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Traders will do anything for money. Film at 11.
March 21, 2007 11:39 AM   Subscribe

"The great thing about the market is that it has nothing to do with the actual stocks." Jim Cramer--probably most famous for his CNBC show "Mad Money"--comes clean in a TheStreet.com interview about the tactics he used while managing his hedge fund and how he, you know, might influence Apple's stock if he were in the game today. Feathers get ruffled.
posted by quite unimportant (53 comments total) 7 users marked this as a favorite

 
That seems incredibly ballsy to me that he would talk about that on camera.
posted by empath at 11:45 AM on March 21, 2007


I'm sure that if he is given a reasonable chance to explain in private and with no transcript, this can all be cleared up.
posted by DU at 11:52 AM on March 21, 2007 [7 favorites]


blatantly illegal... but essential

Ah, this post-9/11 world is so refreshing.
posted by phaedon at 11:53 AM on March 21, 2007


Why do I sense the imminent bursting of another bubble?
posted by psmealey at 11:57 AM on March 21, 2007


I like the "Spitzer's back up in albany now" line. And how he said Motorola and Nokia need to fix prices.

Actually it's a good commentary on why the limitations on cellphone technology suck. The cellphone market is what the PC market would be like if it wasn't for net neutrality. Wireless net neutrality is really essential, because frankly companies shouldn't be cutting all these backroom deals in order to access customers.
posted by delmoi at 12:08 PM on March 21, 2007


The statute has long since run on his conduct so it's not THAT ballsy, but still . . .
posted by The Bellman at 12:09 PM on March 21, 2007


I wish this seemed more surprising to me.
posted by OmieWise at 12:09 PM on March 21, 2007


I see all kinds of crap going on in the cellular phone business--rotten back-door deals, angry customers, etc. Apparently it isn't nearly as closely regulated as the wired telephone industry, so it's still a bit of a "frontier"--meaning, go ahead and screw people.

You wanna make REAL money, and screw lots of people? Start an extended-warranty company for consumer electronics. It's a totally unregulated, incredibly profitable insurance-like industry. Ask anyone at Best Buy.
posted by metasonix at 12:24 PM on March 21, 2007 [1 favorite]


Why do I sense the imminent bursting of another bubble?
posted by psmealey at 2:57 PM on March 21


Welcome to two weeks ago.

I actually respect Cramer for speaking quite plainly about stocks and particular companies, but if you glance through his book Confessions of a Street Addict, it's clear that he's prone to some compulsive behavior. In the book he relates stories about how he broke some of his hedge fund's contractual obligations with brokers and clients on bad days just to keep himself alive.
posted by Pastabagel at 12:31 PM on March 21, 2007


Also, Jim Cramer should be required reading for people who believe too strongly in the efficient market hypothesis.
posted by Pastabagel at 12:33 PM on March 21, 2007 [5 favorites]


I thought Kramer spent his entire goodwill investment at the Laugh Factory.
posted by It's Raining Florence Henderson at 12:38 PM on March 21, 2007


(snap)
posted by metasonix at 1:10 PM on March 21, 2007


Welcome to two weeks ago.

Does that mean I get to do my 40th birthday all over again? It was last week, really.
posted by psmealey at 1:29 PM on March 21, 2007


This just in: hedge fund managers are dicks.
posted by mckenney at 1:31 PM on March 21, 2007


I see all kinds of crap going on in the cellular phone business--rotten back-door deals, angry customers, etc. Apparently it isn't nearly as closely regulated as the wired telephone industry, so it's still a bit of a "frontier"--meaning, go ahead and screw people.

You wanna make REAL money, and screw lots of people? Start an extended-warranty company for consumer electronics. It's a totally unregulated, incredibly profitable insurance-like industry. Ask anyone at Best Buy.
posted by metasonix


I don't have to ask them. They ask ME. Repeatedly. And the girl behind the register gives you this puppy-dog look like she'll lose her job if she doesn't sell you that $10 policy on your $30 clock radio. Wait, I worked in a Best Buy when I was a kid. I know that she probably will lose her job. Also, Best Buy, I don't want your damn magazine subscriptions. I haven't even gone into a Best Buy in a while, and now I remember why. There's NOTHING in that store you can't buy on the intertubes for less money and less hassle. Ok, I'm done derailing.
posted by ninjew at 1:31 PM on March 21, 2007 [1 favorite]


Welcome to two weeks ago.

