Brouhaha over the Booyah: Timing Reveals All

Jim Cramer has drawn a surprising amount of media fire the past few days over his manipulation comments made all the way back in December. (I first mentioned this in our Christmas linkfest — 12/24/06)

Why the very belated ire? 

Mike Panzner makes a few interesting observations in Ringing the Booyah at the Top?. Mike and I discussed this earlier in the week, and he has a fascinating
theory: Every bull market has it’s icon, and Cramer is this bull’s
version.

So why now, rather then back in December when it first uploaded to TheStreet.com site? 

The timing is what makes this "revelation" truly revealing about those who
would hang Jim: This is not so much about Cramer, as it is about a
major shift in sentiment. The hostility is coming through now that the markets look vulnerable. Prior to the market cracking in February, no one much cared.

The same sort of action covers why Enron and Worldcom went from shining examples to Pariahs so quickly: Once money is lost, people forget the decision making process and only focus on the outcome. For investors, that is precisely backwards — they should be process oriented, but they are not. It isn’t how a ballplayer does in any given at bat that matters, rather, the on base average, total hits and runs scored over the season is what counts. However, the angry mob doesn’t care about such things, they only want their pound of flesh — and some payback.

If Cramer is the symbol of this Bull run, then as soon as it began to falter, the lynch mob came out. IMHO, it is oh so very telling about human nature and the behavior of crowds mobs.

Has ever two more absurd words been spoken in sequence then "Rational Investor?"

~~~

 

One other thing: I thought Cramer "confessed" to far worse things in Confessions of a Street Addict

~~~

The infamous video:

Jjc_and_task

>

Sources:
CRAMER REVEALS A BIT TOO MUCH
RODDY BOYD
NYPost, March 20, 2007
http://tinyurl.com/3c6mwp

Jim Cramer draws fire over manipulation comments
Dane Hamilton
Reuters, Tue Mar 20, 2007 6:55pm ET
http://tinyurl.com/29dzl5

Jim Cramer’s big mouth
His revelations only confirm what dupes average investors are
Thomas Kostigen
MarketWatch,  12:03 AM ET Mar 23, 2007
http://tinyurl.com/ynletc

Cramer’s Response:

The Least I Owe You
Jim Cramer
RealMoney.com, 3/22/2007 6:29 AM EDT
http://www.thestreet.com/_rms/newsanalysis/general/10345939.html

What's been said:

Discussions found on the web:
  1. Frankie commented on Mar 23

    I wonder what his buddy (and prior hedge fund limited parter) Elliot Spitzer thinks of the revelatory rant?

    It’s about time that the “manipulators” get spanked. Naked short selling (with no intention of actually borrowing real shares), planting lies, slander, and misinformation are all commonplace…especially from the dark side. They don’t have to live by the same “rules” and laws the longs do! Regulations meant to stop illegal shorting has been utterly toothless. Why is planting an intentional lie, or MISinformation about a company any less agregous than buying on insider information?

    In fact, Barry deserves much credit for raising this issue…depite being a writer for Cramer’s site. I’d love to see you sink your teeth more into my points raised above. A “level playing” field demands it!

    Thanks man.

  2. abe commented on Mar 23

    Cramer always played at the edges. Pre Reg FD it was a different game. He took maximum advantage, sometimes in grey areas, sometimes over the line. That’s who he is. I’ve got no problem with anyone “gaming” a stock down, as long as he is taking risk, vs talking down the stock via puppets on TV.

  3. Guy Lerner commented on Mar 23

    Love him or hate him or right or wrong, one thing you can say about Jim Cramer is this: I believe he is sincere in his motives.

  4. Turbo commented on Mar 23

    I used to joke that the bottom of the next bear market would be marked by Cramer getting out of prison and embarking on a new career as a televangelist. Spiting regulators at the onset of a bear market seems like a really good way to make that happen.

  5. Craig commented on Mar 23

    Since Barry kindly provides the link to Bill Cara’s blog, you might want the real take on this.
    Bill’s take is this:
    Marc also asked if the Cramer “confessional” video on YouTube had been removed. Apparently, Cramer is backing down today (see interview with Don Imus), which I opined would happen. Individual traders have little understanding how powerful HBB is.

