CNBC’s raging bull

STUMBLE across Jim Cramer’s show on CNBC and you may think you’ve come upon a music video featuring a balding, manic businessman. Lights pulsate as cameras sweep the set, lightning crackling on a flat-panel screen while booms of thunder punctuate a loud electronic guitar riff. Then a middle-aged man in rolled-up shirt sleeves flings his chair across the room, gesticulating wildly as he shouts: “Are you reaaddyyy SKIDADDYYY?!?”

This is not your father’s finance show.

It’s “Mad Money With Jim Cramer,” the former hedge fund manager’s high-octane hourlong take on the world of stocks. For CNBC, it’s a far cry from sedate business fare like Louis Rukeyser’s “Wall Street Week,” which used to define the genre. Since it debuted in March, the program has transformed the 6 p.m. time slot from one of the business channel’s lowest-rated into one of its highest, with an average of 182,000 viewers -- a jump of 80% from a year ago, according to Nielsen Media Research.

Cramer is not the first CNBC anchor to gain a following based on style as much as substance; Maria Bartiromo, for example, became a favorite of Wall Street traders in the late 1990s, when she was known as “the Money Honey.” But Cramer is the rare commentator whose influence moves the market itself.

Along the way, he’s given a needed lift to CNBC, a business channel that has been profitable -- small as its niche is, its well-heeled viewers are desirable to advertisers -- but that nonetheless has struggled to keep people watching after the market closes. (His success comes after the channel’s ill-fated evening experiment with boutique talk shows featuring the likes of once-hot magazine editor Tina Brown and comedian Dennis Miller.)

Cramer’s formula seems tailor-made as an evening fix for market junkies in a post-recession, entertainment-hungry culture. During the show’s “lightning round,” he offers instant, five-second assessments of companies tossed out by viewers who call in. (He says he’s conversant in 2,000 actively traded stocks.) In other segments, he goes on at length about such varied topics as defense contracting, liquor sales and Brazilian banks.

His fans track his advice with cult-like devotion, jumping to place orders for stocks as soon as he mentions them. Professional day traders have taken notice as well.

The result is a Wall Street phenomenon now known as the “Cramer effect:” The day after a stock gets a mention on “Mad Money,” its price shoots up, at least temporarily, and its trading volume soars.

“It’s amazing,” said Damon Southward, manager of trader content on Briefing.com, an investor news service that began reporting Cramer’s picks to subscribers a few months ago. “You see stocks that literally trade several times their average volume in reaction to Cramer.”

One reason for his influence is that he has filled a void left by the recent stock analyst scandal, in which professional analysts were caught pushing stocks their companies had some stake in. Since then, large brokerage firms have shied away from weighing in on smaller stocks -- one of Cramer’s specialties.

That worries some critics, who question Cramer’s track record. They note that stocks get an artificial bump after he touts them, a spike that short-sellers then take advantage of.

Steve LeCompte, managing partner of CXO Advisory Group, a market analysis website for private investors, analyzed more than 100 stocks highlighted on “Mad Money” and concluded that Cramer’s picks do not translate into substantial returns. In fact, he believes the show’s viewers could end up losing money by overtrading and incurring excessive fees.

“My advice would be to buy a good index fund and watch him for entertainment,” he said.

Method in the madness

In an interview last week on his set at CNBC’s New Jersey studios, Cramer defended his record and disputed the notion that his lighthearted approach comes at the expense of serious-minded analysis. “If I can’t be entertaining, no one will watch,” said Cramer, who seemed animated and intense but not nearly as tightly wound as his on-air persona. “The kind of sector analysis that I do is not only extremely responsible but probably much better than your broker or analyst does, and that would have cost you a fortune.”

“I think you’d rather have a guy who is just literally out there trying to find you the right ideas and is not trying to get the corporate finance or get the commission be your honest broker,” he added.

But Cramer does acknowledge that his apparent influence on the market could eventually undercut the effectiveness of his advice.

“I want to help people make money,” he said. “If an effect [on a stock] is contrary to making people money, that could be a problem.”

Now 50, Cramer tried his hand as a newspaper reporter and pursued a law degree before making his name on Wall Street. He helped found TheStreet.com and managed a hedge fund for wealthy families that produced a hearty 24% average return after fees for 15 years.

Achieving that rate came at a price. Intensely driven, Cramer never sat down at work -- he didn’t even have a chair -- and was known for throwing items like keyboards and water bottles in frustration.

“I drove everybody crazy,” he said.

