Cramer v Stewart: a bit disappointing

I just watched the Jim Cramer vs Jon Stewart showdown on The Daily Show and I’m just not as impressed as some others. Stewart’s real problem with Cramer seems to be that he should have known that the meltdown was coming and told his viewers. By advising them to buy stock that he should have known was bad he is jointly responsible for the fomentation that led to the stockmarket crash. There are two reasons why I’m not convinced:

  1. As Megan McArdle says, Stewart is being hypocritical. He is “… doing exactly what Cramer is–making powerful statements, and then when he gets called on him, retreating into the claim that well, you can’t really expect him to act as if he were being taken seriously.” I don’t know how much to trust reporting that Stewart himself is careful to point out is comedy, not journalism.
  2. Stewart’s central claim is that Cramer should have known better. I say that Cramer’s viewers should have known better. So perhaps Cramer should realise that the CEO of Lehman Bros had an incentive to say they were doing well. But Mad Money makes money by being entertaining and getting people to watch, not by doing hard-hitting journalism. If Cramer were an uncompromisingly hard interviewer he’d never get any of the CEO interviews that people tune in to see. Viewers should realise that his show doesn’t succeed by picking stocks well, as the numbers show. If they don’t then they’re going to be relieved of their savings by someone else if Cramer doesn’t lose it for them first.

Ultimately, I was a bit disappointed that Stewart’s entire attack asked Cramer to adhere to journalistic standards that he has little incentive to aspire to. He doesn’t hold himself to such standards (although I understand why), and he doesn’t hold investors to those standards either.

More comment from MR, The Economist and Noam Scheiber.

22 replies
  1. Will de Cleene
    Will de Cleene says:

    I found it a good lesson in the dangers of infotainment, hence the F-ing with people’s long term investment point. As Stewart said, at least he admits to being a snake oil merchant. Whereas Cramer’s show is marketed as a trustworthy source of financial news for the layman, while featuring CEO fluff pieces with a knowingly complicit salesman.

  2. Matt Nolan
    Matt Nolan says:

    I guess this illustrates one of the issues with Baysenian updating – you need to have the constant iterations to actually head towards our equilibrium, and when judging these people we often don’t have enough data points …

  3. Online Degree
    Online Degree says:

    I agree with you too about Stewart. It’s not supposed to be so, but hey – who are we to say. Anyway, thanks for sharing this. I sure hope it helps to put him in his place.

  4. Miguel Sanchez
    Miguel Sanchez says:

    Haven’t seen the interview, but I do remember the Mad Money clip, and in this case I don’t think the “people should know better than to take him seriously” defence holds up. He was responding to a very specific question from a viewer – “should I take my money out of Bear Stearns?” – and would have known full well that they would probably follow whatever advice he gave. So to give such an unequivocal answer to something he couldn’t have known one way or another was pretty irresponsible.

  5. Stephenie
    Stephenie says:

    I agree with Miguel Sanchez, Cramer should have “known full well that they would probably follow whatever advice he gave”, sometimes you have to make it clear to people that you are merely providing them with your personal opinion which maybe discredited but Cramer made no hint to viewers that what he was saying maybe wrong or even suggest that there was any fault in the matter. He was basically encouraging the layman to not think and do as they were told. I think the main point of the debate is that Stewart was just airing everything the average person has been ranting about in the coffee shop/pub, and I’m more than glad that it has finally been brought to media attention rather than people skirting around the debate of how did few financial advisors/experts not see this coming.

  6. insider
    insider says:

    Wasn;t one of Stewart’s main points that they were effectively incentivised not to see it coming because ratings were the real issue not sound analysis?

  7. Matt Nolan
    Matt Nolan says:

    “Wasn;t one of Stewart’s main points that they were effectively incentivised not to see it coming because ratings were the real issue not sound analysis?”

    The ratings issue is so so so important – effectively market information was biased, of course outcomes were going to be messed up in such a case.

  8. rauparaha
    rauparaha says:

    It’s just so obvious that his incentive is to boost ratings, not to provide excellent advice that I can’t believe anyone really listens to him. Sure, he directly gave bad advice sometimes, but who can really believe an infotainment show is the place to go for investment advice???

    I have sympathy for those who lost money because of such shows, but I don’t want to hold entertainers to a higher standard of care than investors. After all, it’s the investors’ money and they’re ultimately responsible for it.

  9. Matt Nolan
    Matt Nolan says:

    “After all, it’s the investors’ money and they’re ultimately responsible for it.”

