> As the astute among you might have noticed, if you sum up all the stocks used in the analysis it would only come to 18.5k. I removed ~15% of the overall recommendations as either they did not have stock data present in Yahoo Finance/Alpha Vantage or the price data did not match with the one given on the Mad Money website.
That seems like a big caveat. Wouldn’t lack of stock price data be an indicator of delisting?
Maybe so. But delistings probably wouldn't have a big impact on the 1-day results, and the analysis already concludes that Cramer's long-term returns are not good.
No, it's quite possible that delisted stocks behaved differently even on 1-day basis. For example, if I recommended only very risky stocks, the ones that stayed listed and survived likely paid off very well (let's say +40% in a year), while the ones that are no longer listed mostly went bankrupt (-100%). 1-day returns would show a very large difference on average.
> Wouldn’t lack of stock price data be an indicator of delisting?
That's one reason. They may not have pricing due to licensing issues at the source, as well. Yahoo Finance is pretty good for a free resource, but it's not as comprehensive as paid sources.
But, even if it's due to delisting, delisting is not inherently a negative thing. It can happen due to mergers/acquisitions or a formerly public company going private, for instance.
Or they merged or changed a name, or were taken private. Searching for the SPAC PSAC shows nothing on Yahoo, because it’s now FFIE (Faraday Future) The poster was also measuring sell recommendations so those would be also be harmed by no data in delistings.
Yep, there's a reasonable chance this analysis suffers survivorship bias. Outliers whose stock-prices severally crashed are less likely to be represented. Hence, impactful sell recommendations are probably missing from the data, explaining why sell-side recommendations don't appear to to perform as well.
I do think that limiting yourself to 1 day, 1 week, 1 month horizons is... limiting. Making predictions on that horizon is essentially predicting events (earnings, mergers etc.) and market dynamics. For example, I've worked at a public company who I knew was in trouble from an engineering perspective. I left, over the 3 years before, and 3 years after I left, the stock performed very well. So in terms of stock market predictions, it's not about knowing he underlying performance of the business. It also lends itself to letting Cramer market his own homework - did the stock go up due to his influence for example? Could be the case for smaller cap stocks, and particularly over a 1 day horizon.
It's also rather comical that he's right a little over 50% of the time when making a positive prediction and a little less than 50% of the time when making a negative. Or to put it another way, the stock market goes up -so when you predict it goes up, you're generally right.
> I do think that limiting yourself to 1 day, 1 week, 1 month horizons is... limiting.
The feedback loop on whether you've made a good decision can be a long time:
> For example, any competent basketball coach could tell you whether someone was skilled at shooting within the course of 10 minutes. Yes, it’s possible to get lucky and make a bunch of shots early on, but eventually they will trend toward their actual shooting percentage. The same is true in a technical field like computer programming. Within a short period of time, a good programmer would be able to tell if someone doesn’t know what they are talking about.
> But, what about stock picking? How long would it take to determine if someone is a good stock picker?
> An hour? A week? A year?
> Try multiple years, and even then you still may not know for sure. The issue is that causality is harder to determine with stock picking than with other domains. When you shoot a basketball or write a computer program, the result comes immediately after the action. The ball goes in the hoop or it doesn’t. The program runs correctly or it doesn’t. But, with stock picking, you make a decision now and have to wait for it to pay off. The feedback loop can take years.
Are you willing to stake your financial future on beating the odds that you're better-than-the-average/market? Especially over the course of multiple decades saving up for (e.g.) retirement, and then keeping your portfolio during the (hopefully) decades of retirement. (Of course you can do good enough to meet your financial goals, even if you could have done better using (say) index funds.)
I think one thing that your explanation is missing is that a skilled basketball player has technique. The reason he sinks 50 3 pointers in a row is because he has a technique that minimizes variance and muscle memory that allows him to move in a repeatable and predictable way. That's how you tell the difference between someone who is good and someone who is lucky. With the stock market, sometimes you can do the same thing. The reason that Cramer is famous/infamous is because so often the explanation for his stock picks are just trash. It may well be that he's manipulating the market and helping out his friends, or pumping stock he already owns, and actually in private he's a shrewd individual. The character on screen is a blithering idiot 90% of the time. It's not that we think his results are bad, it's that the method he's using to produce those results seems obviously flawed.
