Study says be patient with ‘Mad Money’ picks

OPINION

By Bruce Meyerson

AP Business Writer

updated 3:26 p.m. ET May 31, 2006

NEW YORK - One screams and throbs at the camera, while the other would address his viewers with the wooden calm of an English gentleman at tea time.

Yet despite the Jekyll-and-Hyde differences between Jim Cramer and the late Louis Rukeyser, there’s one notable similarity between their TV programs: any mention of a company could move its stock.

This is a crucial fact for individual investors to understand because the stock market is a crafty place where the smart money loves to prey on predictable patterns like the instant bounce for stocks touted by Cramer on CNBC’s “Mad Money” program. And when the pros win, the ordinary folk are bound to lose.

(CNBC is operated by NBC Universal. MSNBC is a joint venture of Microsoft and NBC.)

Cramer fans needn’t despair. Rather than swearing off the former hedge fund manager’s advice, all that may be required is the poise and patience to wait a couple of weeks before putting your money where his mouth is, judging from a study into trading patterns after each airing of Mad Money on weekday nights. Cramer himself urges viewers to avoid the temptation to rush right in, especially during after-hours trading, though he doesn’t see a need to hold off for weeks.

Investors flock to Cramer’s show for good reason. It’s rare for average investors to have direct access to a professional stock picker with Cramer’s vast knowledge and experience. That’s why shows like his have the effect they do, and why caution is advisable.

There was a time, before the Internet, where it was hard to get stock and bond quotes, let alone timely advice from the pros. One easily accessible resource was the weekly edition of Barron’s. Even more accessible to the masses was Rukeyser’s long-running “Wall Street Week,” which appeared once a week, free of charge, on PBS.

Since Barron’s came out on the weekend and Rukeyser’s show generally ran on Friday nights, there was an entire weekend to mull the information imparted by the money managers and investment analysts featured in either venue. Invariably, by Monday morning, the pent-up demand would push the touted names higher.

The pace has quickened dramatically since the mid-nineties, stoked by all-day market coverage and prognostication on CNBC, countless Web sites and frothy online message boards.

At the same time, technology has provided the computing power and sophistocated software to crunch all that real-time information in real time, enabling professionals to prowl for opportunities afforded by the market’s herd-like reactions.

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