Blodget: Cramer gives bad investment advice on Today

Henry Blodget, the disgraced former Wall Street analyst, writes on Clusterstock.com that CNBC “Mad Money” host Jim Cramer doled out some bad advice on Monday’s “Today” show in terms of investing in the market when he adviced people to get out.

Blodget writes, “Why does Cramer think you should get out now? Because the market could decline 20% from here.  That’s possibly the worst justification for selling medium-term holdings we’ve ever heard. (The market could ALWAYS decline 20% from here.)

“For what it’s worth, we agree that the market will likely go lower over the next year. We also agree that people should not have any money in the stock market that they need in the next five years. But the point is that ‘those assets’ never should have been in the market in the first place.  The stock market is always unpredictable and dangerous over such timeframes, and people should never count on it to fund near-term expenditures.

“We also couldn’t disagree more with Cramer’s recommended strategy of suddenly selling everything now, with the market down 30%+ from the peak. This is market-timing at its worst. Adjusting your long-term investment strategy because you’ve realized that you can’t stomach risk is one thing. Panicking and selling because the global economy and markets are temporarily collapsing is another. After more than a decade of being overvalued, stocks are finally approaching fair value, and, time and again, emotional selling based on market conditions has been shown to be a terrible investment strategy.”

Read more here.