The Cramer Effect

G

garfangle

Since I haven't been around in awhile, if this has already been discussed then...

Jim Cramer of Mad Money on CNBC has a noticeable effect on the aftermarket price of the stocks he features on his show. Usually, after he mentions his like (or more rarely dislike) of a stock he features (not brought up by callers/guests/lighting round) it bumps up by a dollar or sometime even two, regardless of its actual price (meaning it could be a significant percent move of not).

Even though his show is taped, the live ticker on CNBC displays this phenomenon pretty accurately. It has been pronounced for some time as well, since last fall.

Is there any way to trade this profitably and has anyone noticed/done it?
 
Quote from garfangle:


Is there any way to trade this profitably and has anyone noticed/done it?
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This has been overly discussed but a way to trade it is to short the following day, grab .5%-1% and get out.
 
I believe the show starts taping a half hour before air. People are calling in when taping starts and get put on hold. While on hold they are at their comp. because you can hear the show and get into the stock before the public see the show. Not a bad gimmick if you can get through on the phone.

I'm surprised the SEC hasn't acted on this though.
 
Or just call into his show at 4:30 and yell booyah a bunch of times, find out which stocks he is hyping up and then go buy them before everyone else.
 
For awhile, I'd short a small amount of shares into the runup after hours that seemed to be going up "too high", and then cover the next day. I started doing this about a month before he appeared on 60 minutes. I think I did it maybe a dozen times tops. It seemed like it was working ok, as I made money on the order of around 30 to 50 cents on most trades or so (I'd have to look back at my spreadsheet on another computer, but that seems about right.) I think since he appeared on 60 minutes though, there are so many more people buying that it seems like shorting into his calls doesn't work as well anymore, but really I wasn't doing it long enough to know for sure. if it was *ever* working. Very likely I just had a string of lucky trades. I had a few bad trades since the 60 minutes appearance, where I gave up a significant multiples of what I was making per trade on average and so rarely try this anymore. Also there have been maybe a couple of times where I "panicked" after hours and covered for a small loss in the after-hours session instead of holding over night, which in retrospect turned out to be a good idea as I every time I would have also experienced good -sized losses. For reasons I don't try this very much anymore.
 
Might as well call it the lemming effect.
Why not short on an intraday topping pattern? And set a tight stop.
Remember, never try to guess a peak. You'll burn yourself bad with that kinda crap.
 
I, too, have shorted into the sometimes irrational exuberance after-hours, with variable results. Sometimes, it works great - you short the initial runup, up a few percent, and it pulls right back. Other times, you start shorting it, and it keeps going.

It seems that he sometimes actually contributes some value, citing some business case that hasn't been made before. PMTI is a good recent example (on which I got whacked). Went up and kept going, though I think the hype over the idea of personal cosmetic lasers is stupid.

The key is probably to be able to find out whether he has said anything new, but you have very little time (sometimes minutes or seconds) in which to do so before the exuberance fades.

Do you really hear the entire show (from the beginning) while on hold, or just the lightning round stuff (which hardly moves stocks)?
 
I think the concern by the thread starter is similar to that of a technical analysis. When everyone knows about it and start doing it, the market will be settled at equilibrium and eventually profit after commission will be forgone. One amazing thing about Cramer (which I think is a joke) is why people believing in him. Check his list of stocks in 2000:

http://www.thestreet.com/funds/smarter/891820.html

Some of the stocks are gone, and the rest dropped dramatically then, IN THE NEW WORLD?? hahaha...why? I can never understand the market, because irrational players in the market never know what they are doing, so how do we analyze psychos???

Everyday I watch the show at 3:30 and sometimes at night, two things I can recall:
1.) The symbols he mentions
2.) The stupid sound effects
I don't see any quality in his analysis, and people are believe those shits?? He is the biggest phony in the financial industry.

reference: The Intelligent Investor, revised edition, updated by Jason Zweig, pg. 16, footnote 7.
 
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