    Cramer now says, “Look, I am no master of the universe. I’m a little glib. I screwed up about CNBC’s Bob Pisani… Now I’m on the hot seat.”

    Unfortunately, Cramer couldn’t even get his story straight with Imus. I found the interview pathetic.

    Every now and then, traders will get some solid insights like Cramer’s and then the horse’s mouth is told to shut up.

    The market is marketing. Don’t ever forget it.”

    This is about Humungous Bank and Broker (HB&B)busting Cramer for telling the truth.
    The game owners don’t like their secret rules being discussed.

    We are supposed to be fully invested until HB&B and their buddies can file out of the exits unaccosted before the lowly riff-raff.

    AND, everyone has to get off the guys back (no I don’t follow him) he called the top in January when he told his viewers to sell tech. Notice we’ve been coasting downhill at a decent clip since then…..

  6. Philippe commented on Mar 23

    Why go so far in the past of an individual miss happening? when we may see every day, stock markets manipulations at a scale never ever seen (please look at today’s markets graphics in Europe at the very same time CAC SMI DAX), this is today’s and for now two years news (stocks and bonds)! Those markets have not been designed and executed through software’s programming and execution without an aim » a big scale market’s manipulation » supported by a vast population of insiders.
    Browsing through the street.com my conclusion is that whoever was willing to speculate on the beneficial side would have been rewarded, as whoever wants to preserve its mental health is better off reading the Big Picture.
    Those events are absolving all and every legal precedents and have absolved any future and past legal infringements.
    The main question will remain are they the true markets representation or the future design ?

  7. Tom B commented on Mar 23

    I kind of like Cramer; I think his takes on particular stocks are often pretty savvy.

  8. dark1p commented on Mar 23

    A question: didn’t Cramer basically admit the same thing a few years ago in his book? I seem to recall a small hubbub at the time, but it never made the MSM.

    I think Barry’s assessment is dead-on. And I can’t feel too sorry for JC. He came of age in a bull market, made a fortune in the greatest bull run in history, cut ethical corners to do it, and is proclaimed (by some) as a near-genius. Hmmm. Probably not, though he is obviously no dope.

    Besides, I can’t help but have a problem with a grown man who acts like a four-year-old. That book he wrote spelled that out, too. He was sorry for being such a jerk, he said, but while he may have curbed his abuse of others (and objects), he still acts like a four-year-old.

    I’m sure others have other opinions. He does seem sincere in his motives, but then, has always was. Even when his motive was making money any way possible.

  9. Scott Frew commented on Mar 23

    Barry–

    Can I humbly propose Efficient Markets to stand alongside Rational Investor?

    And to commenter Frankie, I’d suggest that the disinformation promulgated by the long side is as intense and intentional, and far greater in quantity, as that put out by what you characterize as the dark side. Take a look at sell side research, or tune in to CNBC, if you don’t believe me. And given the upward bias of the markets, and the cheerleading character of the media, it’s a lot easier to manipulate stocks upward than down. Year end bonuses/paydays provide powerful incentives to mutual funds and long-leaning hedgies, and not all of them are immune to the temptations.

    Best regards.

  10. KP commented on Mar 23

    Cramer is definitey the driver of the short bus….love him, hate him, or whatever he has LOTS of followers. The trend is your friend. Just don’t drink the Koolaid.

  11. Winston Munn commented on Mar 23

    Has the power of the Cramer Factor rolled over?

  12. Craig commented on Mar 23

    Dark1p, In that sense Berry is right. Who would care if the market was up, up, up?

    No, they only care because he goofed with their plan early.

    He admitted plenty in books and TV but mostly to reveal it for his readers or viewers. If he didn’t DO it he would be an idiot trying to tell regular people how the street works wouldn’t he?

    The only reason it matters is timing and obviously, what he says is true.

  13. costa commented on Mar 23

    Why is this a shock. The market is always manipulated. You buy/sell stocks that a analyst from your broker’s company upgraded/downgraded. You buy/short because something has crossed a moving average or has formed a pattern. And various other “technical” indicators or “professional” advice. The market will always be maniuplated, there are the bookies and the bettors and the bookies are the only ones who make out. The only difference in the market is you can limit your loses and profits are unlimited.

