Host of CNBC’s Mad Money with Jim Cramer

Is it an act? That’s what I asked him, back before Jim Cramer joined CNBC as a host.

He had already become a well-known hedge fund manager and co-founder of TheStreet.com. He was a regular guest on Squawk Box as a co-host. But it was before his numerous books on investing in the stock market.

Before commercials appeared with takeoffs on his character on CNBC’s show Mad Money.

Before CBS’s 60 Minutes did a profile on him.

Before his “They know nothing!” tirade against Ben Bernanke and company.

Before he went on the Today show in 2008 during the financial crisis and warned investors that they should take money out of the market if they needed it within the next five years.

Before he became a target—rightly or wrongly—of everyone from the Obama administration to Jon Stewart.

“I learned a long time ago,” he told me, “that you have to make it interesting. ”

And he sure does that.

On his CNBC show Mad Money, while he’s ranting and hyperventilating about stocks that you should buy or sell with haste, he looks like someone you’d avoid at the bus station. But here’s the deal with Jim Cramer. Even off camera he’s high energy, but he’s one of the smartest people you’ll ever meet.

And it’s not like his path to Wall Street was a gilded path. This is a guy who worked as a print journalist. In fact, that’s where he learned “to make it interesting.” At one point in his life he spent nine months living out of his car. And while he searched for what he wanted to do with his life, he got a law degree from Harvard Law School.

Just because he punches bells and whistles for ratings on Mad Money, don’t let that fool you into thinking that’s all there is to Jim, or that it’s a joke. The screaming shtick on TV belies his thoughtfulness when it comes to investing. He was a successful hedge fund manager way before he became a TV star. And while some critics will question the profitability of his stock recommendations on the show, keep in mind that Jim made serious money in real life. He knows more than virtually all his critics because he’s actually done it. And he did it by being flexible in buying and selling, sometimes moving in and out of positions based on stock movements that ranged in the teenies (sixteenths of a point—remember when stocks traded that way?).

The biggest value that I’ve always seen in Jim’s on-air work is that he can teach people how to think about stocks and the underlying companies as investments. Forget about whether his stock recommendations pay off—that’s not how he made his millions.

He’s trying to teach viewers how to evaluate companies and the stocks that provide investment opportunities. If you watch it with that approach in mind, you’ll be better off than trying to day trade or position trade his recommendations.

And about his tirade about Bernanke. (“He has no idea how bad it is out there! ”) In retrospect, wasn’t he right?

Jim doesn’t actively manage money anymore, but from 1988 to 1997, he beat the S&P 500 every year. That includes the recession year of 1990, when his fund gained 12 percent even as the market fell 7 percent. And in 1995, while the S&P returned a solid 34 percent, his fund rose a scorching 60 percent.

Then came 1998.

Jim Cramer’s Best Mistake, in His Own Words

[In 1998, the S&P rose 27 percent while Jim Cramer’s fund returned a dismal 2 percent. He had ridden a formula to success that involved buying stock in the best savings and loans in the country. He would buy S&Ls that were trading lower than their book value.]

We got into these savings and loans that we thought would either get bought or grow big. It had worked for the better part of a decade.

[But in 1998, low interest rates made it hard for S&Ls to make money on deposits, and the government began opposing consolidation in the S&L industry.]

Everything that had been working stopped working.... Investors were calling for updates minute by minute.... We ended up losing in an earnings fashion and in a take-over fashion. Our portfolio was just bad.

In the middle of 1998 I went to my partner, Jeff Berkowitz. We admitted to making a blunder and agreed that “We don’t like what we’re doing here.”

Either the market was incredibly overvalued and we should give the money back, or we should accept the fact that our methodology was flawed. It’s considered heresy to change styles. But we had to do it.

We had these soul-searching sessions nightly. We’d go over our stock positions one by one. We would black out the winners and talk about why the losers were bad picks. We had to go to our investors and tell them the methodology that we’d used for a long time wasn’t working. It wasn’t easy. Can we admit that we did something wrong, and have the investors stick with us? A lot of them didn’t. We had $100 million taken out in one day. It was horrible. It was mind-numbing. The faxes piled up with sell orders and wiring instructions.

It was gut-wrenching for me because for the most part the people who left me had been with me since 1982. About a third of our investors pulled out. I was just crushed by it.

But the change worked. We started buying tech stocks. We tried to figure out what companies were going to beat earnings forecasts by the biggest amount, and took big positions. In 1999, the S&P gained 20 percent—we were up 62 percent! And in 2000, when the NASDAQ tanked 11 percent, we started shorting [betting against] tech stocks and gained 36 percent.

We had made a colossal mistake, and a lot of people pulled out. But we took an honest look at what we were doing, and it saved the firm.

About Jim Cramer

Jim Cramer graduated magna cum laude from Harvard College, where he was president of the Harvard Crimson. He worked as a journalist at the Tallahassee Democrat and the Los Angeles Herald Examiner, covering everything from sports to homicide, before moving to New York to help start American Lawyer magazine. After a three-year stint, Mr. Cramer entered Harvard Law School and received his JD in 1984. Instead of practicing law, however, he joined Goldman Sachs, where he worked in sales and trading. In 1987 he left Goldman to start his own hedge fund. While he worked at his fund, Mr. Cramer helped start Smart Money for Dow Jones, and then in 1996 he co-founded TheStreet.com, of which he is chairman, and where he has served as a columnist and contributor ever since.

In 2000, Mr. Cramer retired from active money management to embrace media full-time, including radio and television. Currently, he is a markets commentator for CNBC and TheStreet.com. In addition to his daily writing for TheStreet.com’s RealMoney and Action Alerts PLUS, as well as his participation in various video segments on TheStreet.com TV, he serves as host of CNBC’s Mad Money television program.

Mr. Cramer is the author of Confessions of a Street Addict, You Got Screwed, Jim Cramer’s Real Money, Jim Cramer’s Mad Money, Jim Cramer’s Stay Mad for Life, and recently published Jim Cramer’s Getting Back to Even. He is a frequent contributor to New York magazine. He has been featured on 60 Minutes, Nightly News with Brian Williams, Meet the Press with Tim Russert, The Tonight Show with Jay Leno, Late Night with Conan O’Brien, NBC’s Today with Matt Lauer and Meredith Vieira, and MSNBC’s Morning Joe.