Ahm..sorry but that was so three days ago. Market is up 150 points at close today, back to 12440. So welcome to today.
posted by spicynuts at 1:33 PM on March 21, 2007


Watching this dirtbag talk about how the Truthâ„¢ is the last thing you want to deal with, takes me back to another lifetime, when I worked at a primary Drexel Burnham office in midtown Manhattan. Some of Milken's henchmen/henchwomen worked at that particular location, and there was one woman who bought a new luxury car every month. In the 18 months or so that I worked there, I received no less than three bonuses, including the Christmas bonus that was around 4 months of salary. The three card Monty games that make up Wall Street have done such damage to our economy, the real underbelly of the economy, it's no wonder that manufacturing is a dead industry in the U.S. People got hooked on the obscene cash flow involved in moving paper and dealing in blatant lies and fabrications, and this cancer has spread to every corner of our society. Black kids have gangstas as their role models, white kids have hedge fundsters as theirs, the only difference are the uniforms. This reality makes me positively ill, and the fact that we all take it as a given is truly disturbing.
posted by dbiedny at 1:45 PM on March 21, 2007 [12 favorites]


That Crammer, he shoots from the hip, huh.
posted by Samuel Farrow at 1:53 PM on March 21, 2007


Well, dbiedny, it trickles down dontchya know.

Reminds me of my dinner at Nebraska's in the financial district last night. Somebody expensed the whole night but no business was discussed or conducted, other than the business of destroying some very large steaks and a few bottles of patron. Don't even know what company I was a guest of.
posted by spicynuts at 1:54 PM on March 21, 2007


"The great thing about the market is that it has nothing to do with the actual stocks."

This might be the truest statement I have ever read on this topic.

Out of college I worked about a year part-time at a small brokerage firm in a small town. I was trying to see if being a stock broker was a possible line of work for me.

The amounts of money these people made were insane. They out-earned any doctor or lawyer. And the funny thing is, they were actually quite honest, open, and ethical about their dealings. If they had been out to screw their clients, or pad their wallets, the earnings would have been stratospheric. They made great piles of money while their clients got 15% return OVER the market. Everyone was happy. Watching an individual person earn $100k in one day for doing nothing except transacting one blip on a screen for another blip on a screen makes you realize how ridiculous the entire thing is.

Try to wrap your head around how a huge company like Ford or GM could "lose" several millions upon millions upon tens of millions of dollars of value one afternoon only to magically retrieve it the next morning, all the while literally *NOTHING* changed about that company. No plants were open or closed, no people were hired or fired, no new technologies were invented or licensed or lost. There was nothing different except for the fact that a few hours of time passed.

As one of my econ professors said, try not to think about it too much or it will keep you up at night.

I heard recently somewhere about a secretary working at an investment firm for $35k per year, and getting a $40k bonus this past xmas. Some of these places are, quite literally, drowning in money.

I'm quite curious to see what happens when the baby boomers all start retiring and start sucking significant funds OUT of investments instead of cramming every spare quarter INTO investments before retirement.

Well... I know what will happen... I just wonder to what extent.

You young'uns HAVE been funding your 401k's haven't you? You may want to increase you contribution by a couple hundred percent.
posted by Ynoxas at 2:30 PM on March 21, 2007 [3 favorites]


At my friend's interview with a hedgefund (he lasted 2 months there) he was asked if he had any qualms about lying in order to make money, to which he replied -as he needed the job- that depends on one's personal philosophy. the interviewer responded, "philosophy, you mean Ayn Rand?" then pointed to their library whose entire philosophy section, without exception, consisted of that person's work. Truly, an enlightened field.
posted by sarcasman at 2:33 PM on March 21, 2007 [1 favorite]


dbiedny, you're right on target. Kaavya Viswanathan's (remember her?) goal in life was, if I recall, to be an investment banker. Who was her role model? It all makes me feel old and out of touch with my save-the-world + personal-enlightenment bullshit.
posted by MarshallPoe at 2:35 PM on March 21, 2007


heh. that whip almost makes no sense to me. how many books did ayn rand write? 10? 2 of them that have anything directly to do with philosophy?

