Denver Post staff writer Ross Wehner talked recently with Jim Cramer, a former hedge- fund manager who writes weekly business columns and hosts CNBC’s “Mad Money” cable TV show.
Cramer, who just published the book “Sane Investing in an Insane World,” talked about the challenges facing home investors and the bidding war between Denver-based Qwest and Verizon for long-distance carrier MCI.
Some excerpts from the interview, edited for length and clarity:
Q: Can you describe what the title of your book means?
A: We are in a world that seems to have lost its way. Where major American energy companies are a fraud, where major American telecom companies are a fraud, where blue chips get cut in half. Where General Motors is in trouble.
You’ve got to recognize that it’s harder than it used to be. And yet at the same time, the brokerage industry is trying to make it sound like it’s easier than it’s ever been, because commissions are low and you can go online and do whatever you want.
What I don’t like is that we’re in a position where the industry is trying to tell you to do the wrong thing. We’re just not intelligent and knowledgeable enough in this country as we come out of high school, as we come out of college, to handle our own money the way we might have been able to at another time.
Q: What is the single most important thing a home investor can do?
A: The home investor has to decide whether he or she has the ability and has the time. And if they have the ability and time, I am confident they can beat almost every manager. If they don’t, they then have to hand it off. You can’t compromise on this stuff.
Q: So what is the best single alternative for those who don’t think they can do this?
A: Well, I have certain managers that I mention in the book. There is, without a doubt, a sense within the mutual-fund industry that managers don’t matter. But no, this is an intensely individual game. Funds are run by a person; there’s ultimately a portfolio manager. And that portfolio manager may be better or worse. Now we accept this in sports. There will be players who are better than other players. And we accept that, and we don’t think that is a shame.
Q: You are known for bold assertions, predictions and no- nonsense talk. Do you ever worry about what you say or whom you’re knocking?
A: No, I have a family life and a group of friends not from this business, and I’m secure in that. You know, I want to be accurate, but Ted Williams only batted .400 his best year, so I make mistakes; I admit that. But no, I don’t really care.
Q: Do you still run a fund?
A: I run $3.5 million of my personal money. When I win, I give the money to charity. If I lose, I take the pain.
Q: Is that the sum of your personal wealth?
A: No! Fortunately not. That’s the only equities.
Q: OK, this is an important point. You said your personal wealth is invested in…?
A: Treasuries, real estate. The vast majorities of it are in Treasuries and real estate.
Q: Turning to the bidding war for MCI, do you think that MCI’s board has been responding to Qwest in a responsible fashion?
A: Yeah, they’ve been fabulous. They are trying to get the best value possible for their shareholders.
Q: What about (MCI chief executive) Michael Capellas? What do you think of him?
A: He’s an honest, straightforward guy doing a pretty good job for his shareholders.
Q: Capellas managed to sell Compaq (to Hewlett-Packard in 2002) despite a proxy fight. The deal ended up doing considerable damage to H-P and ended up in the dismissal this year of CEO Carly Fiorina.
A: Well, did it have to be that way? I was smitten by Carly for a while, and as I’ve said on print and TV, that was a mistake. I’m not so sure that she did this great job. I bet the company that they’ve got under this new guy from NCR does a turnaround. This guy Mark Hurd. I think he’s pretty good.
Q: So you think that was a good deal?
A: I think it could have been a good deal. I don’t think it had to be as bad a deal. I think that Carly Fiorina turned out to be an incredibly divisive figure. And a lot of the really good people at both companies fled the company because of her, and I didn’t count on that happening. Take a look at the first six months of the deal when people were still energized.
Q: So if you were pitching Michael Capellas as a possible hire to a Fortune 500 company, how would you describe his skills?
A: Capellas gets his job done, whatever the job is. Take something out of bankruptcy – he’s a good man. Sell the company – he’s a good man. Gets the job done. A results-oriented guy.
Q: Could he run a phone company?
A: Nobody could run a phone company; it’s too hard now. It’s a bad business – too many players. Even after all this consolidation, it’s still not enough. The competition’s cutthroat. It has to be the worst industry in America.
