Granville, Cramer and the Second Coming

Outsized reactions from <I>Mad Money</I> viewers indicate a scary froth in the market.
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Market Gurus Have Their Moments

More than anything else over the last 20 years, I have learned that financial popularity has its seasons, so it is important to explore the Joe Granville/Jim Cramer parallel. Like Granville, Jim "El Capitan" Cramer has become a market guru, and investors, traders and viewers have had an animated response to his Granville-like wild gestures and animated personality. He has recently graced the cover of

BusinessWeek

, and, like Joe, he is so influential that the mere mention of a stock on his

CNBC

"Mad Money" program causes an instantaneous response (with some stocks rising as much as 10% in overnight trading).

"Sell Everything" Reaches (Nearly) Everyone

Twenty-five years ago, Kansas City-based market technician Joe Granville was seen as a Wall Street prophet. He was one of the first market technicians to use

on-balance volume

as a means of predicting stock prices. Under the sponsorship of an unknown brokerage firm, Arnold Securities, Granville began to tour the world, giving a series of traveling seminars, in the late 1970s and early 1980s. He had a remarkable run of prescient market calls that resulted in international recognition. His "Sell Everything" message to subscribers in January 1981 made headlines around the world; the

Dow Jones Industrials Average

fell 2.5% on the next day and 1.5% on the day after that.

Where Are the Clowns? Send in the Clowns

Granville's fame and seminars grew in size and sensationalism. Toward the end of his skein, his presentations were staged in huge hotel auditoriums, and attendance was always standing-room only. The crowds were boisterous in response to the circus-like festivities, which typically included belly dancers, a band and often clowns.

Granville made a dramatic entrance in each of these "seminars," dressed in a tuxedo as he walked down a long aisle while the crowds cheered the messiah's next coming. His antics were wild, in marked contrast to the more subtle presentations then seen on Wall Street. Once, on the stage of one of his seminars, Granville dropped his tuxedo pants and pointed to stock symbols printed on his boxer shorts, ending with a delighted cry of, "And here's Hughes Tool!"

Similar and Yet Not So Similar

There are many similarities between Joe Granville's 1980s popularity and Jim Cramer's today; there also many dissimilarities.

Granville graduated from the Todd School for Boys in Woodstock, Ill., a school made famous by the graduation of another entertainer, Orson Welles, and briefly attended Duke University. Cramer graduated from Harvard College in Cambridge, Mass., where he was president and editor-in-chief of

The Harvard Crimson

. Later, he graduated from Harvard Law School.

Granville's first book,

A School Boy's Faith

, was a travelogue in poetry. Cramer's first job was also in journalism, as a reporter for the

Tallahassee Democrat

and the

Los Angeles Herald Examiner

. (Before Harvard Law, he helped launch the magazine

American Lawyer

.)

After enlisting in the Navy, Granville joined E.F. Hutton. He quit six years later to start the

Granville Market Letter

. After his newspaper gigs, Cramer joined

Goldman Sachs

. He quit to form his hedge fund, which was known as Cramer Berkowitz.

A Renaissance Man for the New Millennium

The most important dissimilarity between Joe Granville and Jim Cramer is obvious: Granville was a one-trick pony. By contrast, Jim's academic achievements and intellectual content are astonishingly strong. And his professional accomplishments at Goldman Sachs, Cramer Berkowitz and at

TheStreet.com

are equally remarkable and have allowed him to become financially independent and to pursue his sincere desire to educate investors on his new platform.

Excitability Could Mark a Market Top

In watching the audience and investors' response to Jim "El Capitan" Cramer's live stock recommendations on his "Mad Money" show last night, I couldn't help but think that the instantaneous markups were eerily reminiscent of participants' responses to Granville during his heyday, which leads one to ask whether the excitability around Jimmy's shows, like that of Granville, could mark a market top as unthinking traders mark up his ideas to a fare-thee-well.

'Mad Money' as Microcosm

As I have mentioned repeatedly on

Street Insight

, my respect for Jim as an investor/trader and as a man knows few bounds. It is the immediate, frantic and unquestioning manner in which investors/traders respond to his ideas (not the ideas themselves) that is reaching silly proportions, and that has me unnerved, causing me to question whether the response to "Mad Money" is a microcosm of a market that has driven fear and doubt away and is ready for a fall.

I want to repeat for emphasis that the ludicrous share-price reactions are not Jimmy's fault (indeed, he cautions investors not to pay up for his ideas). Like the doom-like Granville calls of 25 years ago (shortly thereafter, a monstrous bull market started!), they are the fault of those who react in such a foolish manner that they should be chastised and that will hurt financially.

The wild response to Jimmy's stock recommendations in

CNBC's

live "Mad Money" show last night could suggest that the momentum and enthusiasm with regard to equities is reaching manic and silly levels -- or it could just be an isolated event.

When I distill the parallels (above) and the meaningful content that is being delivered by Jim (vis à vis Granville), I come to two conclusions.

First, Jim is delivering a hard-hitting, informative real-time market/company analysis and is laying his opinions on the line. Unlike Granville's "Sell Everything" mantra, Jim's information reveals substance that is rarely available in the business media today.

Second, participants' response (again not Jimmy's fault) is a strong indication that a section of the investment population is getting goofy and is ready for a fall.

Doug Kass is general partner for two investment partnerships, Seabreeze Partners L.P. and Seabreeze Partners Short L.P. Until 1996, he was senior portfolio manager at Omega Advisors, a $4 billion investment partnership. Before that he was executive senior vice president and director of institutional equities of First Albany Corporation and JW Charles/CSG. He also was a General Partner of Glickenhaus & Co., and held various positions with Putnam Management and Kidder, Peabody. Kass received his bachelor's from Alfred University, and received a master's of business administration in finance from the University of Pennsylvania's Wharton School in 1972. He co-authored "Citibank: The Ralph Nader Report" with Nader and the Center for the Study of Responsive Law and currently serves as a guest host on CNBC's "Squawk Box." Kass aappreciates your feedback;

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