posted by phaedon at 2:41 PM on March 21, 2007


At my friend's interview with a hedgefund (he lasted 2 months there) he was asked if he had any qualms about lying in order to make money, to which he replied -as he needed the job- that depends on one's personal philosophy. the interviewer responded, "philosophy, you mean Ayn Rand?" then pointed to their library whose entire philosophy section, without exception, consisted of that person's work. Truly, an enlightened field.

Wow, is this really true? What a nightmare.

I would love to hear more about Drexel Burnham in the 80's. The crazy shit that went on at places like DB and Salomon Brothers and the obnoxious personalities back then makes my head spin.
posted by Falconetti at 2:47 PM on March 21, 2007


It was a filthy profession,
but the money was addicting,
and one addiction led to another,
and they were all going to hell.
posted by Armitage Shanks at 2:57 PM on March 21, 2007


Falconetti, Michael Lewis' Liar's Poker is a well-written first-person account.
posted by box at 3:10 PM on March 21, 2007


"The great thing about the market is that it has nothing to do with the actual stocks."

.. and CNBC has nothing to do with financial news reporting.
posted by Jay Reimenschneider at 3:12 PM on March 21, 2007


I love how Cramer's demeanor on that clip had nothing in common with his "Mad Money" persona.

His antics are meant to further draw in the "sucker" crowd so he and his ilk can line their pockets with even more cash.
posted by action man bow-tie at 3:30 PM on March 21, 2007


Interesting, but I think he semantically flubbed about the "nothing to do with the actual stocks" line. It has everything to do with the stocks. The problem is that the stocks have nothing to do with their respective companies.
posted by Bugbread at 3:36 PM on March 21, 2007


You wanna make REAL money, and screw lots of people? Start an extended-warranty company for consumer electronics. It's a totally unregulated, incredibly profitable insurance-like industry.

Yeah, but it's such a stupid scam that anyone who falls for it gets what they deserve.

I was at Best Buy a couple weeks ago picking up a new pair of speakers, and this dude totally gave me the hard-sell on a warranty. The warranty he was trying to sell me cost $30. The price of the speaker set? $160. Left a sour taste in my mouth, even though all the people who I talked to before him were totally courteous and helpful.

Extended warranties are a ripoff anyway - nearly all hardware failures happen either at the very beginning of a product's lifetime (when they're still covered by the manufacturer's warranty), or near the end when you're probably thinking about replacing it anyway.

Heck, if you're really paranoid about warranties, just buy stuff with an AMEX or similar card that automatically gives you an extended warranty.
posted by Afroblanco at 4:54 PM on March 21, 2007


Falconetti, you might also be interested in James B Stewart's Den of Thieves Connie Bruck's The Predators's Ball and Ben Stein's A License to Steal.
posted by IndigoJones at 6:06 PM on March 21, 2007 [3 favorites]


I didn't understand exactly what he's been doing here. I also didn't quite understand what Anjelica Huston was doing at the racetrack in The Grifters. In my confusion they seem like variations on the same business plan.
posted by TimTypeZed at 6:10 PM on March 21, 2007


At my friend's interview with a hedgefund (he lasted 2 months there) he was asked if he had any qualms about lying in order to make money, to which he replied -as he needed the job- that depends on one's personal philosophy. the interviewer responded, "philosophy, you mean Ayn Rand?" then pointed to their library whose entire philosophy section, without exception, consisted of that person's work. Truly, an enlightened field.

Really? Well, a guy I know who works in that field has copies of works by Chaucer and Chomsky on his bookshelf at work. So I think what we've learned here is that there's a counter-anecdote to every anecdote meant to generalize an entire group consisting of thousands of people.
posted by mullacc at 6:36 PM on March 21, 2007


Thanks for the video link. I wouldn't have seen it otherwise.

