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Thursday, June 13, 2024


Unless this time the greatest "contrarian long-term secular indicator of all time" no longer applies, this bear market is not finished.  Although if you’re short, you’re ability to trade it may be. – Ilene


bear market, secular bear marketCourtesy of The Pragmatic Capitalist

The end of investment fads tend to coincide with sharp changes in investor sentiment and long-term secular moves.  No one has represented the excessively bullish & leveraged market of the 80’s, 90’s and 00’s more than Jim Cramer.  He worked at the most highly leveraged hedge fund on Wall Street – Goldman Sachs.  He took a dotcom firm public and promptly lost 95%+ for his shareholders at the peak of the market in 1999.  He ran a super beta tech hedge fund in the leverage driven 80’s & 90’s (which I guarantee you underperformed the Nasdaq 100 on a risk adjusted basis), and he now runs the bullish of all TV bullish shows – “Mad Money”.  The show basically begs small investors to be reckless with their hard earned cash.  It borders on financial negligence in my opinion, but that’s for another discussion.  No one has been a better icon of the excess of the 80’s and 90’s than Cramer himself.

Cramer is a powerful man.  The mere mention of a stock can send shares soaring.  (If investors are truly upset about the stock manipulation that Goldman Sachs and high frequency traders are accused of they should be extremely alarmed about Cramer’s show – no single person has manipulated more stock prices in the history of the stock market).   When this phenomenon began several years ago I was dumbfounded.  I asked myself: “who would buy these stocks in the after hours market at such a steep premium?”  Late last year the trend had waned.  The stocks Cramer recommended didn’t soar.  Cramer’s power had declined.  After all, he had called the bottom to the bear market on 3 separate occasions (all wrong), had recommended Bear Stearns just weeks before they went under, recommended Wachovia just days before they went under, top ticked the banks in a bet with Eric Bolling in what has to go down as one of the worst market calls of all time and even proclaimed in late September 2008 that “the bounce means the crash can’t happen”.   His track record was in tatters, but he salvaged it miraculously with the call that wasn’t really a call at all.

James Cramer, Jon StewartIn early October of 2008 Cramer gave the most obvious of obvious financial advice on The Today Show: don’t invest in the stock market if you need the money in the next 5 years.  Cramer called it “the second greatest call of [his] career”. I call that financial planning 101.  It wasn’t a market call at all even though he has fooled investors into believing that it was some great market call.  It was broad financial advice that every investor should know and adhere to at all times.  The market could have been at 100 or 1,000,000 and his advice would have been 100% correct.  Those who can see beyond the Cramer veil know that he was wildly bullish about the banks and the overall market all the way to the bottom, but he is a superb entertainer and an even better salesman.  People believe him and CNBC continues to pawn him off as their guru.  And we all know why – he puts people in the seats….and when your business relies on selling ads, viewership is kind of important.

Well, the Cramer power is back and small investors are eating it up as if nothing ever occurred.  After a 40% move in the indices Cramer’s loyal viewers are back in action snatching up odd lots at a furious pace in the after hours market only to get slammed in the coming days and weeks.   Small investors are excellent contrarian indicators and the combination of Cramer and small investors makes, perhaps, the greatest contrarian long-term secular indicator of all-time.

Richard Russell says:

“This bear market, like all others before it, will only end in exhaustion. And with exhaustion we will see stock values that this generation has never seen or imagined before.”

You think the secular bear market is over?  Then why are small investors so hungry to speculate with their “mad money”?  Where is the exhaustion in the market?  Let me know when Cramer isn’t herding small investors into high beta stocks on a daily basis.  Then we’ll know the secular bear market is over….



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