One Question for Jim Cramer

Jim Cramer is host of CNBC’s “Mad Money,” featuring lively guest interviews, viewer calls and, most importantly, the unmatched, fiery opinions of Cramer himself. He serves as the viewer’s personal guide through the confusing jungle of Wall Street investing, navigating through both opportunities and pitfalls with one goal in mind — to help them make money. He’s also co-anchor of the 9 a.m. ET hour of CNBC’s “Squawk on the Street” (M-F: 9 a.m.-12 p.m. ET).

Cramer is the founder of TheStreet, a multimedia provider of financial commentary.

He graduated from Harvard College where he was President and Editor-in-Chief of the prestigious daily, The Harvard Crimson. After graduation he became a reporter for the Tallahassee Democrat and later for the Los Angeles Herald Examiner where he covered stories ranging from homicides to sporting events.

Cramer is a former hedge fund manager and founder/owner and Senior Partner of Cramer Berkowitz. His compounded rate of return was 24 percent after all fees for 15 years at Cramer Berkowitz. He retired from his hedge fund in 2001, where he finished with one of the best records in the business, including having a plus 36 percent year in 2000.

Q: What’s the most significant risk you’ve taken professionally?

Jim:  

You want risk? Walk away from a job that you worked years to get, walk away from a job that paid you more your first month than you had made your whole life. Walk away from Goldman Sachs.

Yet, that’s what I did in February of 1987 because I always wanted

Jim Cramer of Mad Money

Jim Cramer of Mad Money

to work for myself and even though I loved the place, I knew that if I didn’t make a move I might never do so.

I first tried to get a job at Goldman in 1981, the year I enrolled in Harvard Law School. I loved the stock market and while I wanted to be a prosecutor, I knew that the summer between your first and your second year at law school tended not to impact where you ultimately worked.

I figured if you want to go to work in stocks, you might as well go for Goldman Sachs, the best there was and the best there still is.

There was a huge problem, though. They didn’t want law school kids. They wanted business school students. So began what amounted to a two year odyssey to prove that I deserved a slot, one of the coveted 25 or so positions that they granted to those who graduated business school every year.

In the next two years I interviewed with Goldman Sachs ten times, got turned down three times and simply didn’t take no for an answer.

And when I got hired for Securities Sales, advising high net worth individuals and smaller institutions on what to do with their money, I couldn’t believe my good fortune.

The payoff was immediate; the commissions bountiful, the people terrific, the excitement non-stop.

Yet, somehow, it wasn’t enough. Somehow I wanted to work for myself. So I made the most stupid and the most brilliant move of my life, I quit. Four years into it I walked away to start my own hedge fund.

Stupid? Yes, because two months after I started I was already down ten percent for the year. I had lost almost everything I had made in the time I worked at Goldman. Then, after clawing back to plus 3%, I ran smack into the 1987 crash. Fortunately, I had been able to cash out ahead of it, one of those moves that in hindsight looks like genius but at the time was just total self-preservation because the market before the crash had been horrendous.

And that’s where the brilliant came in. Because I had cashed out ahead of the crash, I managed to have a positive return, something that almost no hedge fund manager was able to claim.

In fact, almost everyone else I knew who struck out on his own to run a hedge fund during that period ended up blown to bits.

That meant tens of millions of dollars came my way to manage. Fortunately, I got back in close to the bottom, and the rest was pretty much history as I managed to rack up a return of 24% after all fees over a 14 year period and then retired to move on to full time writing and television.

When I look back at what I did, I still can’t believe that I took that risk. I would have been happy if I stayed at Goldman Sachs, I know that for certain. By my goal had always been to work for myself and when I had enough capital to make a go for it, I jumped at the chance. Even as it was catastrophic at first, I would do it over again in a heartbeat.

But, and this is the big but, I was single at the time, I had no kids, I wasn’t fearful. I didn’t have responsibilities beyond my own rental apartment and share in a place in the Hamptons. So while it was the riskiest move I ever made in my professional life, I knew I did have the rest of life to make it back if I failed.

Looking back 25 years later, that’s certainly not the case anymore.

 

Comments

  1. This is great Anne. I have been aware of Jim Cramer for about five years but never knew the details he outlined here. Interesting that he says leaving Goldman was his biggest risk. Guess we will never know if that opinion would change had he not cashed out ahead of the 1987 crash. Interesting that he describes that as “dumb luck.”

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