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Cramer Vs. Klarman - You Get What You Pay For

Tyler Durden's picture




 

Seth Klarman's comments on "The Truman Show" market and "born bulls" appeared to upset the status quo today on CNBC leaving none other than Joe Kernan and then later, Jim Cramer questioning Klarman's credentials with a passive-aggressive "when did Klarman turn negative? We should look into that..." question. We found it intriguing and wondered how much the investing public weights the differing views of these veritable titans of stock market wisdom. The answer - a market-based answer - lie in the purest measure of all... the cost of acquiring their knowledge...

 

Cramer dismisses Warren Buffett and Seth Klarman's call for the market as being "fully valued" or "over-valued"

Money-shot at 33 seconds... "well, I mean urr, when did Seth Klarman go negative? We should look into that.. was it last week? or a couple years?"

Of course, Cramer has nailed the turns too...as we noted here:

As a gentle reminder: At the end of October 2007, right before markets began their descent to their current lows Cramer gave out investment advice on his wildly popular show, Mad Money.

 

 

Here was his game plan at the time:

 

"You should be buying things and accept that they are overvalued, but accept that they're going to keep going higher.

 

I know that sounds irresponsible, but that's how you make the money.

 

Right now, up is down, left is right, peace is war."

 

Indeed.

And the final arbiter of the value of investment wisdom delivered by these gentlemen...

It appears the market has spoken...

You decide...

Though one can't help but see a resemblance to what Klarman described as "born bulls"...

What investors see in the inkblots says considerably more about them than it does about the market.

If you were born bullish, if you’ve never met a market you didn’t like, if you have a consistently short memory, then stock probably look attractive, even compelling. Price-earnings ratios, while elevated, are not in the stratosphere. Deficits are shrinking at the federal and state levels. The consumer balance sheet is on the mend. U.S. housing is recovering, and in some markets, prices have surpassed the prior peak. The nation is on the road to energy independence. With bonds yielding so little, equities appear to be the only game in town. The Fed will continue to hold interest rates extremely low, leaving investors no choice but to buy stocks it doesn’t matter that the S&P has almost tripled from its spring 2009 lows, or that the Fed has begun to taper purchases and interest rates have spiked. Indeed, the stock rally on December’s taper announcement is, for this contingent, confirmation of the strength of this bull market. The picture is unmistakably favorable. QE has worked. If the economy or markets should backslide, the Fed undoubtedly stands ready to once again ride to the rescue. The Bernanke/Yellen put is intact. For now, there are no bubbles, either in sight or over the horizon.

 

But if you have the worry gene, if you’re more focused on downside than upside, if you’re more interested in return of capital than return on capital, if you have any sense of market history, then there’s more than enough to be concerned about. A policy of near-zero short-term interest rates continues to distort reality with unknown but worrisome long-term consequences. Even as the Fed begins to taper, the announced plan is so mild and contingent – one pundit called it “taper-lite” – that we can draw no legitimate conclusions about the Fed’s ability to end QE without severe consequences. Fiscal stimulus, in the form of sizable deficits, has propped up the consumer, thereby inflating corporate revenues and earnings. But what is the right multiple to pay on juiced corporate earnings? Pretty clearly, lower than otherwise. Yet Robert Schiller’s cyclically adjusted P/E valuation is over 25, a level exceeded only three times before – prior to the 1929, 2000 and 2007 market crashes. Indeed, on almost any metric, the U.S. equity market is historically quite expensive.

 

A skeptic would have to be blind not to see bubbles inflating in junk bond issuance, credit quality, and yields, not to mention the nosebleed stock market valuations of fashionable companies like Netflix and Tesla. The overall picture is one of growing risk and inadequate potential return almost everywhere one looks.

There is a growing gap between the financial markets and the real economy.

 

h/t @Not_Jim_Cramer

 

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Mon, 03/10/2014 - 20:57 | 4532924 HedgeAccordingly
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HedgeLy
JPMorgan CFO: $27B Profit Outlook Not Bank’s Target $JPM | http://t.co/FRYX2DqklE 
Mon, 03/10/2014 - 21:10 | 4532988 The Alarmist
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Uh, sorry, but fading Jim Cramer is something of a no-brainer.  Need I say more?

Mon, 03/10/2014 - 21:55 | 4533124 gmrpeabody
gmrpeabody's picture

Classic, Tyler...,

Out fucking standing..., +100

Mon, 03/10/2014 - 22:34 | 4533282 National Blessing
National Blessing's picture

JP Morgan runs the world.  Along with Goldman Sachs.  I just hope my kids can go to Harvard so that they can become global thieves, too.  Bitches.