  14. V L commented on Mar 23

    The hedge funds are more creative now. They use foreign newspapers (harder for the SEC to investigate, plus UK newspapers have much lower standards when it comes to fact verifications) like UK’s Sunday Express to inject a bogus rumor of Alcoa or Dow takeover for example.

    It is interesting that nobody has complained and nobody has minded the manipulations when the manipulations were directed to move the prices up, but everyone gets upset when the manipulations become directed to bring the stock price down (as in Cramer’s example).

    There are interesting double standards imbedded in the psychology of the mob – manipulations are ok as long as they are directed to drive the stock prices up.

  15. Barry Ritholtz commented on Mar 23

    BTW, YouTube pulled the video (due to TSCM’s copyright demand).

    I put the original TheStreet.com video up in its place . . .

  16. Craig commented on Mar 23

    Try this:
    “The Least I Owe You
    By Jim Cramer
    3/22/2007 6:29 AM EDT
    You may have seen some articles the past several days attacking me about an interview I gave recently where I discussed the kinds of manipulative trading practices that go on every day in the investing community. Let me say this: No one knows and respects the securities laws more than I do. (I didn’t go to Harvard Law School for nothing!)

    When I was a hedge fund trader in the 1990s, I played fair, and I did nothing that violated those laws. But others did not play fair, and that’s why I started TheStreet.com and have been writing about these abuses for nearly a decade — to explain to my readers how the markets really work. I wanted to give transparency to the market and tell people the good and the bad.

    Some professional traders don’t like it when I expose how their game is played, and some of the TheStreet.com’s competitors don’t like it when people are interested in what I have to say. But I am going to continue to write and talk about how the markets really work — in my own sometimes hyperbolic and tongue-in-cheek style — and call them as I see them. That’s the least I owe you.”

  17. Jdamon commented on Mar 23

    Do you guys really not understand that Joe and Jane six pack now own a much, much more stock than they used to. Before they relied on working for the same company for 30 years and retiring with a defined benefit pension. They really didn’t care if the market went up or down. However, now most all companies only have 401(k) plans which participants depend on for as their only source of retirement funds. When the market falls (as it did from March 2000 – March 2003) the pain is overwhelming as people lose their hopes for retiring at a decent age. Thus, anger when the market falls is now amplified.

  18. Idaho_Spud commented on Mar 23

    Barry,

    I read econ blogs all the time, and the first time I ever heard of Cramer’s YouTube video was a couple of days ago on one of said blogs.

    Although *you* (and perhaps many in your professional circle) seem to be aware of the existence of this video, I don’t believe you have brought it to your loyal reader’s attention. So to me, at least, this is brand new news.

    Frankly whether someone first viewed this video in December or today, it comes across as both distasteful and illegal; unfortunately this is not unexpected behavior from Wall St.

    Ethically I don’t see much difference between this and backdating options, something that you were very upset about.

    So now the news has gone beyond a page on YouTube and into the MSM. If there is a growing sense of righteous indignation over the idea that Cramer gamed the market and ripped people off with illegal methods – well that’s probably the correct emotion.

    Maybe he will be the next Bad Boy poster child: Up there with Lay, Boesky, Milken and Keating. At least those people were discreet enough not to admit to anything they did in a TV studio with the camera rolling 😉

  19. Michael C. commented on Mar 23

    Cramer marked the exact low of this past “correction” to the hour. He called for each sub-prime blowup to result in a down 200 Dow and said there were a dozen more to come.

    The SPX bottomed at 1370 almost exactly when that article was posted and hasn’t looked back since.

  20. Craig commented on Mar 23

    Idaho, do you read?

    Try reading what he said and watch the video. Cramer is EXPOSING others, not himself.

  21. V L commented on Mar 23

    “I don’t believe you have brought it to your loyal reader’s attention”

    Idaho_Spud,

    Barry posted a link to the video a few months ago.

