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In the fall of 2005, I was sent by my accounting firm to Birmingham, Alabama on a mission to help reinstate the fraudulent Accounts Receivables for HealthSouth’s financial statements. To burn off some energy from sitting at a computer most of the day, I ran semi-faithfully on the Hilton treadmills in the evening. In order to pass the time, I would turn on the television mounted in the corner, and was entertained by this guy named Jim Cramer on CNBC’s “Mad Money” which launched in March, 2005.
Jim would burn more calories than I did by running around his studio with his shirt sleeves rolled up, while yelling, “Sell, sell, sell!” or “Buy, buy, buy!” He would hit certain buttons which would make all sorts of sound effects, and he distracted me from the pain of getting through those first couple of miles. Like watching a car wreck on the side of the highway, I had a hard time turning the channel, and continued to listen to his passionate yelling.
After a few months of this entertainment, it became obvious to me that Jim Cramer was an entertainer, and not necessarily a financial expert. He had the same message, but interchanged stock names and tickers. I often wondered if anyone took his stock tips seriously, and what would be the results if they did.
Well, I found out there is a paper from two researchers at the University of Pennsylvania’s Wharton School that finds that Cramer’s picks have been less than scintillating.
On its website, TheStreet compares the return of the Action Alerts PLUS Portfolio to the S&P 500 plus dividends received but not reinvested. That’s because the portfolio donates the dividends to charity rather than reinvesting them. Launched in August 2001, Action Alerts PLUS Portfolio has been a centerpiece of the financial advice offered by TheStreet.com. PLUS Portfolio subscribers, who pay $15 a month, always get the recommendations before Cramer buys them for the portfolio. Likewise, subscribers get Cramer’s picks before he airs them on “Mad Money.”
When someone is screaming at you to buy anything, hold tight to your wallet Click To Tweet
The lesson is that good investing is usually pretty boring, and when someone is screaming at you to buy anything, hold tight to your wallet. ~Jonathan S. Hartley, Matthew Olson, The Wharton School, University of Pennsylvania
Intelligent Investing believes that having a long-term investment philosophy is best.
Do not wear yourself out to get rich; do not trust your own cleverness. Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle. ~Proverbs 23:4-5
All hard works brings a profit, but mere talk leads only to poverty. ~Proverbs 14:23
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