Do these compare performance before or after fees? Regardless, if you're comparing funds (that contain lower risk investments, like bonds) to the S&P500 then they're going to lose whenever equity markets beat bonds - which is most of the time.
If I actually (by picking stocks) have a lower expected return than the S&P, shouldn't I be sending all the hedge funds my stock picks so that they can short them (while being long S&P) - therefore beating the benchmark ~75% of the time?
> Or to put it another way, the stock market goes up -so when you predict it goes up, you're generally right.
Yes! If you compare to the coin toss baseline, you need to weight it by how the average stock (whatever that means) moves. So the baseline of a 50-50 coin toss is misleading, and should probably be 50+epsilon, 50-epsilon instead, in order to be a fair comparison. However, the S&P 500 baseline is solid, imo.
Jimbo is a TV personality and knows just as little as anyone else. The little positive correlation his recommendations have on a short term basis are from people buying in and pushing the price up. Casual market manipulation.
Cramer tells everyone to buy, everyone buys. Price goes up, then smart people cash out in the profit taking. It doesn't matter what the recommendation is after that buy. Cramer can tell you to sit in a dark closet and fart for the rest of the week. He's successfully driven the price up on a very short term basis, and those that have caught on make easy money.
you can literally watch a tick-by-tick chart of a Stock/ETF that is talked about by any of the CNBC talking heads during market hours and watch this occur in real time.
This might be a bit odd but I'm going to try and link this with Steven Seagal of all people.
Currently Steven Seagal is getting raked over the coals on Reddit due to some of the extraordinary claims he's made about his martial arts abilities, they don't quite line up to our current understanding of what is effective (think, less Aikido and more Ju-Jitsu, at least in the ring).
I think what has happened to Steven Seagal (and here to Jim Cramer) is that we're now in the era where it's possible to (somewhat) easily fact check the claims that you make and prove that they're wrong.
Your Seagal story reminds of a bit further back, in 1995. That was when Hillary Clinton went to Nepal, and along the way made the claim that she was named after Edmund Hillary. Ignore that she was born six years before his famed climb, and her mother unlikely to have heard of him in the U. S. Make of it what you will, that isn't my point.
My point is that in 1995, my first thought was, "you know, we can instantly check this stuff now, as the words leave your lips." I don't know that politicians have been made more honest as a result, but it's an improvement anyway.
In the case of Cramer, who cares enough to trade on his recommendations? Doesn't matter, that isn't the point (but thank you, TFA author, for the effort). The point is that instead of vague memories of how it turned out, like we'd have to make do with 40 years ago, we have folks that can make sense of 20K records and tell you whether Cramer is full of shit, generally speaking.
People have known Steven Seagal and most traditional martial arts have been largely ineffective (in comparison to things like boxing and later BJJ and MMA) for a long time. I'm not going to say they're useless as many of their techniques made it into things like BJJ (thinking of traditional jujitsu), but they certainly don't live up to their reputation from movies and what people like Seagal would have you believe with rediculous exhibitions where he effortlessly flips people around that offer no resistance and immediately take a rolling break fall.
You're absolutely right that the internet in general has made this much easier though. There's even an entire website that's been around for probably 20 years called bullshido that is a play on "Bushido" and "bulls**" that covers this topic in detail iirc.
I think more than fact checking is the ability to share the results. 30 years ago, you would have needed to be a reporter or known one to have analysis reach that many people.
In the 90s, I thought that was a purely good thing but now I’m wishing we had an in-between version where stuff just shy of time cube has millions of fans.
It is, but not because of Seagal's skill as a martial artist. Great castings for the villains, unique setting providing memorable action setpieces, grounded/realistic directing, and Erika Eleniak popping out of a cake half-naked all make it memorable. Seagal's bullshido? Meh.
> On average, he was making more than 20 picks per episode of his show [1]. This is a staggering number of picks to be made by one person!
Presumably there's a small team coming up with a list, just as there's a team of writers for a comedy show.
The program is pure entertainment and as far as I can tell unashamedly so. I can't really find fault with that any more than I can with people, say, watching sports on TV.
Interestingly, the point about outperformance being due to only a few stocks is often true of the broader marker. In 2018 10 stocks contributed more than 100% of the S&P 500 gains.
