Jim Cramer’s “call of a lifetime” came 53 weeks ago, on October 6, 2008.
That was the day he abandoned his usual niche-network platform to implore NBC Today Show viewers to dump their stocks because the market was going to plunge another 20%. (It was already down 30%+ from the peak.)
We lambasted this call at the time. Not because we thought Cramer was wrong about the market–we actually agreed with him on that (see here). We hated the call because, like most of Cramer’s advice, it was a market-timing call. And market timing is generally a terrible strategy, especially for individual investors.
A few weeks later, Cramer branded this the call of his life.
But was it really so wise?
The market did plunge after Cramer’s Today Show call. In fact, instead of the 20% decline he was worried about, it plummeted 35%.
So those who panicked when they heard Cramer’s plea felt great for a while. And if they got back in in the spring, they’re feeling great right now. For these folks, the call really was the call of a lifetime. (It would have been better if he’d made it back in 2007, before the market plummeted 30%. And it would have been better if he hadn’t called the bottom three months earlier, in July 2008, and told everyone that the bear market was over. But who’s counting?).
Of course, 53 weeks later, the market is now back to the same level it was before Cramer made the call. So investors who did NOT get back in this spring are probably not so happy.
Investors who just ignored Cramer, meanwhile, are far better off than those who sold and did not buy back in. They did not incur any transaction or tax costs, and they collected (and, hopefully, reinvested) a year’s worth of dividends at much lower prices. If they kept investing regularly or rebalancing as stocks fell, moreover–important parts of a wise investment strategy–they accumulated a lot more stock at lower prices, thus coming out considerably ahead.
But Cramer also told everyone to get back in at the bottom, right?
Well, he made positive noises back in the spring, no question about it. So credit to him for that. We don’t recall him going back on the Today Show to implore everyone to bet the farm again, but we may have missed it.
But, regardless, how many of the folks that dumped everything in a panic last October when they saw Cramer on the Today Show really got fully invested again? Anecdotally, individual investors seem to have mostly sat this rally out. So our guess is “few.”
If some of these folks didn’t get fully invested again, meanwhile, how do you think they feel now?
And just as important, what should they do now? Have they missed the whole rally? The generational low? The chance to buy stocks at cheap prices when everyone else thought the world was going to end? What if the market keeps going up? What if the market goes straight to 15,000? What if they buy now and then the market crashes again? Help!
So, 53 weeks later, it’s worth asking whether Cramer’s call really was the call of a lifetime.
Cramer was certainly right about the near-term direction of the market, and, for a while, he saved those who acted on his advice some money. A year later, however, with the market having recovered all of its losses, Cramer’s call just looks like what most of Cramer’s calls look like: Noise. And, in our opinion, it stands as yet another clear example of why most investors should avoid market-timing.
PS: For those keeping score, here’s what we said last October, when Cramer made his “PANIC AND SELL EVERYTHING” call >
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