The “E Booyah Virus!”

You are no doubt aware of the outbreak of the deadly Ebola Virus in Africa that has claimed the lives of over 1,000 victims and the mere presence of this Virus is causing untold economic hardship for those being quarantined to contain the Virus.  It is truly a tragedy for all concerned and we should remember them in our prayers.

The Virus I want to warn you about, I call the “E Booyah Virus.”  It’s a financial virus that has the potential to cause serious damage to your “financial health.”  In case you don’t recognize the name of this Virus, it is the infectious investment advice spewed by Jim Cramer on CNBC, in his newsletter, his investment guides and his daily emails to investors called “Daily Booyah!”

If you “Google” him, you will find that many others have looked at his advice, tracked the returns, and demonstrated that the only one, making money consistently, is Jim.  And I think that’s “Bull Yah!”  You don’t need to track all his recommendations year by year to prove that it is “Bull Yah,” you only need to look at Cramer’s own claims of success.

For the 14 years ending in 1991, he ran a hedge fund claiming an average annual return of 24% (while taking home $10 million a year as compensation.)  Let’s assume that being a smart guy, thinking about his future, he saved 10% of his compensation each year.  (That’s $1 million a year earning 24% a year.)  Fourteen years later (1991), he would have had a nest egg of over $80 million.

Now let’s assume that beginning in 1991 he consumed (spent) all future earnings from CNBC, investment guides etc. etc. Why? He already had a nest egg of $80 million set aside. He boast about his great hedge fund returns so lets assume he has been earning an average of 24% annually (the number he uses to advertise his stock picking skill) on his “nest egg.”  His “nest egg” should be worth well over a billion dollars. But Jim claims that his net worth is between $50-$100 million. The numbers just “don’t add up.”  Looks to me like he has suffered some big time losses along the way. He would have been a lot better off investing his “nest egg” in an S&P 500 index fund which would have given him a net worth in excess of $300 million.

Vaccinating yourself from the “E Booyah Virus” is easy.   Diversify, using passively managed, low cost, index type portfolios and stay disciplined. You will then be immune to the Virus.

Note 1:  Jim will sell you a copy of his current portfolio for $199.95

Note 2:  If you want to follow, I plan to start “tweeting” @wheelerwrites

9 Comments

Filed under Advisors, Investments, Investors

9 responses to “The “E Booyah Virus!”

  1. Phil Henry

    Dan, brilliant! Great article.

    On a sidenote, sorry to see you lost LeBron… Are you keeping your seats?

    Take care,

    Phil Henry
    Sent from my iPhone

    >

  2. Debbie Fisher

    Good one, Dad! It’s amazing these guys are allowed to say the things they do and sad that so many people believe them. Keep up the good fight!

    XXOO

  3. You nailed it Dan. I can’t believe CNBC uses him for commentary or as an “expert” analyst. He’s a clown! Also, you did a great job at the Matson Money Investor symposium!

  4. Charlie Benn

    Classic commentary … like reading some of your stuff from years ago. Good stuff … smoke out the charlatans!

  5. Nice work Dan. On the few occasions I’ve seen Cramer in action, I viewed his performance as entertainment rather than any serious investment commentary. However, I fear that others probably do take him seriously. Your analysis of his lack of wealth reminded me of the excellent “Where are all the billionaires (& why should we care)?” TEDx talk by Victor Haghani.

  6. Alfonso

    Da, great article asu usual. Simple maths to unmask this charlatans.

  7. Adam

    Great article – this guy was exposed as a cheat and a manipulator not that long ago – but somehow he is still on TV ( http://www.youtube.com/watch?v=W90V_DyPJTs ). Very sad because he was one of our original inspirations for using innovative methods.to teach students financial literacy …

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