  22. Craig commented on Mar 23

    Wait, I apologize. I forgot, this is the country that attacked everyone trying to warn us about the war in Iraq, went after Valerie Plame, all those who left the WH, Congressman Jim McDermott, all the genrals, etc. and defended Bush and the murderer Cheney.

    Of course they would attack the news bearer and not the NEWS. This country is in deep shit.

    Mediocrity is winning.

  23. Michael Schumacher commented on Mar 23

    If that video is a revelation to anyone then they need to get into another profession.

    Cramer is totally playing that like a violin. His followers cheer his “admission” as some sort of sacred information that no one knows about while positioning himself to look like the little guy by sitting back and watching how it’s handled by the talking heads. If anything happens to him, I seriously doubt it will because all he’s done is provide a documented and not easily erasable “evidence” of what anyone who been in this business for more than 10 minutes would already know.

    Cramer is simply selling books and he knew what he was doing way before any of this got any real press. He is simply placing himself to be in a position to be championed by the uninformed.

    Sorry I see right through the BS and this should not be made out to be anything other than yet another salesjob.

    MS

  24. dark1p commented on Mar 23

    I don’t know, Mr. Schumacher. Cramer doesn’t seem like a BSer–at least, not really someone who does it consciously. I don’t think he’s just trying to sell books or whatever. He acts like he has a compulsive need to actually tell more of the truth than he should. And the idea that he does it to ‘expose’ others who do it…boy, is that a leap of faith. Great rationalization, though.

    Paging Dr. Freud…Dr. Howard…Dr. Fine…

  25. Idaho_Spud commented on Mar 23

    Craig, Yes I read. Even your posts.

    I am addressing Barry’s notion that everyone was supposed to have known about this video. I did not… most people in the US likely did not either.

    I am also addressing the notion that Cramer is suddenly being tarred and feathered just because the market is suddenly weak in the knees. I suspect he’s getting negative attention because he’s rather eleganly described insider criminal activity on TV.

    His sly way of explaining *precisely* how a clever hedgie guy could manipulate the market (without actually mentioning his own involvement), is like OJ writing a fictional book called: “If I did it”.

    I’m not saying OJ killed anyone or that Cramer did anything illegal while managing a hedge fund mind you… lol.

  26. V L commented on Mar 23

    The public is naïve. Wall Street has been milking the retail investors for years. There are even products out there designed exclusively for the institutions to monitor and squeeze retail.

    For example, NYSE ReTrac (monitors retail trading volume) is exclusively designed for the institutions to identify the volume of retail buy and sell shares volume and helps the institutions to time their trades.
    http://www.nysedata.com/nysedata/InformationProducts/NYSEInfoTools/tabid/274/Default.aspx

  27. Craig commented on Mar 23

    Good enough Idaho. I saw it a few days ago and sent it to Barry as I hadn’t seen it here either.

    I don’t know why you waste your time on my posts though!

    I think we agree here. Sure Cramer is a shameless self-promoter, so what? I don’t doubt his motivation(s). Anyone who claims to have higher motivations is a liar or self-deluded.

    I don’t have a problem with people selling books or making money on TV, exposing ‘secrets’ or supposed secrets. (BTW, DUH, like anyone investing/trading doesn’t know it’s fixed by the big money.)

    I suspect you are correct in that this is a case of blaming whatever/whomever was convenient.

    Cramer is convenient.

    Dark1p, check out BillCara.com, it isn’t my explanation. BillCara.com is where i read about this first and Bill is who explained it quite nicely.

  28. Michael Schumacher commented on Mar 23

    dark 1p-

    Cramer does’nt sound like a BS’er?????

    Somone mentioned drinking Kool-aid above…..

    Read this as it’s referenced in the above article about the video

    http://www.financialarmageddon.com/2007/03/ringing_the_boo.html

    Towards the bottom it mentions that he would never say any of this on TV……why? Because of the exposure it would get and people would become turned off by this. He is protecting a large portion of his base by only “revealing” this to people who take the time to do a little research. If he cared so much about the “little guy” then tell them……..don’t place yourself as there champion but then refuse to give them what you say you are.

    Classical bullshit……sells books and keeps ratings up.

    MS

  29. Craig commented on Mar 23

    Okay, I thought about this some more after watching CNBC this AM.

