Good day everyone,
I hope you are all well and having a great day, welcome to CryptoGod-1's blog on all things crypto. By now I hope we are all well aware of the "Inverse Jim Cramer Index" and if not definitely check it out although I will delve a bit into it further in the article. His latest comments and statements regarding crypto are interesting, and here I will try and digest and break down what I think will happen in relation to what Jim Cramer believes.
Who is Jim Cramer
James Joseph (Jim) Cramer is the host of Mad Money on CNBC, and an American television personality and author. He is also an anchor on Squawk on the Street. Born in 1955, Cramer studied at Harvard and went on to work in sales and trading at New York investment bank Goldman Sachs. In 1987 he left Goldman Sachs to begin his own hedge fund, known as Cramer & Co. (later Cramer, Berkowitz & Co.). He also co-founded Thestreet.com, a financial news and literacy website.
His hedge fund had mixed results, claiming to have had only one negative year between 1988 and 2000. However, that year was 1998 when the S&P 500 Index had a 29% increase. This lead to concern among investors and led to significant investor withdrawals. Cramer claims to have made a 47% return in 1999, while in 2000 it claims to have made 28%. Cramer claims to have produced a 24% average annual return over the 14 years of his hedge fund, and that he "routinely took home $10 million a year or more." However, many have disputed these results and claims.
In 2001, Cramer retired from managing the hedge fund, which was then taken over by his former partner, Jeff Berkowitz. Below is an extract of Cramer giving an interview on what its like to Think Like a Hedge Fund manager.
Cramer's Latest Crypto Warning
The original article regarding Cramer's views can be found here at news.bitcoin.com. Within, he gives some sharp and severe warnings for Crypto enthusiasts. Recently the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) released a joint statement on the the risks of crypto. They explained the dangers and risk with the “significant volatility and the exposure of vulnerabilities in the crypto-asset sector." Cramer believes these are the beginning of what he has been calling for, which is:
"The SEC is going to do a roundup of all of the ones [crypto firms] who are not compliant. The SEC is going to sweep everything, which is why I am telling everybody: get out of these."
Cramer went on reference Sam Bankman-Fried (SBF) and the FTX collapse, which he see's as being a catalyst in the SEC roundup. All in all, Cramer takes the view that crypto is just one large Ponzi scheme and nothing more than a scam of epic proportions.
“I see a lot of people feel, like John Stark [attorney for over 18 years in the SEC’s Enforcement Division], that it’s [crypto] just a giant scam”
However, he does not want the industry in itself to collapse. Instead, Cramer is calling for the people behind the Ponzi schemes to be found and and removed as the bad players in this industry. This is obviously something I feel all of us would like, however, how feasible and achievable is it? If the SEC does a widespread sweep on the crypto companies to check their compliance, then what's to stop another emerging in their place only not in the United States. Of course as was seen with Binance in the past, to comply with the United States they had to open a Binance.US branch to only serves American citizens, but this opens more questions than it answers. Would going after the American version of an exchange hinder its business elsewhere? Or would it simply place further constraints on American citizens when it comes to crypto, while the overall exchange continues with its practices elsewhere?
Cramer went on to imply that despite the warning signs, people are still bidding which is driving the prices of cryptocurrencies up. He continued with his narrative and warned investors to get their money out of crypto while they can. Firstly, that it how the market works. The price is determined by supply and demand, meaning the bigger the demand and the lower the available supply, the higher the price. Secondly, the prices of nearly all crypto are down compared to where they were even 12 months ago. While it is understandable a lot of people may currently be under financial pressure due to the rate of inflation and economic issues, it is perhaps not helpful to create more fear and doubt around crypto in this moment. It is after all a bear market, or crypto winter as some would call it, and therefore it is expected that the prices will be lower. Certainly I believe there will be some crypto's which will go to zero and not remerge from this downturn, but likely there will be plenty of others which emerge and flourish in the next bull run.
Cramer himself used to invest in Bitcoin, Ethere, and in a host of non-fungible tokens (NFTs), but sold all of his assets related to crypto last year. Since then, he has been advising investors to avoid investing in speculative assets, which includes crypto. He also notes that while the Federal Reserve continues to tighten the economy its a dangerous time to be investing in such things. Cramer went on to state that he:
"advised investors to get out of crypto, emphasizing that it is never too late to exit “an awful position.”
Cramer also noted how he would not touch crypto again in a million years! While this sentiment ties in with his above quotes of advising users to get out of crypto, I also believe there is a lack of truth from his part on never investing in crypto again. Like anything, when a product is cold it is not popular and the general consensus is to avoid it. However, this is the opposite of what people should be doing. Right now is the time to buy when it comes to things like Bitcoin. The price is down and relatively cheap compared to where it has been in the past year or two, meaning large returns could be achieved if the asset was to enter a bull run and reach similar levels of November 2021. Regarding the current price of Bitcoin and its strong resiliance of not break below the $16K level, Cramer stated:
“Well, I’ll tell you what Stark said. Because it’s phony and a scam. Crypto prices are “being propped up by people who want them propped up, and that’s all there is.”
Community Response (As Expected)
Below is an extract from a Reddit Post which was posted discussing this exact topic. As expected, the majority of reddit users have the same belief, which is that is Jim Cramer is badmouthing crypto, we should be expecting a new bull run any day now.
While of course it is not as simple as that, but going by past trend it can be a good bet to take what Cramer says with a pinch of sale. However, as shown in a 2009 Penn State study, Cramer is generally neither extraordinarily good nor unusually bad when it comes to his average stock recommendations. That has not stopped him being completely off in the past though, with just as recently as October 2022 when he almost fell apart on camera while discussing his analysis of Meta. Cramer had backed the stock to do well and even recommended to buy stock in Facebook’s parent company. He apologised on CNBC after Facebook plummeted by 24% and fell to its lowest price in six years, stating:
“I made a mistake here. I was wrong. I trusted this management team. That was ill-advised. The hubris here is extraordinary, and I apologize.”
It has not stopped parody accounts, such as the one shown below, representing the "Inverse Cramer Index." There was not much sympathy towards Cramer, and it has not stopped him making further claims such as his recent one regarding crypto.
Also back in October 2022 it was reported that Tuttle Capital Management had filed to launch two exchange traded funds that traded on the stock tips of Cramer. One of these would goes long while the other one would go short. Their mooted tickers would be LJIM and SJIM. He is certainly a famous man amongst the traders of Twitter and Reddit, but possibly not one to take serious along the lines of Warren Buffet and co. Since his comments on Crypto we have seen a pump with Bitcoin going back above $17,250 at the time of writing, so it seems like he has struck once again!
Looks like its good times ahead for Crypto if Cramer's statements are anything to go by. The recent pump has been a welcome sight, and if we see Bitcoin pushing towards $19,000 and beyond then we could really begin to believe in the "Inverse Jim Cramer Index."
We shall see what happens. Have a great day.
Peace. CryptoGod-1.
** I first published this article on Medium on the 10th of January 2023, which can be read here: https://medium.com/@1r3n9project/bcdd2f760993 **
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