Sunday, August 12, 2007

Jim Cramer’s Guide to Market Manipulation

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“Mad Money” host Jim Cramer has gained a huge following, and more than a few critics as well, with his explosive stock-picking patter. But in a revealing video interview with, the financial Web site he cofounded, Mr. Cramer drops some bombshells that go well beyond his usual chair-throwing, ‘Booyah’-shouting routine. In the clip, which has drawn lots of commentary on YouTube, Mr. Cramer brags about his ability as a former hedge-fund manager to game the stock market and offers what amounts to a how-to to aspiring stock manipulators, The New York Post reported Tuesday.

In the December interview with the site’s “Wall Street Confidential” Webcast, Mr. Cramer describes at least two strategies, including a way of driving stock futures up or down that he explicitly said was legal. “A lot of times when I was short, I would create a level of activity beforehand that would drive the futures. … It’s a fun game,” he told’s executive editor, Aaron Task.

But Mr. Cramer spends most of the interview describing a practice called “fomenting,” where a hedge fund manager essentially creates a false impression about a company in order to drive its stock one way or another — which he says is “blatantly illegal,” but adds that “the Securities and Exchange Commission doesn’t understand it.” While he claims this practice is widespread, he never says he has used it himself.

Here’s how fomenting works, according to Mr. Cramer: Say a hedge fund manager is holding a short position — a bet that a stock will decline — in Research in Motion, which has just announced blockbuster quarterly earnings results. An enterprising fund manager might call several brokerage houses and either feed them bad information or order a slew of short sales. Then he or she could call up a “bozo reporter” with a fake news tip about Resarch in Motion rival Palm.

The result, he says, is a perfect storm of bad news that temporarily lowers R.I.M.’s stock price, long enough for the manager to reap a tidy profit. He recommends a similar procedure with Apple (the video was filmed before the company introduced its iPhone at its annual Macworld convention in January).

“These are all the things that you should be doing on a day-to-day basis and if you’re not doing it, maybe you shouldn’t be in the game,” Mr. Cramer tells Mr. Task.

Mr. Cramer sums up his philosophy this way:

What’s important when you are in that hedge fund mode is to not do anything remotely truthful, because the truth is so against your view, that it’s important to create a new truth, to develop a fiction.

Jim Cramer and his illegal trading tactics




March 20, 2007 -- Flamboyant Wall Street trader turned TV host Jim Cramer, not known for being the shy, retiring type, might have said too much in a video interview he did for a financial Web site.

The host of CNBC's daily program "Mad Money" had hedge fund-trading desks buzzing yesterday after he bragged about manipulating stock prices during his days as a trader.

In the video from's "Wall Street Confidential" Webcast, Cramer boasts about manipulating the price of a high-flying stock down, and even acknowledges that doing so might have been illegal. The video is making the rounds on YouTube.

"A lot of times when I was short, I would create a level of activity beforehand that would drive the futures. . . . It's a fun game," Cramer said in the Webcast, which was moderated by Executive Editor Aaron Task.

Cramer later said that "no one else in the world would ever admit that, but I don't care."

However, seconds later, he acknowledged, "I'm not going to say that on TV," referring to his show on CNBC.

A remarkably successful money manager when he ran the $450 million Cramer Berkowitz hedge fund, Cramer in the Webcast shared his "tips" on how to drive a stock price down so that a short-position - a bet that a stock price would drop - remains profitable.

He added that the strategy - while illegal - was safe enough because, "the Securities and Exchange Commission never understands this."

A call to Cramer was not returned.