    Very very true. However, they are part of a long chain of misinformation – something that, maybe, they should take some responsibility for …

  10. rauparaha
    rauparaha says:

    @Matt Nolan
    Absolutely. I’m referring to the specific case of taking your primary advice from someone who has almost no incentive to give you high quality advice. In fact, he has an incentive to be nice to companies so they’ll keep giving him interviews and ‘insider info’. I think taking advice from THAT sort of person precludes you from complaining you were misinformed.

    Now if your personal investment adviser gave you bad advice then I’d think it wasn’t your fault. But that’s an entirely different set of incentives that they have.

  11. Matt Nolan
    Matt Nolan says:

    Indeed – but the type of information Cramer was providing did aim to have some positive probability of being true. In conjunction with the piles of other misleading information out there it is possible that there could have been someone who was “pushed over the edge” by Cramer’s recommendations.

    I do not think that he should be liable in any financial sense of the world – the damage to his reputation is sufficient enough.

    But before the crisis I believe that people had some faith in him – and to some degree he may have abused this. Us discussing it is part of the process of optimally readjusting his reputational capital 😉

  12. Scott
    Scott says:

    Shallow analysis of the interview in my opinion.

    Stewart’s main point was that CNBC knows that a shadow capital system exists alongside the system accessible and known to Common Joe. CNBC is complicit in supporting this system by not acknowledging its existence and not adjusting it’s behavior/advice accordingly. The risk to Common Joe, who watches CNBC for stock picking advice, is therefore greater than it otherwise would be.

  13. rauparaha
    rauparaha says:

    I’m not sure what you mean: interviews with investment bankers and fund managers are all over CNBC so how can you say they don’t acknowledge the existence of the shadow banking system? If you mean that CNBC cosies up to these firms to get interviews with them… well, obviously they would. That was half my point.

    The shadow banking system was a big part of the financial crisis, but I don’t think it is fair to say that business channels ignore its existence. Perhaps you mean that they failed to properly explore the risk inherent in the large holdings of CDOs that many firms had. In that case I would say that most people underestimated that risk and CNBC were no more at fault than anyone else.

  14. Matt Nolan
    Matt Nolan says:


    They aren’t at fault if they aren’t providing information – I think we should only criticise them if they provided mis-information. As a result, I have to agree with Rauparaha here

  15. Scott
    Scott says:

    My original point was that CNBC doesn’t discuss HOW the system operates. Do you think Common Joe is aware of the manipulation that goes on? Would CNBC have as many viewers if they openly discussed this aspect of the market?

    Check out the interview with Cramer from 2006 (it appears the original, unedited version has been taken down). His statements are startling to say the least.

  16. Matt Nolan
    Matt Nolan says:

    “My original point was that CNBC doesn’t discuss HOW the system operates. Do you think Common Joe is aware of the manipulation that goes on? Would CNBC have as many viewers if they openly discussed this aspect of the market?”

    But you can’t really criticise someone for not giving information – if there was such a market for the information why didn’t someone push out and provide it?

    Ultimately, I only blame CNBC if they actually mislead people blatently – there is a world of difference between giving no information and giving mis-information.

  17. Scott
    Scott says:

    Matt –

    What about the concept of being complicate with their silence? By remaining silent on the matter they perpetuate the myth that the system is fair and equitable. This is NOT a case of them “giving no information”, its a case of them behaving in accordance with a false “reality”.

  18. Matt Nolan
    Matt Nolan says:


    Complicate with their silence? I don’t know, they don’t have a responsibility to do anything. If they were blatantly mis-advertising things I can see what is wrong with them – but if they simply didn’t address facts then I don’t see an issue.

    If they didn’t address facts and then investors didn’t go looking for them it is still the investors fault that they threw their money down the toilet.

  19. Scott
    Scott says:

    Matt –

    Im not arguing over whether or not Cramer gave good or bad advice on one particular day over one particular stock. My “greater point” is that they advertise themselves as being on the side of Common Joe but do NOT behave accordingly by discussing the gaming of the system (and thus making Common Joe aware of ALL the risks of trading). I believe this can be described as “mis-advertising”.

  20. Matt Nolan
    Matt Nolan says:


    Hi again Scott,

    I find it hard to sympathise with people who brought stocks solely on the recommendations of Cramer – ultimately, they have to take some responsibility for not actually doing any real research.

    However, if Cramer knew that Bear Sterns was bankrupt and was telling people to buy – I see that as true mis-information. In that case he is culpable.

    However, I guess I’m just making value judgments in some sense here 🙂

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