Cramer certainly gave some validation to how I *imagined* the financial markets are manipulated, especially in conjuction with consolidated media outlets.

So ... can anyone here refute his claims? How about defend his practices? It seems like the other side of the discussion is sorely missing here. Does anyone believe that what he's talking about here is moral and/or ethical? I'm curious.
posted by mrgrimm at 6:49 PM on March 21, 2007


Know who else used to work in investment banking? Sacha. Baron. Cohen. And that was after he developed the proto-Borat character.
posted by b1tr0t at 6:59 PM on March 21, 2007


Nothing saddens me more than seeing how many kids are coming out of college and working for consulting companies and investment banks. Get out there and take some risks, create something real and contribute to the beauty of the world. The world has enough cynics.
posted by any major dude at 9:59 PM on March 21, 2007


I'm quite curious to see what happens when the baby boomers all start retiring and start sucking significant funds OUT of investments instead of cramming every spare quarter INTO investments before retirement.

It's one of my pet theories that when the ratio of Retired-to-Working Americans reaches a certain point, the private investment markets will crash (down 90+%) years before the Social Security system goes insolvent. I don't have any numbers to back that up; just a bad feeling that if there was one really really big pissing elephant in the room nobody ever wants to talk about, that'd be it. (And I like to drop it into conversation just to watch Free Market Addicts turn purple.)
posted by wendell at 12:00 AM on March 22, 2007


JUDY
Yes. See, just imagine that a bond is a slice of cake. Now you didn't bake that cake, but every time you hand somebody a slice of that cake, a little bit comes off, little crumbs fall off. And you're allowed to keep those crumbs.

SHERMAN
Crumbs? Really...

MR. McCOY
(pointedly)
And many a man has sold his soul for those little crumbs.

JUDY
(enjoying this)
Yes. And that's what Daddy does. He passes somebody else's cake around and picks up the crumbs. But you have to imagine a lot of crumbs. And a great golden cake. And a lot of golden crumbs. And you have to imagine Daddy running around picking up every little golden crumb he can get his hands on. That's what Daddy does.
posted by bashos_frog at 5:01 AM on March 22, 2007


Get out there and take some risks, create something real and contribute to the beauty of the world.

the longer I live, the more I wish I hadn't done this.

to be quite honest, getting rich is the goal, and to die comfortable is the reward.
posted by perianwyr at 6:04 AM on March 22, 2007 [2 favorites]


I'm quite curious to see what happens when the baby boomers all start retiring and start sucking significant funds OUT of investments instead of cramming every spare quarter INTO investments before retirement.

Well... I know what will happen... I just wonder to what extent.


Boomers retiring and selling equities will not hurt The Market as long as there are buyers for those equities. To find those younger buyers, think globally: not every country has a population that is getting older.

See this Businessweek article for more.
posted by Fuzzy Monster at 7:54 AM on March 22, 2007


any major dude writes "Get out there and take some risks, create something real and contribute to the beauty of the world."

perianwyr writes "the longer I live, the more I wish I hadn't done this.

"to be quite honest, getting rich is the goal, and to die comfortable is the reward."


I think the idea is "you, go out there, live in poverty, and create beauty, so that I, who will live in wealth, can enjoy it".
posted by Bugbread at 8:03 AM on March 22, 2007


You young'uns HAVE been funding your 401k's haven't you? You may want to increase you contribution by a couple hundred percent.

I am (I was really excited to have earned $160 on an $1800 IRA in one quarter, go me!), but if there's a huge pull out of funds, won't 401ks be hurt?
posted by drezdn at 8:19 AM on March 22, 2007


I like the response from other hedge fund guys: "Clearly, if Jim Cramer says these things, he and only he comes under great suspicion! Let the limited number of SEC goons focus on Jim Cramer, for he has spoken in public in a very general way about illegal practices that pervade the industry - tantamount to an admission of personal wrongdoing!"
posted by ikkyu2 at 9:04 AM on March 22, 2007


to be quite honest, getting rich is the goal, and to die comfortable is the reward.
posted by perianwyr at 8:04 AM on March 22


I simply do not believe this to be true.