    Consider this Michael….and please keep in mind, I’m not into defending anyone, but in figuring this out.

    Maybe the flak (and the release of this info on Youtube instead of CNBC) is because Cramer is actually attacking the biggest talking head, the Tony Snow of the HB&B, the spinmeister of market spinmeisters, the PR man for the big money, Bob Pisani.

    Notice how Rick Santelli can disagree because he is supposed to as a grown-up bond guy, but everyone else better be in lockstep with CNBC and the positive spin.

    NOT that this is THE answer, but it sure seems plausible. Notice there was nothing about this video until we had a monster down day and Cramer had the unmitigated gaul to disagree publically on TV with Pisani.

  30. Michael Schumacher commented on Mar 23

    IMO, there’s nothing to figure out….

    I hate this statement but I’ll use it: It IS what it IS.

    Whatever is going on at CNBC (not much of any substance IMO) is there business, if there “talent” disagree then keep it in the locker room so to speak(I don’t watch CNBC since it can’t even explain why oil is up- they rolled the contract over from April to May the other day but you never heard that as the reason). Cramer is very skilled at what he does with regards to how he is percieved by his viewers…..that’s what this is about…the perception of “exposing the games” plays up very nicely. When, in fact, he really said nothing at all….at least to the informed.

    Perception vs Reality…it should be the new tag line of the century.

    MS

  31. David Merkel commented on Mar 23

    I saw the video when it first came out, and I thought something to the effect of, “Cramer is dishing dirt on industry practices, including some that he may have used that were technically legal at the time, but not ethical.” (It fails at minimum the “do unto others as you would have others do unto you” test.)

    There have been other posts by Cramer at RealMoney that have gone into similar issues. The difference here is that video is a stronger medium, and he did himself no favors by behaving in a cavalier manner. He’s a busy guy, and the TSCM videos are valuable, but I believe they are typically one take and out the door.

    I think the reason it has come to light recently is that though Barry blogged it, most bloggers wee not following TSCM video closely, and it took awhile for it to become viral through the YouTube process, then get blogged, then hit the mainstream media (the last to know).

    Regarding market manipulation: yes, it goes on. Is it a big factor in the markets? No. The markets are basically fair. As in any business, because there humans involved, and not robots, there will be unethical players. That can never be squeezed out of any human system.

    On net, I think Cramer did us a service by talking about the issues in the video; the issues need to be aired, but he did himself no favors by releasing it carelessly.

  32. Craig commented on Mar 23

    I watched CNBC on the day they announced the April/May oil contract until Maria got so starry eyed about the market I couldn’t stand anymore.

    Sometimes they get so giddy on CNBC it’s like watching crack addicts and I have to watch bloomberg to rehab.

    I’m trying to understand this….if you don’t watch CNBC, how would you catch the explanation ON CNBC? That would definitely be perception vs reality.

  33. Michael Schumacher commented on Mar 23

    Craig-

    >>I’m trying to understand this….if you don’t watch CNBC, how would you catch the explanation ON CNBC? That would definitely be perception vs reality.>>

    many other sites and blogs point that out….you do not have to watch it to know what the game is over there. Especially if you’ve seen it before.

    MS

  34. Evan Andersen commented on Mar 23

    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

  35. Philippe commented on Mar 23

    Mr Merkel

    Those are few statistics, which may draw your attention:

    Markets CAC DAX SMI SP have been going up July /February on a non random basis i.e. a distribution which is not identified through normal statistical distribution (Gauss or Poisson)
    The probability for having an homothetic (of degree 1) pattern of these afore indices is very low and yet they have such configuration.
    The probability of having an homothetic pattern at the same time (CAC DAX SMI) is infinitesimal and yet they have these patterns almost every day (please check several days of trading in these markets).
    Banks have been posting (all of them) capital gains on equity trading (the dispersion of their wining and losing trades and identity of the particular stocks trades would be helpful) in all zero sum game banks post capital gains and the correspondent parties a loss. In the foreign exchange it is a very rare occurrence unless they front run customer’s orders.
    Few chartists are having daily an accurate reading close to 90 PCT.

