Jim Cramer is one of the hottest acts in cable news, mixing wild antics and stockpicking rants on his frenetic hour-long show, Mad Money. Cramer sat still for an interview with BusinessWeek Editor-in-Chief Stephen J. Adler as part of the Captains of Industry series at the 92nd Street Y in Manhattan. He talked about his days as an extremely successful hedge fund manager, revealed the inspiration behind his on-air persona, and, of course, shared his investing insights. Some excerpts:
You had been very interested in stocks as a kid, and then that kind of languished for a number of years. Then you became interested in it again in law school. Talk about how you started investing again, and how you got the money to start investing seriously.
At law school I was recommending stocks on my answering machine because I was all fired up. Marty Peretz—who was the editor of The New Republic—called me repeatedly to try to get me to write a book review… I didn't return his calls. So first, "Hi this is Jim Cramer. I'm not here right now, but I think you should go buy Monolithic Memories at 19." And then, "Hi this is Jim Cramer. I'm not here right now, but I really think it's time for Advanced Micro (AMD) to make its move."
So for three straight weeks, he tried to get hold of me. The fourth week, I finally picked up, and he goes, "Look, I don't know anything about you, but meet me at the Coffee Connection." He gave me a check for half a million dollars, and it was off to the races.
What did you turn that half-million dollars into?
I turned it immediately into $440,000. Then by the end of school, I had managed to get up to about $750,000 and then I doubled it the year after and doubled it the year after, and continued to double it for a long time.
After graduating from law school, you spent some time at Goldman Sachs (GS). Then you started a hedge fund, which is where you made most of your money, right?
I made a killing at the hedge fund… I had a good 14-year run and quit in my best year, which I always wanted to do… I had this epiphany kind of intervention done by my family and friends at Thanksgiving weekend at the end of 2000. They said, you're worth a huge amount of money and you're just absolutely the most miserable, horrible person on earth who nobody can stand, and everyone is worried about it… I went in the next day and I stood on the desk and I said, "I'm out of here. It's all yours… I have caused tremendous misery and heartache for everybody who works here, so it's yours." Then I left. And I never went back.
Looking back on it, what do you see as the broader societal value of the kind of trading you were doing?
I think that a guy like me in a hedge fund creates nothing. We're not the least bit valuable. We're just total predators.
So now you're doing Mad Money, which is a huge success. Everybody wants to know: "Is that you?" How much do you have to psych yourself up to do what you do on that show?
I would say that the histrionics are acting?… One of my best partners at my hedge fund was Gene Hackman… He has been instrumental in giving me the lessons that I need… Certainly the writing is mine, and the lightning round is mine. But the idea of the pacing and the idea of who I am on the show—a lot of it is coached by Gene and Betsy Hackman.
Now it's time for the Captains of Industry lightning round. First, Sirius Satellite Radio (SIRI).
If Mel Karmazin does not merge with XM (XM), he will not make it. That company cannot stand alone… Sirius Satellite is not going to have a good quarter. I do not want to own that stock unless he calls XM and they get a merger.
I have said that as long as Andrea Jung is running the company, it will not go up. She's one of my top five CEOs who must leave. Not a nice guy. I don't play one on TV either.
Barnes & Noble (BKS).
I think the Riggio brothers are terrific… I recommended it on the basis that I think [Barnes and Noble] has become a secular temple.
Which media stocks do you like least?
The New York Times (NYT) and Dow Jones (DJ). They're really good brand names, but those are two companies that I just can't like. They are too superior to everybody else. They're Holy Grail. You know, you can't be Holy Grail and be a business. I would rather invest in Harvard and Yale than Dow Jones and the Times.
What's your outlook for the U.S. securities market in 2007?
I think it's going to be real good… We have incredibly low interest rates. Forget the big mortgage problem. The big story for 2007 is that we just don't have enough stock. Twenty-nine of the 30 stocks in the Dow Jones average have buybacks. If you take a look at the moves you see in stocks now, it's because there are just no sellers… Then layer on the fact that the private equity guys have just raised $3 trillion… Those forces are all fabulous for the market.
What are your favorite stocks for 2007?
There are a bunch of them that I'm thinking about. I'm thinking about Toyota (TM). And the reason that Toyota is very interesting is that Ford (F) and GM (GM) have already announced they're both going to cut out 250,000 cars and trucks.
I think they're really going to scale back by a million. And only Toyota has the ability to make cars to take that share. I think Altria is very interesting. Again, that's the cancer-causing company. There was a really important decision that came down last week in the second circuit court of appeals which basically said, "No more class actions."
This is from a member of our audience: Will the U.S. be the dominant economic power in the 21st century or will we be eclipsed by China?
I think we'll be eclipsed by China. The Chinese Communists are just such great capitalists. They're just unbelievable capitalists masquerading as Communists, and they are so competitive that I think in the end, it's theirs to win.