Mon, 03/10/2014 - 22:44 | 4533310 Manthong
Tue, 03/11/2014 - 00:57 | 4533576 jeff montanye
jeff montanye's picture

and dukakis in a tank reminds me of obama on the phone to putin.

he is a publicist not a president:

http://www.truth-out.org/news/item/22356-how-obama-became-a-publicist-fo...

Tue, 03/11/2014 - 07:02 | 4533786 negative rates
negative rates's picture

What is this? A 3 round knockout fight, I heard Cramer hit his falseto in the first round.

Wed, 03/12/2014 - 14:40 | 4539706 TheRedScourge
TheRedScourge's picture

If they share the running of the world, then they logically only run about half the world, meaning they don't run the world. Fail.

Tue, 03/11/2014 - 08:27 | 4533884 Titus
Titus's picture

Listening to Jim Cramer preach about "where else are you gonna put your money" is like listening to a herpetic crack whore preach about the virtues of unsafe sex.

I'd rather jerk myself off.

Mon, 03/10/2014 - 21:09 | 4532956 Grande Tetons
Grande Tetons's picture

So, Mike Dukakis is not the only one who looks like a moron wearing a helmet. 

http://4.bp.blogspot.com/_O0h61kl5hik/TKQklce8JmI/AAAAAAAAFME/cXEDWT4ZMj...

Sorry kids, this is back from the greatest hits/shits of 1988. 

http://en.wikipedia.org/wiki/United_States_presidential_election,_1988

Scroll down to see the candidates...a who is who in the sociopaths' hall of fame. Ron Paul was spreading the truth to deaf ears back then too! 

Mon, 03/10/2014 - 22:46 | 4533319 Manthong
Manthong's picture

..so now I see your earlier post  :-)

Mon, 03/10/2014 - 23:01 | 4533361 Grande Tetons
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manthong, when I saw Cramer's mug...I reverted back to 88 in a heartbeat. Where have I seen a shithead like that before?  

You must have been so inspired. 

Tue, 03/11/2014 - 00:04 | 4533501 Manthong
Manthong's picture

Indeed.  :-)

Mon, 03/10/2014 - 21:04 | 4532965 fonzannoon
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This @Not_Jim_Cramer really has it out for Jim Cramer.

Mon, 03/10/2014 - 22:26 | 4533246 mayhem_korner
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Vegas odds says it's his wife.

Mon, 03/10/2014 - 21:07 | 4532976 yogibear
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Facebook is Wall Street's darling stock.  Everyone jumped on the train in the 20's. 

Mon, 03/10/2014 - 21:08 | 4532981 Ban KKiller
Ban KKiller's picture

"There is a growing gap between the financial markets and the real economy." Now you tell us.    

Tue, 03/11/2014 - 05:56 | 4533736 StychoKiller
StychoKiller's picture

[quote]You get what you pay for.[/quote]

Oh really?  I've been "paying" for a competent, effective Govt -- seen such a beast?

Mon, 03/10/2014 - 21:10 | 4532987 Boomberg
Boomberg's picture

When the shit hits the fan Cramer and Kernan are the first I want to see swinging from the gallows. 

Mon, 03/10/2014 - 22:21 | 4533227 mayhem_korner
mayhem_korner's picture

 

 

For me, I'd like it to be Cramer that hits the fan - like what happens to the dude Harrison Ford spars with by the airplane in Raiders.

And since you asked (you didn't), here is my Top 10 (rank-ordered) through the spinning blades:

 

Dimon

Cramer

Geithner

Blankfein

Buffett

Barry (diversity pick)

Shards of Dimon

Corzine

Sorkin (to oil the machine)

Ben

...and Rick Santelli calls the play by play.

(now, back to my scotch...)

 

Mon, 03/10/2014 - 22:33 | 4533278 Grande Tetons
Grande Tetons's picture

You had me at Dimon. 

Mon, 03/10/2014 - 21:10 | 4532991 Spungo
Spungo's picture

Why is that guy's book so expensive?

Mon, 03/10/2014 - 21:43 | 4533089 bonin006
bonin006's picture

I think it's out of print - now a collectors item

Mon, 03/10/2014 - 22:04 | 4533170 crzyhun
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Back in the dark ages of ZH and Marla and so many others, TD offered a pdf of Margin of Safety. What a super write. Kramer is the bad remake of Dumb and Dumber.

Mon, 03/10/2014 - 22:45 | 4533314 bonin006
Tue, 03/11/2014 - 00:21 | 4533526 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

YES!!!!! thx

Tue, 03/11/2014 - 07:27 | 4533809 PT
PT's picture

Did you read his book?  Was his advice not available elsewhere?  Did you take his advice?  Did you make >= $3575.96 out of advice that was only available in his book (and "saving money" by not buying stuff doesn't count) ? (Yes, I do assume you didn't pay anywhere near that for the book - I'm just going off it's "current" price.)

