving. Make sure you are working with someone who will take to time to understand you and your situation intimately – both for today and on an ongoing basis.
Article by Scott Kyle