You Got Screwed

James J. Cramer

You just gotta love Cramer. Whether he’s on his knees confessing to being a stock market addict or lunging across the table, ranting and raving on CNBC, he entertains, invigorates, and educates. But he’s also a bull in the china closet – so now, after the 2000-2002 debacle, we get his condemnation of the whole Wall Street scene inscribed with the immortal words, “You Got Screwed,” as he picks over the underbelly of the tarnished beast. Yes, it’s a short book, but that’s its selling point: Cramer crams everything into something you can sit down and read in a couple of hours – and actually understand via his take-no-prisoners style. His brash attitude is more of the street fighter than the wood-paneled office executive, and this train wreck of a market comes alive with real personalities backed up against the wall as Cramer blasts them to bits. No words wasted. Just typical Cramer. You either love him or hate him, but you can’t ignore him.

First he tells you why the system reeked and rotted, eventually collapsing under the weight of fakery and fraud. Then he ends the book by advising you how to never be caught up in Wall Street’s self-serving ever again. And he does a good job of both.

His advice on how to protect yourself in the future is good, basic, investing 101: “Admit the crash happened and move on, find a trusted financial advisor if you won’t or don’t want to do the homework yourself (he advises 2 hours a week), investigate and analyze companies prior to putting one red cent into them, forget 'buy and hold,' learn to read balance sheets, put emphasis on dividends, monitor insider and corporate (‘buybacks’) buying of their own stock, use P/Es to value stocks, always keep cash available, and avoid margin.”  Good advice from a pro who’s seen and done it all.

But moving on to the good parts, mutual funds get the brunt of the Cramer cannonballs. The game they played was “beat the numbers.” The financial press loved it because it gave them “the reason” why the market was going up. Made they look smart. Cramer takes apart this silliness, exposing it for what it was – accounting gimmickry, pure and simple. All that the analysts and companies had to do was lowball the upcoming quarter, then "beat the number" by a penny, and we were off to the races. So why was the investing public taken in so thoroughly? “The public thought it knew all it had to know…Democratization (of stocks), however did not bring with it all the skills you needed to make good judgments for the long term. For example, no one provided the tools of how to read a balance sheet or assess cash flows. No one taught people how to spot red flags or how to tell if a company wasn’t  doing as well as you thought. And no one explained that stocks, particularly tech stocks, were high-risk pieces of paper…” (26)

Then moving on to corporate governance, Cramer slams the looting of the treasury via stock options as corporate insiders served themselves a hearty dish of cheap stock, seemingly at no cost to the bottom line. Only later do we now realize that that dog won’t hunt either.

He indicts the SEC, the accountants, the corporate officers, the boards of directors, the media, the brokerage houses, the analysts, the academics…everybody except those whose money was being looted – the individual investor.

Cramer’s saves his strongest salvos for his slicing and dicing of Enron. His delivers an indictment of the whole political culture of the 90s with: “…maybe it was just everyone because Enron represented, not a simple fraud like WorldCom, but a wholesale breakdown of every aspect of the legal, accounting, governmental, and regulatory bulwark to keep corporate America honest.” Sounds remotely familiar like another entertaining individual of the 90s who took shot at the same targets through humor. The comedian Seinfeld perhaps knew us better than we knew ourselves at the time, as his four scoundrels lied, cheated, scammed, and flimflammed their way through the decade – an era that produced a “something for nothing” attitude that seems to have permeated every facet of our lives, and emptied out our pocketbooks as well.

In the end, Cramer’s diatribe is basically an intelligent cry for investor education. Education of investment techniques and an understanding of ourselves. Learn that and you won’t have to depend on a Cramer or anyone else to manage your finances, plus you won’t get screwed by anybody either.