After retiring from his hedge fund in 2001, he landed a regular gig on CNBC, where he offered economic analysis on the more buttoned-down “Kudlow & Cramer.” Susan Krakower, the channel’s interim head of prime-time programming, said she saw his potential but thought he was miscast. When Cramer told her that he had a nationally syndicated radio show that provided lively stock tips, she sent over a camera crew to film the program.

After watching the footage, “I was like, ‘Out of my way,’ ” Krakower said. “I knew organically, innately that this was a hit. But he had to be put in the right environment and he had to be opened up.”

In January, he left “Kudlow & Cramer,” which has continued without him, to develop his new show.

“Mad Money” often seems like a relic from the flush 1980s, when greed was in. “Let’s try to make some money!” Cramer declares at the beginning of each show.

And yet, he frequently offers the kind of cautionary warnings you’d expect from a veteran of the dotcom bubble burst. The show opens with a lengthy disclaimer and he often tempers his advice with caveats about the need to have a balanced portfolio.

“You can’t just buy stocks ‘cause I like them,” he said last week in the exasperated tone of a tired parent.

Still, the formula works because of his relentless, high-adrenaline enthusiasm that hooks traders. When he gets excited -- which is most of the time -- his voice screeches until he’s almost unintelligible and he resembles the plastic bulls he constantly throws at the camera: red-faced, glowering and snorting. (When he’s not on air, Cramer constantly guzzles herbal tea to try to fend off laryngitis.)

Knowledge holds viewers

CNBC President Mark Hoffman said that Cramer’s personality may initially grab viewers but that they are compelled to keep watching because of his expertise, drawn from many years on Wall Street.

“The sizzle alone will not get the audience,” Hoffman said.

Steven Brill, who worked with Cramer at Brill’s magazine American Lawyer, said that despite the frenzied quality of “Mad Money,” it serves a serious purpose.

“If the goal of journalism is to impart honest information from people who know something, it’s clearly doing that,” Brill said. “It’s almost taking the style and pyrotechnics of Nancy Grace and applying it to somebody who has a 180 IQ.”

It’s clear that Cramer’s not embarrassed by gimmicks. On one recent night, he smashed a series of home appliances. On another, he gnawed on steaks from Appleby’s and Ruth’s Chris Steak House to demonstrate the difference between the chain restaurants. And when he taped in front of a studio audience for the first time in late July, Cramer came out onto the set wearing a straitjacket, escorted by two men in white coats.

“Welcome to CRAMERICAAAA!” he hollered, wrestling out of his confinement.

“Boo-yah! Boo-yah!” chanted the audience, offering what has become the trademark greeting on “Mad Money.” (It was originally started by one of Cramer’s radio listeners in New Orleans, who uttered it in thanks for the money he made from a stock tip.)

The crowd of mostly twenty- and thirtysomethings beamed as they pumped their fists in the air. When they had a chance to ask him a question, they gushed.

“You’re a true rock star!” said a man from Florida.

“You’re not a rock star -- you’re a stock star, baby!” responded one woman from New Jersey.

But not everyone remains an ardent fan. When a stock he picks drops -- as did Dick’s Sporting Goods, which went down 19% after he touted it on Aug. 15 -- many are unforgiving. The Yahoo! Finance message boards are filled with furious complaints about Cramer, sprinkled with unprintable epithets.

For his part, he said he feels terrible when people tell him they lost money because of his picks.

“But you can’t stop people from being reckless,” he said.

The retired money manager said his major picks on the show have done “extremely well.” According to a compilation provided by CNBC, the 21 “picks of the week” Cramer has made since April rose an average of 6.24% -- about double the rise in the blue-chip Standard & Poor’s 500 index and slightly less than the small-stock S&P; 600 index during that same period.

Analysts noted that to get that return, investors would have had to buy the stock at the price it was when Cramer mentioned it -- an easier prospect for professional traders than amateurs.

“While the casual investor is still trying to open his online account, these guys have been in and out of stocks five times,” Southward said.

Not all who lost money off his tips are embittered. Nutley, N.J, resident Douglas Roberts said he was out a few thousand dollars after buying one of Cramer’s picks last month but doesn’t blame the “Mad Money” host.

“I learned a quick lesson: There’s no substitute for your own research,” said the 44-year-old, a controller at a jewelry company.

And Roberts said he still tunes into Cramer’s show several times a week, even though he doesn’t believe he’ll be able to make substantial profit off from it.

“It’s just good TV.”