Believe it or not, Jim Cramer of CNBC helped spur my passion in investing in the early 2000s. I had initially invested in the late ’90s on a recommendation from a family member. I had no clue what I was doing, and my interest faded as quickly as my brokerage account balance. That family member gave me investment advice to buy nothing but tech stocks, in the late ‘90s. That advice was given to her by a practicing financial advisor, or more accurately, a stockbroker. Online trading platforms existed then but stockbrokers still had a large influence on retail investors because of an implied promise of beating the market. These brokers made commissions by giving stock recommendations. The more stock sold, the more money they made. 

Doing everything I could to recover, I watched a lot of CNBC and followed tickers scrolling at the bottom of the screen. After the market closed, I was really at a loss on where to go to get more information on the stock market. Naively, I was looking for a silver bullet answer to my investing woes. I was a finance major in college, but the academic side really didn’t interest me at the time. Yes, I recognize the irony of seeking out financial markets information on TV rather than university. Maybe it was my younger self looking for an easy answer to a complicated question. 

It was this middle-aged guy on basic cable smashing buttons with sound effects that had a greater impact on my impressionable mind. “Buy this!” “Sell that!” Squealing pig sounds. I was hooked. Any “buy” recommendations made by him were seriously followed upon, whether reading articles on the company and frequently trading on this advice. I did this throughout college until 2008. As entertaining as Jim Cramer is, he did not give any thoughtful advice to his audience, let alone me. 

After the financial crisis, Cramer is excoriated for giving viewers bad investing advice. As the video mentions, financial news on cable and in print had (and still does) a hyper-focus on short-term moves. These news sites are competing for our attention. You’ll still see headlines like this, “The Dow is Down 500 Points!”. The Dow is trading at nearly $35,000 as of this writing so that 500 points amounts to 1.4%. Imagine how many readers I would lose with the headline “The Dow is Down 1.4%!”. The problem is finance is not entertaining to most people. The media needs to juice up their headlines to make a boring topic less boring. 

It took me more than a decade to really start to understand my relationship with financial media. No one cared about my money as much as I did, so I had to get serious about learning to love the “boring” stuff. 

Yes, I still read financial news but with a bit of a twist. It is always important to me to be on top of what the markets are doing. If there is a topic of interest, I will still click but look for the source material. A good journalist will always link where they got their data, which should always be from a reputable source. Take this example “Cramer Says the Market is Expecting Too Many Fed Rate Hikes this Year”. I just said Cramer gives bad advice but stay with me. What I’m looking for are links and sourcing to actual data. I don’t care what Cramer has to say but it is typically safe to assume that the author linked to some good source data as seen below.

“The market has priced in five interest rate hikes for 2022, with a sixth one starting to gain traction for later in the year, according to the CME FedWatch tool.

Goldman Sachs late Friday increased its baseline estimate of four rate hikes to five, two days after the Fed wrapped up its January meeting.

Bank of America on Friday said it expects seven rate hikes this year.” Krystal Hur, CNBC

Now through one article, I am able to access Goldman’s forecast, Bank of America’s forecast, and a very good CME interest rate tool. I did not read what Cramer thought about rates as he’s most likely wrong.

My best advice is to read, read, read with an eye towards going to the root source. Keep a good perspective on things too. The market has definitely moved in January 2022, but did anything materially change? Acting on Jim Cramer’s advice does not normally produce good outcomes. Acting on one month’s headlines really isn’t much different. 

When it comes to investment decisions, stay away from clickbait from even reputable sources. CNN and the New York Times, need to sell clicks too. Read books that give proper investing advice like “A Random Walk Down Wallstreet”, “The Intelligent Investor”, “Misbehaving”, and “The Little Book for Common Sense Investing”. None of these books give a guaranteed solution to untold riches but they have made me a better investor. 

Confirmation bias will have a negative impact on your portfolio. Seek out differing viewpoints like we do. Being humble and recognizing that financial markets are complex, makes you realize that no one source has all of the answers. Don’t come up with your conclusion first and then seek out articles that back it. 

We have access to financial firms who publish viewpoints and data where the goal isn’t generating clicks. I know this is something retail investors don’t have access to, but we all have access to the same public data. It is a skill to know how to read the data and analyze it properly. 

Understand emotions will tend to get in the way of the best-laid plans. If a market was up 10%, investors tend to view that as slightly positive. If the same market was down 10%, investors tend to think it’s the end of the world. I’m exaggerating of course, but our negative bias does react to down movements more than up moves. 

Lastly, I tend to gravitate towards SSRN for peer-reviewed white papers. The site offers academic literature for any topic. I happen to gravitate towards financial and economic topics. This is not light reading as the typical paper is about 30-90 pages in length. It’s what I do for work and as a hobby. I live and breathe this stuff. 

There it is, my secret sauce. I’m willing to be transparent with my process because I know it is not an easy road to follow. It takes commitment and passion to keep doing it to my standard. If you view the stock market as a competitive arena, I believe you’ll have to do this and more to keep up with the likes of the professionals.  

Our firm takes in this information and applies it to our modeling tools. We have an investment committee that discusses and debates where assets should go. This is ongoing and every investment is always under review. This is more than a full-time job because of the passion every committee member has with financial markets, in addition to the impact on our clients’ lives. We live and breathe it. 

We also send our allocations to be analyzed by multiple third parties. We are humble enough to understand that we don’t have all of the answers. 

Members of our firm read financial news and data for fun. Most normal people would disagree and find financial news boring. We are recently seeing a wave of newly minted day traders who are taking advice from Reddit, family members (like me decades ago), and Dave Portnoy from Barstool Sports. Financial markets are a competitive place. We just scratched the surface on how to deploy money so unless you’re willing to put in this amount of work, we don’t recommend this type of activity with your savings. Only 10% of day traders don’t lose money. We think the success rate is lower because anyone who’s gone bankrupt probably doesn’t identify as a day trader anymore so they’re not being counted.  

As Warren Buffett once said, “The stock market is a device for transferring money from the impatient to the patient.”

Disclosures

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

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