Load The Boat

Jim Cramer has become quite a phenomenon lately with his show Mad Money. The point being that whether you like the show or you hate it, after these months of airing, something very apparent blares at you. When he hypes a stock, if soars.

It started with just the daytraders. Because the show airs at 6 pm and the "regular" market is closed, the "home gamers" who use daytrading software play the stocks in the after hours. By the time the stock opens the next day it can be up 50 cents or 3 bucks, depending on how hard he hyped it and of course whether it's traded on the NASDAQ because the daytraders like that best.

Some of these stocks immediately pull back after gapping the next day, and some of them simply soar higher. We saw this one Wednesday. On a Tuesday night he latched onto REDF, the Indian web portal company. He pushed it pretty hard. So, Tuesday afternoon REDF closed at 15.09. It opened Wednesday at 19.46 and soared to 21.40 in the first minutes of trading.

This is very reminiscent of something that was happening in 1999. There was a tech guru by the name of "Gilder" and he was actually very good at seeing what technologies worked and what didn't. But hot technology doesn't always mean hot companies. In any event, he'd talk positively about a company and the next day it would open up 10,20,50 points. It was nuts.

Now we have Cramer. He's the new Gilder. When he says buy, the sheep buy and up it goes. Is this the new paradigm? For now, yes. You can't ignore the power he's wielding right now. Granted it's upsetting a lot of people, especially the people who specialize in short sales. Nothing will ruin your day more than being short a stock that Cramer calls a "load the truck" on.

The point of this isn't to point out new and exciting stock ideas, nor to bash the guy or what have you. The point is that this guy moves stocks and we cannot ignore it. Personally, we feel it's bordering on "crooked" because they air him at a time when most people cannot react, but for now he's there and he's moving things. Keep an eye on this, because we think it's going to grow in popularity. Just remember however that at one point Gilder could move stocks 500%. By 2002 he was bankrupt and his subscriptions dried up.

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