Get Rich Carefully

On Wednesday night, Ken Kavula, Nick Stratigos and I participated in a “book club” program delivered by NAIC/Better Investing featuring Jim Cramer’s Get Rich Carefully. We were joined by Eve Lewis and the panel unanimously felt the book is a worthy read for long-term investors.

Booyah. Jim Cramer surprised me.

I didn’t expect the book to be this good. The end result is a profile of a matured/maturing investor. Jim started with Goldman Sachs, learned a great deal from one of the most successful investors of all time, Michael Steinhardt … went on to manage his own hedge fund and ultimately become the influence that he is today.

The preface alone is worth the price of admission. Cramer covers the turbulent and challenging landscape facing should-be long-term investors today. The breach of trust, shenanigans and continuing nuisances of high frequency trading, dark pools and opportunists with too many brain cells and too much time on their hands persists today.

As George Nicholson, grandfather of the modern investment club movement, would most probably remind us: “It’s incumbent on us — all of us — to rise above this to champion better futures for the people we care about.” Buying excellent companies when they’re on sale — and holding them for as long as it makes sense to do so — is still relevant. Perhaps even urgent based on the accompanying illustration of recent trends.

In the July 2014 preface, Cramers “calls” the current level of the NASDAQ and its 16-year highs. He stipulates that the denizens of the NASDAQ are less likely to explode this time around. He puts HFT and the other nonsense into context. And …

Cramer closes the preface with … “I, on the other hand, prefer for you to get rich using stocks as your wealth builders, as long as you invest wisely and carefully when doing so.”

Closet Better Investor

Ken Kavula speculated that Cramer is absolutely a closet investment clubber. He largely focuses on core stocks, seeking and owning leadership companies and remaining vigilant for opportunities in several general themes. He also suggests that it’s OK for investors with experience and risk tolerance to stretch and reach for opportunity. This is absolutely consistent with Nicholson’s admonition about seeking high-quality core holdings as the strategic foundation of our portfolios while allowing for speculation and “playfulness” with a suitable portion of our portfolios, for example 10% of total assets.

In that context, the Cramer on CNBC and in current publications often takes the persona of the higher flying risk taker. (Some of this is assuredly related to audience and appetite.) His entries in the current Groundhog Challenge, were compiled from his 20 stocks for 2015. Cramer is currently high on the leader board.

Cramer’s Groundhog Selections can be monitored here: Cramer’s Celebrity Groundhog 2015 Entry

Contrast that list with the stocks in the ActionAlertsPlus charitable trust portfolio. I’m not sure exactly how current the portfolio is, but turnover is relatively low (certainly lower than the TV show lightning) but definitely a different breed of companies — virtually all of them leaders in their industries:

A New Market Barometer For Us

Cramer cites the non-farm payroll data as the report that he finds most influential. He keeps a close eye on this.

Again, I was skeptical.

Again, I was surprised.

Here’s a look at the 20-year track record of U.S. Non-Farm Payrolls ($$EMPLOY) courtesy of www.stockcharts.com:

All the usual caveats apply. We don’t think of these charts as predictive. We never use them in isolation. But as “another arrow in the quiver” it simply makes sense that hiring trends and recessions go together. The disruptions in 2001-2002 and 2008-2009 are quite obvious … and we’d be concerned if the payroll trends flattened or declined at the same time as return forecasts bottomed and the $USHL deteriorated. Recessions and depressions can inflict significant damage. And harboring in high-quality, decreasing speculation and raising cash equivalents is logical for those seeking capital preservation or in the words of Nicholson, “to enable better shopping after the recovery is rolling.”

Community Investing

The power and potential of community investing is nothing new to us.

Cramer surprised me. I was reminded that his concern and hope is genuine. He really does want a nation of investors to do better. He’s meandered down several paths from Goldman to Steinhardt to Cramer Berkowitz to CNBC/MadMoney. …

Results matter too. I’d really like to see better long-term performance from the Action Alerts Plus portfolio — perhaps a little more of that Steinhardt magic/advantage or some of that portfolio design and management magic experienced over seven decades by many of us.

Cramer shares valuable lessons well and the maturation continues. Learn the lessons well. Share them. “We are now ready to triumph over the daily trauma of markets that we no longer fear. We have each other’s backs. We know there is no such thing as overnight wealth [for most.] That’s for fools who will never attain it. We’re busy taking our time, avoiding the pitfalls, trying to see around the curves and tiptoe past the endless land mines as we attempt, carefully, to get very rich and not to give it back when we get there.”

Booyah.

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