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Madder MoneyMe vs. Jim Cramer, Round 2.

By Henry BlodgetPosted Monday, Feb. 12, 2007, at 4:47 PM ET

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4. "Jim doesn't say you should just blindly do what he says. He recommends that do your own research—and he tells you how to do it." At first blush, this sounds responsible and persuasive (and it's certainly more responsible than "watch TV, get rich.") The trouble is that it encourages amateur investors to believe that, if only they watch the show and do a bit of research, they can win the speculation game. The reality is that your odds of winning are low even if you have above-average skill and even if you do nothing but research.

Remember, your competition—all other traders—are primarily full-time professionals who do nothing but research and trade all day long. Unless you have a multimillion-dollar research budget, a platoon of brilliant analysts, relationships with salespeople at all major brokerage firms, relationships with senior managers at every company, a Rolodex full of industry contacts, and a decade or two of trading experience, you will be at a serious disadvantage no matter how much research you do. Remember, too, that the vast majority of professionals, even those who possess all of the above advantages, lose the speculation game (because it is really hard to win). Then ask yourself again why, by watching a TV show and doing some part-time research, you should reasonably expect to win.

(By the way, how do you think the managers of 15,000 U.S. hedge funds and mutual funds feel about competing against millions of part-time amateurs who think that watching Mad Money gives them an edge? Answer? Stoked. Finally, some easy money.)

5. "Jim Cramer is smart and talented." Again, no argument here. I have great respect for Cramer's brains, talents, and work ethic. Given how much he could actually help average investors, I'd like to see him use those talents to promote intelligent investing instead of speculation. Perhaps, someday, he will.

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Henry Blodget's book, The Wall Street Self-Defense Manual, was recently published by Atlas Books and Slate. You can buy the book here. You can learn more about it here.

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