Calling Out Cramer (YRCW)

I wish CNBC had never given Cramer a TV show. The man's a genius, as evidenced by his book Real Money - one of the best books on modern investing I've ever read. Cramer accepts that fundamental value is a major component of a stock's price, but it isn't the only component. The market can take good companies and overbuy the company's stock until it's doomed to eventually crash. However, the wise investor can study the momentum in a stock and hold it even after it's overvalued, selling only when the momentum dies. Cramer provides data from his own trading to prove a point.

But it was a mistake to give him a TV show. For starters, he doesn't have personal stakes in many of the companies he recommends. If he recommends a buy and the stock tanks, he loses nothing except a little credibility. In addition, he doesn't have near enough time to study a stock and make an informed decision on it. He's got to come up with calls, on the fly, every single day. Most traders I know keep a watchlist between 20-30 stocks, but that's it. I can only imagine Cramer's watching around 200 just to keep up.

Allow me to call attention to one in particular: YRCW, or YRC Worldwide.

On September 23, 2009, Cramer called a buy on this stock. A big quote here: "You missed the bottom. You haven't missed the top." Please, please, let me show you how much you "missed the top."
That giant red line there would be the stock price plummeting on news.

See, if you'd actually done your homework on the company, you wouldn't have made a dumb mistake like this. My associates and I did - we got out in the spring. YRCW was once a great company, but now it's almost bankrupt. Don't trifle with companies like this unless you're prepared to do your homework. And don't listen to Jim Cramer if you can at all help it.