Jim Cramer’s interview for Thestreet.com-SCARY!!
March 23, 2007
I found a scary video through Bill Cara’s blog, financial guru for “the little people” with a social conscience. I particularly wanted Mark to see it, but it looks as if Mr. Cramer may have pissed off the wrong people. The video was pulled by the thestreet.com, under pretext of copyright infringment. Here is a write-up on it with a short excerpt, but frankly, it does not do it justice. When I watched it, my mouth was catching flies for 10 minutes. And if you know Jim Cramer, you know he can spit out a mouthful in 10 minutes.
Is the mouth that roared in trouble? Jim Cramer, the stock market commentator and GE’s (GE)CNBC TV host, in a December interview on TheStreet.com web site, and now getting a a great deal of attention, described illegal activities used by hedge fund managers to manipulate stock prices. The interview, posted on video site YouTube.com, may be studied by U.S. government and stock market regulators. The interview pulled no punches in describing tactical buying, shorting or using options to create an impression in the market that could prompt other traders and investors to buy or sell a stock. “A lot of times when I was short at my hedge fund…meaning I needed (a stock) down, I would create a level of activity beforehand that could drive the futures,” Cramer said. “It’s a fun game and it’s a lucrative game.” He said some tactics are “blatantly illegal,” but sometimes essential for poorly performing hedge funds. He didn’t say he ever used such tactics himself. He also said the SEC doesn’t understand some illegal activity. There’s much more in the interview, and eyebrows have been raised everywhere.
Hey! I found the video again. Here it is… If you do any kind beginner investing, or are thinking of getting into it, this is an eye-opening bit.
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March 23rd, 2007 at 8:01 pm
If you ever want to day trade, those are exactly the kinds of guy’s you’ll be going up against. It’s a game where the little guy will get cleaned out. Fund managers have more money, better access to research and are not only more informed, but also capable of making momentum plays. Sadly, though, most funds perform significantly worse than any of the major stock market indexes.
I’m a value and fundamentals investor. Anything I buy, I have the intention of holding for years (but I will sell if the fundamental business deteriorates unexpectedly). While prices diverge quite a bit from fundamentals in the short run, it’s always temporary. Maybe that’s why Cramer got cleaned out so badly during the .com meltdown.
March 24th, 2007 at 12:40 am
I have never held Cramer on a high pedestal for the reasons demonstrated on the Wall Street Confidential. It just proves to all of the conspiracy theorists on hedge funds that there money is a wash with irresponsible managers and all of this is lumped into the concept of a hedge fund! I am sure that the long-short equity does have games that are played like this on a constant basis and I have seen similar in the foreign exchange markets but to have to go as far as making sure people know what they are doing is illegal is beyond irresponsible. Disclaimers are in place in a Private Offering to categorize the risk, which the client will understand but taking it to the point that you would have to commit illegal acts to justify returns just shows the quality of management Cramer is. Do we think that Warren Buffet had to do this? Remember that many hedge funds are doing exactly what they set out to do and that is cover exposure and risk for the underlying client like a pension fund. I think he is giving the industry a bad name and only trying to sell his show and ego. Cramer is not a money manager…he is an actor.
Evan Andersen
Lydia Capital
March 30th, 2007 at 8:11 pm
Jim Cramer believes his own BS. No matter how many fund managers do what Cramer says, in the end the thing he said about fundamentals is totally wrong–easily proven by anyone with a few simple finance formulas and a history of stock prices and companies’ profits. All stock values will only come from company profits. It is a closed system with no other inputs. The typical fund manager doesn’t last long because in the end none of them can deliver what they promise–to beat the market.