> Before you go daytrade on his recommendations you should know that the numbers we are seeing here are heavily influenced by outliers. If you miss out on the top 1% of recommendations (~110 stocks out of the 11,000+ buy recommendations he had made), your 1-day return would be -0.062% instead of +0.034.
It’s true of many good investment strategies that if you retroactively ignore the best winners (without also ignoring the worst losers) that your measure of performance drops dramatically.
Readit News
That seems like a big caveat. Wouldn’t lack of stock price data be an indicator of delisting?
That's one reason. They may not have pricing due to licensing issues at the source, as well. Yahoo Finance is pretty good for a free resource, but it's not as comprehensive as paid sources.
But, even if it's due to delisting, delisting is not inherently a negative thing. It can happen due to mergers/acquisitions or a formerly public company going private, for instance.
It's also rather comical that he's right a little over 50% of the time when making a positive prediction and a little less than 50% of the time when making a negative. Or to put it another way, the stock market goes up -so when you predict it goes up, you're generally right.
The feedback loop on whether you've made a good decision can be a long time:
> For example, any competent basketball coach could tell you whether someone was skilled at shooting within the course of 10 minutes. Yes, it’s possible to get lucky and make a bunch of shots early on, but eventually they will trend toward their actual shooting percentage. The same is true in a technical field like computer programming. Within a short period of time, a good programmer would be able to tell if someone doesn’t know what they are talking about.
> But, what about stock picking? How long would it take to determine if someone is a good stock picker?
> An hour? A week? A year?
> Try multiple years, and even then you still may not know for sure. The issue is that causality is harder to determine with stock picking than with other domains. When you shoot a basketball or write a computer program, the result comes immediately after the action. The ball goes in the hoop or it doesn’t. The program runs correctly or it doesn’t. But, with stock picking, you make a decision now and have to wait for it to pay off. The feedback loop can take years.
* https://ofdollarsanddata.com/why-you-shouldnt-pick-individua...
Are you willing to stake your financial future on beating the odds that you're better-than-the-average/market? Especially over the course of multiple decades saving up for (e.g.) retirement, and then keeping your portfolio during the (hopefully) decades of retirement. (Of course you can do good enough to meet your financial goals, even if you could have done better using (say) index funds.)
If I actually (by picking stocks) have a lower expected return than the S&P, shouldn't I be sending all the hedge funds my stock picks so that they can short them (while being long S&P) - therefore beating the benchmark ~75% of the time?
Yes! If you compare to the coin toss baseline, you need to weight it by how the average stock (whatever that means) moves. So the baseline of a 50-50 coin toss is misleading, and should probably be 50+epsilon, 50-epsilon instead, in order to be a fair comparison. However, the S&P 500 baseline is solid, imo.
edit: Stop downvoting me. I did not realize parent commenter was OP of the reddit post.
https://www.investopedia.com/terms/c/cramerbounce.asp
Currently Steven Seagal is getting raked over the coals on Reddit due to some of the extraordinary claims he's made about his martial arts abilities, they don't quite line up to our current understanding of what is effective (think, less Aikido and more Ju-Jitsu, at least in the ring).
I think what has happened to Steven Seagal (and here to Jim Cramer) is that we're now in the era where it's possible to (somewhat) easily fact check the claims that you make and prove that they're wrong.
My point is that in 1995, my first thought was, "you know, we can instantly check this stuff now, as the words leave your lips." I don't know that politicians have been made more honest as a result, but it's an improvement anyway.
In the case of Cramer, who cares enough to trade on his recommendations? Doesn't matter, that isn't the point (but thank you, TFA author, for the effort). The point is that instead of vague memories of how it turned out, like we'd have to make do with 40 years ago, we have folks that can make sense of 20K records and tell you whether Cramer is full of shit, generally speaking.
You're absolutely right that the internet in general has made this much easier though. There's even an entire website that's been around for probably 20 years called bullshido that is a play on "Bushido" and "bulls**" that covers this topic in detail iirc.
In the 90s, I thought that was a purely good thing but now I’m wishing we had an in-between version where stuff just shy of time cube has millions of fans.
Presumably there's a small team coming up with a list, just as there's a team of writers for a comedy show.
The program is pure entertainment and as far as I can tell unashamedly so. I can't really find fault with that any more than I can with people, say, watching sports on TV.
https://m.investing.com/analysis/6-stocks-responsible-for-ne...
Pretty big caveat there...