Cramer’s Invasion of the Body Snatchers

Remember the movie “Invasion of the Body Snatchers” where the Alien life force is replacing the humans with exact replicas- except something is just a bit “off”? The movie was re-made three times (based on a book) so there must be something to it.

Who can forget the Pod People?

Jim Cramer= Pod Person

Have you seen Jim’s latest book? It’s called “Stay Mad for Life: Get Rich.” I skimmed through it recently in the local bookstore.

It espouses:

1. Buying stocks of a select group of companies and holding them for a long time after you’ve done your homework on them

OR

2. If you don’t have time to study your investments, buy index funds.

WHAT????

Wasn’t it Jim Cramer who said: “Buy and hold is for morons”?

If it wasn’t him, then I apologize. But recently he did say this in response to an article by Paul Farrell on Marketwatch.com that attacked his show and methods:

If anything, buy and hold is a completely reckless and irresponsible strategy. This is why I have always preached “buy and homework.” There’s nothing wrong with buying a stock with the intention of owning it for years, as long as you’re willing to check up on that stock every week to make sure that your thesis for owning it hasn’t fallen apart. Too often people regard buy and hold as a license to pay no attention to their investments and hide their heads in the sand when things turn sour. How many nuclear utility stocks did our parents own mindlessly with buy and hold? How many Enrons and WorldComs and Webvans and eToys.coms were bought and held? Don’t be silly, Mr. Farrell: You are the reckless one.”

Yes- all buy and hold investors should beware because their company could, gasp, be Enron. Or, even worse, Webvan.

Recently, Businessweek wrote about the “new” Cramer.

Most people actually won’t get rich by buying individual stocks, Cramer says. Unless you do your homework, namely spending an hour a week researching for each stock you own, “You won’t beat the market, and you’ll probably lose money,” he writes.

Times have changed, he writes. Now, partly due to new regulations on how much information executives can reveal to fund managers, “trying to game short-term movements in stocks (is) almost impossible,” he says.

Wait a minute. Buying and selling every day (or week) won’t make you rich? Jim, you’ve been lying to me for years! I feel so betrayed.

But it gets better.

To advise readers and viewers to trade short term, Cramer says, is like telling them “you too can play in the NBA.” A few might be able to do it, but the vast majority won’t. “I’ve evolved to the point where I see the daily struggle that people go through to just put away $100 a month,” Cramer says. It’s a more realistic approach. “I wish I wrote this book first,” he adds.

I congratulate Jim Cramer on figuring out one thing. Not everyone is a hedge fund manager with millions to invest. Most of us do have simply $100 a month. Trading on the dips is unrealistic with $100 a month. The buying and selling fees will eat up too much of our investment to make it worthwhile. The only strategy we have is “buy and hold.”

Welcome to our world Jim.

One thing we can agree on is: stock investing is still the way to get rich. Even if it’s on $100 a month. And even if it’s a buy and hold strategy. Just ask all of those little old ladies who have their Exxon or GE stock. Nothing wrong with that.

Nope, Buy and Hold isn’t for morons.