Without getting into details, I know people who take home a comfortable upper-middle class yearly salary each MONTH. And most of them do not seem happy to me.

Retirement is important... but I don't know that retiring 10 years early is going to necessarily make up for an entire lost life. And for us mortals, retirement is going to be much further away.

I'm 36, and I imagine the retirement age will at least be 70 by the time I reach it, if not 75. So that means I've got possibly another lifetime doing this.

As for me, I've so far identified 3 "dream jobs" that I know for a fact would pay much less than what I make now, that I am absolutely convinced would make me much happier.

drezdn: Yes, unless this younger generation invests both much more aggressively and much sooner than the boomer generation, then the equities market will have no alternative but to take a heavy, heavy dive. At first, it should manifest as just stagnation, but then, as those deductions from the market begin to accelerate, you will simply have more sellers of equities than buyers, and the financial markets will work exactly as designed, and the value of those equities will drop (plummet?).

Fuzzy Monster raises an interesting point, however, I think the article is much too optimistic. The "pessimist's" view is still entirely too optimistic, and the "optimist's" view is simply pie in the sky.

As other markets mature, advance, and proliferate, that will make interest in the American markets FALL, not increase. Indians are going to invest primarily in maturing Indian markets. Same for the Chinese.

His idea that there won't be enough equities to buy is a flight of fancy if not an out-and-out fabrication. Of course, these guys get paid to be highly optimistic and try to rationalize it.

There is already SUBSTANTIAL foreign interest in American securities/equities/stores of value, especially bonds and real estate. If those funds are removed to invest in newly efficient and booming markets abroad, then we have yet ANOTHER crisis completely independent of the one we were just discussing.

Also, add to this that there is LIKELY going to be a huge labor crisis in this country, and especially labor that can't be easily replaced with untrained immigrant workers. There's going to be huge drains on medical, legal, and executive labor pools. White collar America is about to retire en masse, and they can retire earlier than blue collar America.

So, a giant portion of the population that are currently earning, producing, investing, and working are soon not to be doing any of those.

Also, for those budding entrepreneurs out there: the boomers already have most of the "stuff" they want, they've already bought the big house, cars, and boats. What they will be spending their eggs on are services.
posted by Ynoxas at 9:07 AM on March 22, 2007 [1 favorite]


Is Jim "working" the interviewer? Is this a character or the real him? This is amazing stuff (in a car wreck way).
posted by andreaazure at 9:10 AM on March 22, 2007


Also note that in some respects, making big piles of money makes it HARDER to retire early. For example, it would be much easier to say goodbye to a 30k a year salary than a 300k a year salary. The "cost" of retirement is much higher for high earners.

You've saved for retirement, you have enough to serve your needs... work one more year and buy that Jaguar you always wanted... then of course you could work one more year after that and have that fishing boat you want free and clear. Of course, in 5 years, you could squirrel your whole income away and trade up to that house on the water... and suddenly you're not retiring early at all.

It's hard to leave money on the table, unless you're miserable, which reinforces my point above.
posted by Ynoxas at 9:30 AM on March 22, 2007


Ynoxas writes "Also note that in some respects, making big piles of money makes it HARDER to retire early. For example, it would be much easier to say goodbye to a 30k a year salary than a 300k a year salary."

Yes, and no. It may be easier to say goodbye to a 30k salary than a 300k salary. However, if you don't have enough money saved, you can't say goodbye to your salary, or you will starve/freeze to death. "Impossible" is harder than "really really hard".

Optimally, of course, at retirement age you'd have a billion dollars in the bank, and a 20k a year salary, making the decision insanely easy.
posted by Bugbread at 10:03 AM on March 22, 2007


Ynoxas writes "It's hard to leave money on the table, unless you're miserable, which reinforces my point above."

