|Don tells the inside story of why he told James Cramer to "Take this job and shove it!" |
Why I Quit TheStreet.com
Don't you hate it when people say that something they did was "more in sorrow than in anger"? It always means they were really angry. But it can also mean they were sorrowful, too. Indeed, for some people -- like me -- the two emotions are inseparable. It's the sorrow that makes me so angry.
That's how I felt about quitting TheStreet.com last week. Well, it wasn't exactly "quitting." I never worked for them to begin with. Since about a year ago I've written 120 commentaries for TheStreet.com and RealMoney.com, and made hundreds of contributions to their Columnist Conversation bulletin board. And my partner Dave Nadig has been a leading participant in their StreetPros.com live trading diary feature. But they weren't paying Dave or me for our contributions. In fact, in a manner of speaking, for a while we were paying them -- MetaMarkets bought more banner advertisements on TheStreet.com than any other website.
But there's no amount they could have paid us to make us stick around. Over the last few months James Cramer began attacking me in his columns, and in Columnist Conversation. I don't mean just disagreeing with my ideas. I live for a good debate! I mean attacking me personally -- directly assaulting my integrity and my honesty. Maliciously. Recklessly. And in a way that was damaging to my reputation.
Here's just a small sample. In posts on Columnist Conversation, he publicly called my writings "gibberish," and "cocktail party chit-chat." He cheered when stocks that I like went down -- for example, he crowed, "Excellent!" when the gold stocks I had written about had a slightly bad day. Two weeks ago he posted a note on Columnist Conversation calling me "disingenuous" and saying he had to dispute my ideas "if only to soothe my own conscience if not our readers' pocketbooks." Of course, calling me "disingenuous" is just a coward's way of calling me a liar.
Despite my protests, TheStreet.com's editors -- while privately expressing to me mortification at what was happening -- stood by helplessly while the attacks continued and intensified. At TheStreet.com, nobody questions James Cramer.
Until last Thursday, when I told James Cramer to "Take this job and shove it" -- in public, on his own website. I quit angrily -- I am angry at the way I was libeled after all that Dave and I have contributed. And judging by the number of supportive emails Dave and I have gotten from TheStreet.com's readers over the last year -- and especially over the last several days -- our contributions were highly valued.
But while I am indeed angry, I did quit as much in sorrow -- sorrow for the doomed business that TheStreet.com has become, and sorrow for the spectacle of self-destruction I saw from James Cramer. I used to be an ardent admirer of both.
Only a little more than two years ago, TheStreet.com and James Cramer were great inspirations for Dave and me when we first started MetaMarkets. They embodied an inspiring vision for a revolution in investment journalism, built around the unique properties of the Web as a news medium, and the unique personality of James Cramer as both a journalist and a professional investor. But like so many visions of the last several years, TheStreet.com is now in shambles, just another dotcom penny stock waiting for the coup de grace while all its most talented people drift away one by one. And James Cramer is now, in his own words, "just another journalist" -- one who uses TheStreet.com as his vanity press, chasing away valuable and popular colleagues who were contributing to this public company at no cost.
What was originally so revolutionary at TheStreet.com was the idea of a working institutional investment manager sharing his ideas with an audience, in detail and in real time. Prior to James Cramer, market journalism was produced by journalists, not market practitioners. Like the scene in The Wizard of Oz in which Toto throws back the curtain on the all-too-human wizard, James Cramer revealed to all the world how real money managers on Wall Street actually work. Through James Cramer's unique manic sensibility, readers were admitted to a previously secret world. There they met the people who move markets and learned to speak their arcane lingo -- and they shared the joy of James Cramer's victories, and the agony of James Cramer's defeats.
All in real-time, on the Web. James Cramer wouldn't have been possible without the Web. No other medium is both as rich and as real-time, and James Cramer needed both attributes in order to put on his show. Newspapers and magazines may be richer in detail, but they are not real-time. Television and radio may be real-time, but they are impoverished in their depth and detail. The Web and James Cramer were made for each other.
But there were troubling issues from the very beginning. Because James Cramer was a working professional investor, his objectivity and integrity as a journalist were frequently challenged. Whenever he wrote about a stock he owned or was actively trading, he was always vulnerable to charges that he was "talking his book" or "pumping and dumping." In one well-known case, there was even a Securities and Exchange Commission investigation. But James Cramer was exonerated in that case and, as far as I know -- despite many accusations -- has never once used his position as a public spokesman to manipulate securities prices.
The whole notion of a market journalist/practitioner has the potential for conflict of interest at its very heart. And don't I know it -- because Dave and I are in exactly the same position. And we always go to great lengths to keep our noses clean -- including the complete real-time disclosure of every trade we make and every position we have advised our clients -- two mutual funds -- to take.
But that potential conflict of interest is precisely what makes it such a valuable model for financial journalism -- the conflict of interest assures that the practitioner/journalist knows what he is talking about, or at least has put his money where his mouth is! Consider the manifest drawbacks of the alternative: financial journalism created by people who have no direct experience or knowledge of this very complex field, and no direct financial incentive to get it right. Inconceivable! And yet that's how 99.9% of financial journalism is produced. James Cramer, Don Luskin and Dave Nadig are among the very few exceptions.
I admired James Cramer when he defended himself against conflict of interest charges in a March, 1999 article for the online magazine Slate, called "A Message to My Enemies." He wrote, "The off-line journalists want me to stop writing and trading. OK, let's say I stop trading. Would I be as good at writing about the market as I am now? No way. I would be just another journalist scrounging info. To these folks, the fact that I was editor in chief of my college paper more than two decades ago would be a big plus, but the fact that I am actually doing this stuff is a big minus. Especially because in the third quarter of 1998 I lost money! Holy cow!"