Sorry for the interrogation, I don't mean to sound like a prick, just asking a couple of obvious questions.  I really don't think that statement, "You get what you pay for" applies as rigidly as many people imply it does.  

In fact, a book like that costing more than thirty bucks sounds like some kind of scam to me.  Pump-and-dump?  Ostentatious (It's expensive so it must be good)?  Bubble?

Truth is, I have no idea - I haven't read the book and even if I had, I'm probably in no position to take its advice.  Has anyone out there read it?  Please tell me - how much is it worth?  What wonderful advice did it give you that you didn't read anywhere else?  Thanks in advance.

Mon, 03/10/2014 - 22:25 | 4533243 Urban Redneck
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I can think of another book that was similarly priced back in 2008...
(before someone PDF'd it)

Mon, 03/10/2014 - 21:14 | 4532998 CalibratedConfidence
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idiot

Mon, 03/10/2014 - 21:18 | 4533015 Spungo
Spungo's picture

Hey, type Seth Klarman into google images. If someone cast him in a movie to play a Jewish character, people would say it's too over the top, too much of a stereotype.

I'm not hating. I'm Jewish too. I just laugh when I see stereotypes.

Mon, 03/10/2014 - 22:02 | 4533154 Bonapartist
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It's a small Tribe and he's in it.

Mon, 03/10/2014 - 21:21 | 4533031 fonzannoon
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EKM was Klarmans biggest fan. 

we need that "where are they now" HBO segments on here. I'd like to know what the hell happened to him.

Mon, 03/10/2014 - 22:53 | 4533316 NoDebt
NoDebt's picture

Near as I can tell, this is the first he's poked his head up in the media since about 2010.  He's involved in several charities (yes, Jewish charities, if you must know), which I suspect is where he spends quite a bit of his outbound effors.  He definitely keeps things on the down-low.

I have an affinity for guys who quietly go about their knitting.  Especially value guys who don't raise a lot of stink about things.  Here's one of my favorites for YEARS.  He closed his fund to new investors a few months back, which is why I don't mind sharing about him now (plus this thread is dead, so nobody's reading this anyway):

http://www.yacktman.com/index.html

"He's a lousy football player.  All he ever does is score touchdowns."

Mon, 03/10/2014 - 21:44 | 4533091 Graph
Graph's picture

Trully sorry Anne, it is not your fault, but Dahau should reopen one hour only - just for this guy.

Mon, 03/10/2014 - 21:50 | 4533106 Rising Sun
Rising Sun's picture

nice reference to 2007 - but Cramer is still spewing instead of lying in a ditch somewhere with an axe implanted in his head

Mon, 03/10/2014 - 23:55 | 4533179 Tinky
Tinky's picture

Cramer question Klarman's judgment is akin to a mediocre, recreational league basketball player questioning Kevin Durant's offensive prowess.

Mon, 03/10/2014 - 22:12 | 4533202 Bobportlandor
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U.S. Total Gasoline Retail Sales by Refiners (Thousand Gallons per Day)

 

Holly Shit!

 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=a103600001&f=m

Mon, 03/10/2014 - 22:17 | 4533216 Tinky
Tinky's picture

Great find – thanks.

Mon, 03/10/2014 - 22:26 | 4533250 Pig Circus
Pig Circus's picture

Yes great find. $3.65 per gallon here in the Twin Cities. Highest except for that brief spike in summer 08. I remember when each .10 cent increase took $8 billion per year out of the economy. I guess not anymore.

Mon, 03/10/2014 - 22:40 | 4533300 mayhem_korner
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Now each .10 takes 30 minutes of high-speed digital fiat printing. 

The more things change, the more they stay the same...

 

 

Mon, 03/10/2014 - 22:55 | 4533337 Bonapartist
Bonapartist's picture

Funny how the MSM isn't calling for Obammy's head on a pike while gas is shooting upwards like they did when Dubya was Prez.

Tue, 03/11/2014 - 08:37 | 4533911 headhunt
headhunt's picture

Damn Bush and Halliburton

Mon, 03/10/2014 - 23:04 | 4533365 Golfjunkie
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I bet It must be do to all the bad weather these last few years (wink, wink)

Tue, 03/11/2014 - 08:35 | 4533910 headhunt
headhunt's picture

Thanks for that.

Holy shit is right!

there's the economy in a nutshell, everything, from the buttons on your shirt to the car you drive depends on carbon based energy. The gasoline drop off must be due to all the buyers of Tesla automobiles.

Mon, 03/10/2014 - 22:58 | 4533346 medium giraffe
medium giraffe's picture

BTFT!

