Finally, Jim Cramer has come clean.
The market is fiction, upon fiction, upon fiction.
Stock fundamentals don’t matter.
It’s all about lying and manipulation.
Lie, spread rumors to reporters, including to the bozos at the Wall Street Journal.
Price fixing is needed in certain industries – and don’t worry, the shareholders will demand phony lawyers to cover up the crime.
No need to worry about the Securities and Exchange Commission (SEC) – they don’t have a clue.
No need to worry anymore about Cramer’s Harvard Law School buddy Eliot Spitzer – he’s in Albany now.
Cramer – the former hedge fund trader and current host of the popular CNBC show “Mad Money” – was interviewed in December 2006 by Aaron Task on TheStreet.com television.
Apparently, for three months, nobody paid attention.
But then, about a week ago, someone posted the ten minute interview on YouTube.
And people started hitting it.
About 113,000 views so far.
And it is riveting television.
Raw, unadulterated, Jim Cramer.
Spilling the beans on corporate criminals on Wall Street.
Cramer talks openly about how hedge fund managers manipulate the market.
To drive stocks down. Or up.
To profit from their short or long positions.
Hedge funds manipulate the stock market by dumping $10 million to $15 million in the market, to move the stock one way or another.
Case in point – Research in Motion (RIM) – the maker of Blackberry.
“A lot of times when I was short at my hedge fund, and I was positioned short, meaning I needed it down, I would create a level of activity before hand that could drive the futures,” Cramer said. “It doesn’t take much money. Of if I were long and I would want to make things a little bit rosy, I would go in and take a bunch of stocks and make sure they are higher – maybe commit $5 million in capital and I could affect it. Now, you need maybe $10 million in capital to knock the stuff down. But it’s a fun game. And it’s a lucrative game.”
If you are short on RIM, “you can’t let it lift.”
“When you get a Research in Motion, it’s really important to use a lot of your firepower to knock that down,” Cramer said.
Manipulation by buying and selling stocks – that’s legal, Cramer says.
Then if you need help, you engage in some illegality – what he calls fomenting.
“You can’t foment,” Cramer says. “That’s a violation. You can’t create yourself an impression that a stock is down. But you do it anyway because the SEC doesn’t understand it. That’s the only sense that I would say that it is illegal. But a hedge fund that is not up a lot really has to do a lot to save itself. This is blatantly illegal. But when you have six days and your company may be in doubt because you are down, I think it is really important to foment. If I were one of these guys, foment an impression that Research In Motion isn’t any good.”
“Get people talking about it as if something is wrong with RIM,” Cramer advises. “Then you would call the (Wall Street) Journal and talk the bozo reporter on Research in Motion and you would feed that Palm has got a killer it is going to give. These are the things that you must do on a day like today. And if you are not doing it, maybe you shouldn’t be in the game.”
Remember, you can’t take any chances with the truth.
“What’s important when you are in that hedge fund mode is to not doing anything that is remotely truthful, because the truth is so against your view – it is important to create a new truth to develop a fiction,” Cramer advises. “You can’t take any chances.”
How do you drive Apple stock down to profit from your short position – especially when the company is just about to announce it’s new IPhone?
“Apple – it is very important to spread the rumor that both Verizon and ATT have decided they don’t like the phone,” Cramer says. “It’s a very easy one to do. You also want to spread the rumor that it’s not going to be ready for MacWorld. And this is very easy, because the people who write about Apple want that story. And you can claim that it is credible because you spoke to someone at Apple. It is an ideal short. If I were short Apple, I would be working very hard today to get that. And the way you would do that is pick up the phone and call six trading desks. And say, listen, I just got off the phone with my contact at Verizon. And he has already said – we’re a Samsung house, we are a Motorola house. There is no room for Apple. They want too much. We are not going to let them in. We are not going to let them do what they did to music. And that’s a very effective way to keep a stock down.”
When interviewer Task tries to get Cramer to talk about the fundamentals of the stocks in question, Cramer brushes him off.
“The mechanics are much more important than the fundamentals,” Cramer says. “Who cares about the fundamentals? Research in Motion just blew out the quarter. Look what people can do. That’s a fabulous thing. The great thing about the market is that it has nothing to do with the actual stocks. Maybe two weeks from now the buyers will come to their senses and realize that everything they heard was a lie. But then again, Fannie Mae lied about their earnings for $6 billion. So, it’s just fiction and fiction and fiction. It’s important for people to realize that the way that the market really works is to have that nexus of – hit the brokerage houses with a series of orders that can push it down, leak it to the press, and get it on CNBC – that’s also very important. And then you’ll have a vicious cycle down. It’s a pretty good game. It can be played for a percent or two.”
What about the cell phone market?
Too much competition, Cramer says.
They’ve got to get in a room and fix prices.
“The problem with the cell phone market is that these guys are all killing each other,” Cramer says. “Someone has to take a dive. Motorola and Nokia have to get in a room and just fix price. They have been reluctant to do that because of the various Justice Departments.”
And it’s illegal, Task weighs in.
“Well, that hasn’t stopped a lot of other companies,” Cramer says. “This seems to be a case where they seem to be directly worried about the authorities. It’s almost as if they have a lawyer that matters, say like the Bristol Myers lawyers. What eventually happens is that the shareholders demand that you get phony lawyers and you sit in a room. It will happen soon.”
Cramer said that the Federal Reserve is looking for ways to cut interest rates without looking foolish.
“The Fed has obviously got to cut,” he said. “The Fed is desperate to try to figure out how quickly they have to cut without looking like dopes that they raised rates. You don’t want to raise in May and then cut in January. You’ll look like Mexico for heaven’s sake. This is a distinguished group of people who went to really good schools. They don’t want to look like dopes.”
Not only doesn’t the SEC have a clue, but Eliot Spitzer is off the Wall Street beat. So, other illegalities are possible now.
Here’s Cramer’s take on how to manipulate Ford Motor stock up, despite a questionable balance sheet.
“Ford went and pledged all of that investment banking to all these guys,” Cramer said. “Ford may be the big client of 2007. So, if I were in the corporate finance room, I would say to the research guy – listen, I have the inside – the plan works. Then you are the research guy. What do I do? It’s bonus time. I’m not going to be a total idiot. Spitzer is going to Albany. Let’s get back in the game.”