CNBC’s Jim Cramer said investors should stop “shadowboxing with a recession that might never even come.”
According to Cramer, investors could “miss out on moves to the upside” when predicting a recession is imminent.
Major banks including Wells Fargo, Citigroup and JP Morgan have all reported strong quarters, which Cramer argues points to a burgeoning bull market that has been in swing since fall 2022.
Historically, Cramer’s predictions have been catastrophically wrong, leading many on social media to use his predictions as an adverse indicator.
In 2008, Cramer’s failure to accurately assess risks during the Bear Stearns crisis cost investors heavily.
At the time, Bear Stearns was one of the largest investment banks in the United States.
However, by March of that year, the bank was on the verge of collapse due to its exposure to the subprime mortgage market.
The Federal Reserve stepped in to broker a deal with JPMorgan Chase to acquire Bear Stearns, but not before the bank’s stock price had plummeted from over $100 to just $2 per share.
Throughout the crisis, Jim Cramer was consistently bullish on Bear Stearns, even as its stock price continued to fall. In an infamous episode of “Mad Money” on March 11, 2008, Cramer declared that “Bear Stearns is fine” and urged viewers to buy the stock. Just five days later, Bear Stearns was sold to JPMorgan Chase for just $10 per share, leaving investors who followed Cramer’s advice with a loss of over 90%.
Cramer’s failure to accurately assess the situation at Bear Stearns was not an isolated incident. In the years leading up to the financial crisis, he had repeatedly downplayed the risks of subprime mortgages and encouraged investors to take on more risk. In a 2007 interview with TheStreet.com, Cramer famously dismissed concerns about the housing market, stating that “the housing market is just too strong. I would regard any weakness as an opportunity to buy.”
Cramer’s bullishness and disregard for risk may have made for entertaining television, but they proved disastrous for investors who followed his advice. His failure to recognize the warning signs of the financial crisis and his consistent endorsement of risky investments ultimately cost many people their life savings.
In the aftermath of the Bear Stearns crisis, Cramer faced criticism from investors and fellow financial commentators. Some accused him of being more interested in entertaining his audience than in providing sound financial advice. Others argued that his failure to accurately assess the risks of the financial system was a reflection of a broader culture of complacency and risk-taking on Wall Street.
Despite the criticism, Cramer has continued to be a prominent figure in the financial media, offering his opinions on a wide range of topics. However, his failure to accurately assess the risks of the Bear Stearns crisis remains a cautionary tale for investors and a reminder of the importance of thorough research and analysis before making investment decisions.