Wait...I'm confused. "Rich people are unhappy. Rich people find it hard to leave their big salaries, unless they're unhappy. This reinforces my previous point." How does it reinforce your previous point? Doesn't your previous point basically negate your later point?
posted by Bugbread at 10:05 AM on March 22, 2007


As other markets mature, advance, and proliferate, that will make interest in the American markets FALL, not increase. Indians are going to invest primarily in maturing Indian markets. Same for the Chinese.

Oh, I completely agree the American markets are headed for some rocky waters, for a number of reasons. Sorry, I wasn't clear earlier. Basically I agree with what Prof. Siegel says in that Businessweek article I linked to: For a North American investor, exposure to World Markets is a very good thing.
posted by Fuzzy Monster at 11:33 AM on March 22, 2007


However, if you don't have enough money saved, you can't say goodbye to your salary, or you will starve/freeze to death.

You're absolutely right, and where unfortunately MOST people are/will be at retirement.

I was meaning people who DO have enough for retirement, but are also very high earners, so the attraction of the "extra" wages is so high, it could make early retirement difficult for those who can actually afford it.

How does it reinforce your previous point? Doesn't your previous point basically negate your later point?

Oops. Well it's certainly nonsensical. I can only imagine I meant "It's hard to leave money on the table, even if you are miserable, which reinforces my point above." Which is still a weak point to be trying to make. Sorry for the confusion. I'll blame it on my brain stem taking early retirement.

I wouldn't go so far as to call most well-off people I know "miserable", but I think "unhappy" is a fair assessment. I guess I'm saying I know unhappy people of all income brackets, but I'm having a hard time identifying people who are in the top income brackets who really are actually happy. Most of them are stressed to the breaking point, and most are hyper-obsessed with retirement, for obvious reasons.

Of course, you have to exert some effort to find ANYONE happy at ANY income bracket. I've come to believe that unhappiness is pretty much the default position for modern life. I realize this isn't exactly a revelation in thinking, but it still affects my life and my perceptions to a great deal.
posted by Ynoxas at 12:47 PM on March 22, 2007


As other markets mature, advance, and proliferate, that will make interest in the American markets FALL, not increase.

Uhmmm ... what?

Now it's undeniable that we'll receive a smaller share of foreign direct investment as other economies grow. But growth in other countries also means the total amount of investment capital available is going to increase. And growth in other parts of the world means they have more money to buy stuff from us, and they have better, cheaper stuff to sell to us.

Economic growth is not a zero-sum game. When other countries get richer, everyone who trades with them benefits.
posted by lbergstr at 1:56 PM on March 22, 2007


lbergstr: we're talking narrowly about financial markets. As the boomers withdraw fund from the equity markets, instead of contributing into them, it will cause negative price pressure on those instruments.

There was the suggestion that investment from foreign entities could take up the slack, but it is my opinion that those foreign entities will more and more invest domestically as their domestic markets mature, advance, and proliferate. Therefore, I would not expect foreign investment to be what "saves" the American equity markets.

Also, I do not agree at all that as other parts of the world "grow" as you say that they will have better, cheaper stuff to sell us.

Conversely, as their markets (real markets, not financial markets) grow, their offerings will become more diverse and more value-laden, as compared to the bottom-rung goods and natural-resource exploitive goods they supply us with now. What we should expect is the goods, and the services, provided by those economies to INCREASE in price.

Now I do agree that as their financial situation improves, they would have the ability to purchase more from us.

But, in the aggregate, we are looking at withdrawal of foreign funds from our equity markets, and looking at the prospects of rising prices for many imported goods and outsourced services. Increased exports are great... but there's no reason to believe we would not still be in a trade deficit situation with many of these countries for years to come.

I don't see America becoming a net-exporter in our lifetimes. If you are a net importer, you want to be the highest man on the totem pole. Every other arrangement is sub-optimal (from your POV).
posted by Ynoxas at 3:00 PM on March 22, 2007


That video made me wish that somebody would lobby for less SEC oversight, so we wouldn't waste tax dollars investigating trading practices like those he described.

Buyer beware, etc.
posted by Tacos Are Pretty Great at 11:49 PM on March 22, 2007


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