‘Money’ man explains method to his madness

Times Staff Writer

Jim Cramer, the host of CNBC’s popular “Mad Money” program, brings the show to USC today in one of his periodic visits to college campuses.

The 52-year-old Cramer, a Harvard Law School graduate, former hedge fund manager and co-founder of financial news company Inc., launched “Mad Money” in 2005. He has become infamous for the wild on-screen antics that accompany his advice on stocks to buy or dump. Despite the clowning, he shows an encyclopedic knowledge of individual companies and market history.

Although he has plenty of critics, Cramer -- who in the late 1970s was homeless for about nine months and lived out of his car in California -- has acquired an avid following among younger people. He met Thursday with a group of Times editors.

How’d you get invited to USC?


This is one where the trustees and the alum played a major role. Typically it has been the [student] stock club that has gotten it started. This was much more from a level that told us we had buy-in, so to speak.

You’ve found that you aren’t welcome at every campus you’d like to take the show?

We are a disruptive influence. But USC is a school where they’ve had so much experience with filming.

We were supposed to go to Notre Dame during football season. At the last minute they pulled it. Stanford said no. We got a direct turn-down from them a year and a half ago.


In a column you wrote for New York magazine in June, you tried to explain why you thought so many people hated you and also why college students, in particular, identified with the “Mad Money” show. You said you were riding two waves: young people who were discovering the stock market and their disdain for the way traditional media deliver information.

We’re in a situation now where we’re all up against Google/YouTube. When radio was king and then TV came, I think radio was very reluctant to recognize that TV was bigger.

Now I think TV still thinks it’s really big -- and the revenues are bigger -- but Google/YouTube I think could make TV small.

This is something that everybody in the media has to recognize. Newspapers are always going to have a core contingent, radio’s going to have a core contingent, TV will, but this next generation just doesn’t view TV the way my generation does.


But the wilder your antics get on the show, is there a risk that the audience just expects more and more outrageousness? You know what the Romans did to keep the crowds satisfied -- giraffe versus bear in the Colosseum!

This is a very important issue to me. . . . I think what you have to say at a certain point is, “Do I have a brand?” And the brand can include some slapstick, but if it’s not substantive and not based on some sort of education underneath it, I will fail.

You want to go out like [John] Elway. You don’t want to go out like Willie Mays. I feel that we’re still in a good trend. As long as I’m in a good trend I’m going to stick with it. But I worry constantly that the show will have overstayed its welcome.

Given the sheer number of stocks you suggest either buying or selling in any given show, do you worry that you’re encouraging people to trade in and out, even though all the research says the vast majority of investors won’t make money as active traders?


Let’s just say I struggle with it. . . . In Year 1 I was much more oriented toward “stock of the day.” And I didn’t like that. In Year 2 I went away from that. In Year 3, this year, I’m trying to say, listen, there are broader themes, there are broader sectors, you can try to pick the best of breed in the sector.

I go back to the fundamental idea that stocks can be interesting. And therefore if you’re interested, you will be better off than if you just let the broker handle you. You’ll be a better client and a better investor.

But you agree that very few people can make a lot of money actively trading?

It’s a sucker’s game.


You also get rapped for encouraging the college crowd to think about careers in finance because that’s where the big payoffs seem to be.

The fact that my demographic is so young -- we say it skews to 28 -- tells me I’ve got people who are fascinated by the process of making money. It’s the idea of going to a [buyout firm] and making more money than you ever dreamed.

When I was at Indiana University, I talked about this with [billionaire investor] Mark Cuban, which was the possibility that these people don’t just want to make money -- they want to be billionaires.

Indra Nooyi, who is the fabulous CEO of PepsiCo, called me after one of the shows and said, “Is there anyone who wants to work at a Pepsi?” I said I don’t know. I met with her team from Frito-Lay. The whole push was “green.” Nooyi said the secret to getting the next generation is that you can prove you’re an environmental company. That has appeal.


But yes -- this is a big issue. The people from Frito-Lay will tell you that they can’t find enough people willing to go to work at the Procter & Gambles and the Pepsis. It’s just not of interest. That’s a shame. These are great American companies.

OK, time for the Lightning Round, as you’ve dubbed it on “Mad Money.” After the stock market’s summer sell-off sparked by the housing sector’s woes, are we still in a bull market, or is the bear at the door?

I think it’s a bull market for everything but the financials.

What’s your favorite stock that no one ever asks you about?


Probably Hologic. This is the company that’s going to be the premiere women’s diagnostic company. It’s like Allergan [which makes Botox], which no one ever asks me about. I have tried to get these ideas out there because these are women’s health and look-good [issues]. The wheels of capitalism are greased by the desire to have wrinkle-free skin.

Name the worst-run major company right now.

Alcatel-Lucent. They’re just horrible. They’ve missed one of the greatest bull markets ever, which is this incredible transformation of plain old phone lines to video and data. They owned that market and they’ve done nothing. Rather extraordinary.

What’s the dumbest call you’ve made this year?


I’ve made a lot of dumb ones. New York Stock Exchange [NYSE Euronext, which at $71.73 Thursday was down 26% year to date].

In August they did twice the volume they did in March. Their margins are huge on that because they have this big fixed cost. And people still hate it.

I think they could earn $4 a share next year. The stock is $71. How can you not give it a 20 [price-to-earnings] multiple if earnings are growing at 25%?

What was your favorite parking area in L.A. when you were living out of your car here?


Interstate 5. The truck stops are really fabulous and everybody protects everybody.

And no rousting. They would roust me all the time from the really good areas. I was doing Hancock Park because it was really nice. They would give you like two hours.





Television versus Google

‘I think TV still thinks it’s really big . . . but Google/YouTube I think could make TV small.’


His favorite unknown stock

‘Probably Hologic. . . . The wheels of capitalism are greased by the desire to have wrinkle-free skin.’

His dumbest call this year

NYSE Euronext. ‘Their margins are huge. . . . And people still hate it.’