  36. Karl Smith commented on Mar 23

    Why can’t this post be trackbacked from HaloScan? – my reply/query is here

  37. S commented on Mar 23

    The words “ethical Wall Streeter” are far more absurd than “rational investors”.

    Just look at all the post bubble wall street/hedge fund scandals that have occured AFTER having had Spitzer and DOJ up their ass from bubble era abuses:

    1) Hedge funds investigated for illegal, after hours trading of mutual funds;
    2) shorting PIPE deals before they close; 3) obvious insider trading that goes on just prior to an LBO deal being announced;
    4) influencing “independent” published research

    Snakes.

  38. John Navin commented on Mar 23

    Kramer’s coming back in the next life as a Buddhist monk who’s taken a vow of silence and whose only source of income is a begging cup.

  39. Francois commented on Mar 23

    When will people understand the very simple and basic fact that investing is done with money?

    What? You want to tell me “DUH!”?

    Then, why so many people who wouldn’t lend a miserable dollar to a needy kid are ready to plow thousands on the word of someone they don’t even know personally? (Wall Street analyst, guru, etc.) Or after hearing a story about an “opportunity”?

    Investing/trading is a lonely endeavor that requires lack of ego, humility (arguing against a market isn’t a money-maker) and discipline to follow a well-studied system built on evidence.

    Said evidence should show that good times and bad times exist and will happen. It’s just going to happen…you can’t predict them, you can’t command them, you can’t wish them away. You can only be prepared to react to it and have a plan to know what to do about it.

    Tough stuff…I can’t claim to fully master it yet.

    Francois

  40. mark commented on Mar 23

    He’s really a down to earth nice guy. a neighbor in fact.

  41. mark commented on Mar 23

    a broker upgrade or downgrade…how is that categorized? do the brokerages get their people in or out just beofre an upgrade? always seems the stock moves a few days before the announcement in the direction of the announcement. is this just a coincidence?

  42. V L commented on Mar 23

    “a broker upgrade or downgrade…how is that categorized? do the brokerages get their people in or out just beofre an upgrade?”

    This is only one example but I think you will get the idea.

    “The SEC also said Bank of America fostered a culture in which investment bankers inappropriately influenced analysts in the quest to keep banking clients happy or to woo new client business, resulting in research that didn’t reflect the analysts’ true opinion about the stock. This led to the false research on Intel, TelCom Semiconductor and E-Stamp.””The SEC also said Bank of America fostered a culture in which investment bankers inappropriately influenced analysts in the quest to keep banking clients happy or to woo new client business, resulting in research that didn’t reflect the analysts’ true opinion about the stock. This led to the false research on Intel, TelCom Semiconductor and E-Stamp.”

    http://www.forbes.com/topstories/home/2007/03/14/bank-america-fined-biz-cx_lm_0314bofa.html

  43. Jesse commented on Mar 23

    The Cramer piece was largely overlooked during the holidays, but when it was placed on YouTube and become noted in a few public places the reaction was broad and remarkably quick.

    Just it for what it is. Reading too much into the ‘delayed reaction’ is the kind of game prognosticators use to look for tops and bottoms. The simplest explanation is usually the best and truest.

    Love your site Barry.

  44. blam commented on Mar 23

    My respect for Cramer went substantially higher. An insider finally spoke the truth.

    There are only a few individual stocks that I would take a chance on trading. The rest are so manipulated by hedge funds, Greenspan/Weil depression era banking trusts, and specialists that their short term performance has little to do with fundamentals.

    The real scandal, to me, is the total lack of enforcement in the equities and futures markets. Add “self regulation” to your list of oxymorons.

  45. TOSH commented on Mar 30

    Have only read JC’s comments recently. Whilst naturally cynical about most institutions, when money is concerned you can turn the cynicism and suspicion rating up another 500%.
    The liberties taken by the financial market in general with the private investor are nothing new. If the institutions could stop the abuse it would have, but enforcing such controls and managing it is close to impossible. Any one charged with abusing the system would need to suffer disproportionately, it would need draconian measures. (Life imprisonment) Even then it would still exist in part.
    Very entertaining piece, but merely confirms what most believed anyway.

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