Mon, 03/10/2014 - 23:13 | 4533390 lasvegaspersona
lasvegaspersona's picture

"If you leave now, what are you going to go to?"

Dear Jim

I already left and I am already there. gold

 

Tue, 03/11/2014 - 00:17 | 4533503 HUGE_Gamma
HUGE_Gamma's picture

For the long term investor.. Cramer was right in 2007.. including reinvested dividends... buying in 2007 wasnt a bad deal at all.. 

anyone that bought gold at 1800 or Silver at 40 wish they had just bought SPY in 2007.. in fact anyone bearish since 1994 would be a big loser right now also

Tue, 03/11/2014 - 01:22 | 4533600 GoldmanSux
GoldmanSux's picture

Anyone who bought SPY in 2003 wishes they had bought gold instead.

Tue, 03/11/2014 - 01:22 | 4533599 soopy
soopy's picture

I find it amusingly ironic you would use a 'market price' sourced from the company you so eagerly deride... Btw Margin of Safety is freely available on the internet as a pdf.

Tue, 03/11/2014 - 01:51 | 4533618 kurt
kurt's picture

Can you hear him whine? He snorted coke and lived in his car. He's proven he'll say anything. Why parse? Many small paychecks add up for him. Luke, he's your father.

Tue, 03/11/2014 - 08:19 | 4533864 Downtoolong
Downtoolong's picture

Tracking Jim Cramer’s Cranial Ukraine Forecast

After the Ukraine crisis spurred a market selloff last Monday, Jim Cramer quickly penned an article essentially threatening his audience with a stupidity award if they dared to follow the trend.  Read it here:

http://www.thestreet.com/story/12461912/1/jim-cramers-mad-money-recap-stop-panicking.html

Jim may now regret (more likely he doesn’t give as shit, after all, he is probably richer than you too) that in his article he also gave a forecast of market reactions to the Ukraine situation for the coming week, which is highlighted and compared to reality as follows:

“Just like previous crises in Egypt, North Korea, Cyprus, Turkey and Greece, the markets are likely to follow the same pattern”, said Jim.

“The selling begins on day one.”  - He’s referring to what had already happened last Monday, so, he got this part right.

“Selling continues throughout day two as the media turns to 24/7 coverage of the event.” - Nope, the S&P was up 1.6% on Tuesday, reversing and surpassing Monday’s losses.

“Beginning on day three, the smart investors begin nibbling at the stocks hardest hit.” - Wrong again; the market was down a tad on Wednesday. I guess it’s hard to nibble when your mouth is full from the prior day’s gorging.

“Day four, will likely be down again as investors worry about the non-farm payroll numbers on Friday.” - Strike three, the DOW was up 61 points for the day. And what exactly does non-farm payroll have to do with the Ukraine situation anyway? Perhaps Jim was implying the Ukraine situation would be contained and meaningless by now? But, not according to this Reuters headline on Thursday morning - “Futures tick up ahead of data, Ukraine woes linger”. Oops that’s two wrong calls for Jim in one day. (I wonder if he realizes that under the rules of the 2005 FINRA Convention a second bad call for the same day cancels out his correct observation on Monday?)

“By day five, which will be Friday, the markets will likely react to the non-farm payroll report, but then be a coiled spring, ready to snap high going into next week”. - Well let’s have a look. In response to positive Jobs data coming in above expectations, the U.S. markets reacted with a big thud nothing. Meanwhile Germany’s DAX dropped 2% on threats of gas supply interruptions from Russia. Then the DOW followed suit with a 34 point drop on Monday, and what looks to be a lackluster open on Tuesday. Sorry Jim, it seems the Ukraine Boogie Man may have bumped payroll stats from center stage and stole the show after all. Or maybe it was this unprecedented market event on Friday, which neither you nor anyone in the cabal you speak for even imagined the day before - “China Allows First Ever Corporate Bond Default”.

So, that’s two more incorrect calls. And God only knows what Jim was saying over the weekend (he was probably testing the script for his next “Mad Money” show on an unsuspecting panel of research volunteers in a basement office in Newark, NJ.)   

In summary, the Ukraine-dismissing market outlook which emanated from Jim’s Cramer’s cranium last Monday (undistorted by any interference from hair) included one correct observation based on 20-20 hindsight and six incorrect predictions for the next five consecutive business days; proving once again that the forecasting abilities of even the most highly paid financial market gurus are sub-par to people on The Weather Channel.

Oh, and don’t forget to “go mad” with your money and BUY STOCKS!!!

 

Tue, 03/11/2014 - 08:29 | 4533887 Shizzmoney
Shizzmoney's picture

Indeed, on almost any metric, the U.S. equity market is historically quite expensive.

 

Proven by the fact that only 40% of Americans actually have money in this "market"...and that will probably wane as income inequality widens.

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