This blog is all about answering questions, explaining the basics, and pointing out all the short falls when first investing. Hence the ‘investing for beginners’. So I wanted to take this opportunity to do something I have wanted to for a long time but had no venue to use other than pen and paper records.
Stock market investors tend to be like any and all other investors in that they like to huddle around gurus. When it comes to stocks the two most common names I hear are Buffet and Cramer. Buffet has hundreds of books written about him and I think the man is a genius. Though, to be honest, I think his methods are outdated and losing relevance as time passes.
Cramer, on the other hand, is overly loud and confrontational in his opinions about companies. Several stock mastermind groups I have encountered put this guy to the stake and light a fire. They hate him. Why? Is he really that far off? Are the rumors of Jim Cramer giving early stock info to his friends a reality? Or is it simple jealousy?
I’m going to put some of Cramer’s picks to the test and leave them out publicly for all to read, should they come across this blog. And today will be my first set of picks that are 100% influenced by Cramerica itself.
I have created an account over on www.howthemarketworks.com and added a portfolio with 100,000 starting capital. Understand this is all fake money and certain market pressures like buy/sell ratios do not affect a fake money site. However, being the loudest swing trader, it should be obvious that a day trade is not Jim Cramer’s style, and these buy and sell positions would be much more accurate if tapered over several days (as even he advocates). So in most cases I think we can forgo the couple point differential from having to sell over time instead of instantly. Further, each recommended trade will be of a small 1,000 amount. This gives the ability to hold more trades (100) for a larger subsection of Cramer’s picks over time.
Without further ado, let’s get started with last night’s picks.
To start the show off we got a look at fannie mae and freddie mac. If you are unfamiliar with these companies, they are essentially the same thing. They both provide funding for and purchasing of mortgage loans. Yes, I know this is a simplistic description but I do not want to write a book about them. We all know the housing market is in the toilet. So it should be a no brainer that the stocks are going down. Really far down.
Considering the importance of these two stocks to the housing industry of America, it is no surprise that the Government does not want them to drop to zero. However, if the Government has to step in and help, then that effectively reduces the value of each private share, effectively reducing the stock price anyway.
The point is, since most of us believe the Government will have to intervene, it is obvious that the stock will drop one way or the other. Cramer took a point to mention a false rise in the prices of the two and reaffirm that he believed the stocks will drop further.
This is a rather simple call, and without doing much ‘homework’ I am going to short these along side his call. -1000 to each. Since the realistic version of the site will not let me short stocks under 5.00 I will just double up on FNM (Fanny Mae).
The next pick was CLNE. Clean Energy Fuels Corp. provides natural gas solutions to companies with large fleets of public transit, refuse hauling, airlines, etc. An energy play? Let’s see why he thinks this is a good call.
Cramer’s biggest ‘for’ argument is that it is owned by politicians. His argument is that government will push more toward natural energy because it will make certain participants money. I would say this is a fairly cynical yet logical argument except that he already made a natural energy call that is rising. FSYS does in fact appear to be a break out. However, that does not mean every stock in the sector will rise just because a few do. I am not sure I agree with this call and would probably not make it a personal buy, but this is to record Jim’s calls, not mine. Looking at the charts, I believe CLNE is too far below resistance to make a solid move into it, but will do so with fake money anyday 
I will keep you all posted on progress of good ol’ Jim’s picks as time passes. Until then, looks like I have -2,000 worth in FNM, and 1000 worth of CLNE! In fake money! hah!
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