Smith Faculty Opinion Article

By Dr. Peter Morici, Professor of International Business E-MAIL WEB SITE

March 23, 2009

Stewart vs. Cramer

I can’t attend church these days, never mind be interviewed, without being asked:
When will the recession end?
Where should I invest my money?
What do you think about Jon Stewart and Jim Cramer?

My answers:
Really end? Not any time soon.
Where I put my money, in an S&P index fund.
Charitably speaking, what theater. Honestly, what demagoguery!

Like virtually every other economist, I have counseled players, pundits and parents for thirty years, you can’t beat the market.

God bestows that talent on a precious few—Warren Buffet is like Babe Ruth, one or two come around every generation. And if those prophets tell us what they are doing, then the market discounts the information so quickly it has little investing value.

That tells you what I think about the advice that Jim Cramer and many others offer. Each gives the studied insight of a good observer.

Financial gurus are like sports writers. They can tell us why the Steelers won last Sunday but they can’t predict who will win next Sunday. At least not with the certainty necessary to beat the odds in Vegas.

Americans watch Mad Money, subscribe to Morningstar and read more staid columnists, because investing is much more than putting up cash for the future. For many, it is gaming, neither vice nor virtue. The casino of the workplace, legitimatized by the need to save for retirement and kids’ education, and the unspoken desire for adventure and excitement.

Jim Cramer, theatrics notwithstanding, gives us his best shot.

If Stewart were a serious guy—if he were more concerned about serving investors than his ratings—he would track Cramer’s prognostications and compare those to other pundits and services. He would do a complete analysis and tell us how Cramer stacks up.

Stewart, the opportunist, is not about to do that when national attention is to be had so cheaply.

Adjusting for the amount of advice Cramer offers, which is determined by his air time, I don’t know whether he would come out better or worse than others. Since Stewart doesn’t know how Cramer stacks up across all his predictions, he should not be hammering him.

Sadly, Stewart likes to make others the fool—the cruel comedy of the adolescent mind.

Cramer foolishly agreed to debate him on Stewart’s home turf, where Stewart treated him badly.

As for all the CEOs and other corporate officials that appear on CNBC and other networks, we should all know by now they are going to put their best spin on their circumstances. I like that they have opportunities to do so.

It’s a shame we don’t have lamps in studios that turn yellow when speakers are fibbing. Alas, we live in an imperfect world, but we have our own common sense.

I would hate to see the financial networks stifled, because comedian Stewart is better at self promotion than Cramer is choosing his venue when challenged to a duel by a bully.

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.