But since the end of last year, James Cramer has become, to use his own words, "just another journalist." He retired as a professional investment manager, and now simply invests for his own account. Is he as good at writing about the market? It's a matter of opinion, but here's mine: "No way."
And what has happened to TheStreet.com as a business? Even when James Cramer was a practitioner/journalist and not "just another journalist," TheStreet.com struggled to make a go of it. At first they charged a subscription fee. Then when it seemed that the only way to make a mark on the Web was to give content away for free, they tried that, and of course it didn't help. Then they tried subscription fees again, but only for certain premium content categories. And now they're trying to charge even higher fees for emails with James Cramer's latest trades. Judging from TheStreet.com's stock price -- under $2 per share, and down from a high of 71-1/4 in March 1999, and trading for about the value of cash on hand -- it's not going to be a world-beating strategy to turn TheStreet.com into an online market newsletter based on James Cramer's hot picks.
But there was a time when James Cramer thought that TheStreet.com would indeed beat the world. Take a look at what James Cramer himself had to say about his company in February, 1998 -- a year before it went public.
- "...already we can see massive profitability in year two."
- "...our cost structure is nil."
- "Ultimately we have to win. There can be no question."
- "I imagine that TheStreet.com could be a television, radio and newspaper all rolled into one, charging premium ad rates and skimming the cream from everybody."
- "I want to replace The [Wall Street] Journal by the millennium. I can tell you that we will succeed in that goal."
I remember what it was like in February, 1998. I read these words of James Cramer -- and similar words by so many other Internet entrepreneurs -- and I was inspired by them, as silly as they may seem today. Dave and I got so excited about the brave new world they were talking about that we became Internet entrepreneurs ourselves. So I know what a tough road this has turned out to be, and I have a lot of sympathy for how difficult it must be for James Cramer to live with the disappointment of having this beautiful dream so thoroughly defeated. Maybe that's one of the reasons why he's treated us so shabbily.
James Cramer has his own version of all this, of course. And he's got a high enough public platform that he can repeat his version over and over, and lots of people will end up thinking that's the way it happened. His version, based on what he's written on his site and in private emails to me, is that I quit TheStreet.com because of my performance as an investment advisor. I guess he's hoping that his legions of loyal and unquestioning fans will accept "the big lie," and simply forget the libel to which Dave and I were subjected -- abuse which would drive out any self-respecting contributor.
Well, as to performance, our performance as adviser is here for all the world to see every day on the Web sites of our mutual fund clients. But whatever it is, our fund clients show it in more detail than any funds I know, against multiple benchmarks, and for any time period you feel inclined to check out. Even more, as adviser, we explain that performance by showing you every single trade we make. All archived right back to the beginning.
What can I say about our performance? We've had good times, and we've had bad times. I've never made any secret of that. I couldn't have. It's structurally impossible the way we've set up our business.
But the world doesn't have very good data on Cramer's performance as a manager. Free from the SEC rules that govern mutual fund advertising, James Cramer has often represented his own performance in vague and mythologized terms -- emphasizing the good and rationalizing the bad, of course. Like any professional in this business for as long as we've all been in it, he's had his share of both. When James Cramer's dismal 1998 performance was leaked to the press, the revelation that he had done so badly and had not disclosed it threatened TheStreet.com's impending IPO.
You can see something that purports to be a stylized version of the performance of James Cramer's personal portfolio in a table on the RealMoney website. Even with the advantages of not having to present the returns in regulated format, and conveniently leaving out the "cash drag" factor from the money he chooses not to invest, the portfolio still hasn't performed well since its inception on April 1. Perhaps not by coincidence, that date corresponds roughly to the bottom in the NASDAQ, which was just when our performance, as adviser, took a turn for the better. It is ironic, and perhaps more than coincidence, that James Cramer began his attacks on me -- which he justifies after the fact as being based on our poor performance -- just when things started to turn for us, and when they were going so poorly for him.
If great recent performance were the criterion for writing for TheStreet.com, eventually everyone would get fired -- including James Cramer. It would be like Darth Vader's human resources strategy: kill any colonel who loses a battle. In James Cramer's own case, of course, he makes an exception.
And besides, the performance that counts in this case is the performance of the ideas that get published. And I'll put the performance of Dave's and my published ideas up against anyone's, including James Cramer's.
But none of that really has anything to do with the issue: whatever you may think about our performance, it doesn't give James Cramer the right to repeatedly libel me in public.
But he's got his story, and he's sticking to it. In an email he sent to me over the weekend, he had the shameless gall to tell me, "I would have been thrilled to have you back. In fact, I was going to bet on you, I think you are just now beginning to get it right. I had this idea of sending money to your firm, saying, I think Luskin has been hit hard enough. It could have been story book, cause I believe you will come back."
Now I get it! How could I have been so stupid? I should have known all along that when he was publicly libeling me that this was just his own very special way of telling me that we were about to turn around, and that he wanted to invest with us. Of course, in all the emails he's never even tried to justify -- nor has he even acknowledged the existence of -- his attacks (perhaps his libel lawyers have advised him not to). Instead, he says that what I need to do to get this blessing he "would have been thrilled to" give me is to publish what he calls a "mea culpa" on his site.
Next thing you know, he'll want me to kiss his hand and say, "Be my friend, Godfather." Needless to say, I emailed James Cramer back and told him what he could do with his story book.
So, yes, I'm angry. I think anyone in my position would be. But I'm sorrowful, too. Sorry to see TheStreet.com, which could have been a great company, failing. And I'm sorry to see James Cramer, someone who I once thought was a great man, reduced to this. Sure, I'd write for TheStreet.com again, as long as it lasts -- I owe that much to the memory of what might have been. But for that to happen, it won't be me publishing the mea culpa.
Donald L. Luskin