Mad Money = sad money, Barron’s says

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Enjoy the manic entertainment experience of CNBC’s Mad Money – but don’t count on getting rich based on host Jim Cramer’s advice – Barron’s recommends in this weekend’s edition. In “Cramer’s Star Outshines His Stock Picks,” the weekly says the TV stock jock’s Buy/Sell calls are “wildly inconsistent” but, overall, perform substantially worse than a passive investment in the market.

Cramer would no doubt disagree, but Barron’s at least bases its conclusion on some serious number-crunching of his stock picks:

Cramer’s recommendations underperform the market by most measures. From May to December of last year, for example, the market lost about 30%. Heeding Cramer’s Buys and Sells would have added another five percentage points to that loss, according to our latest tally.

To his credit, Cramer’s Sells “made money” by outperforming the market on the downside by as much as five percentage points (depending on the holding period and benchmark). His Buys, however, lost up to 10 percentage points more than the market.

Barron’s also says stocks Cramer highlights as Buys tend to have gone up in the days before the call, and the reverse with Sells. The paper speculates on whether that points to advance leaks of broadcast plans – a serious allegation – or merely Cramer’s preference for calling stock moves based on the momentum of “what is working.”

Investor relations folks seem to regard Cramer as comedy, or aggravation, or both – but not a serious source of investment advice. If Cramer was serious, he wouldn’t yell so much or use funny sound effects. Even mentions on his show are a short-term event. But the Barron’s piece offers a more reasoned analysis of Mad Money and its picks than I’ve seen so far.

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