Tuesday, June 5, 2007

Cramer Talks About Manipulation.

Portions of an interview between Jim Cramer and Aaron Task of “Wall Street Confidential” (a video feature on TheStreet.com) have been published in the June 2007 issue of Harper’s Magazine. Many folks will be furious at what Jim reveals, but I think from a pragmatic view, this is a wonderful learning lesson

"You’ve really got to control the market. You can’t let it life. When you get a Research in Motion (RIMM), it’s really important to use a lot of your firepower to knock that down, because it’s the fulcrum of the market today. You can’t create, yourself, an impression that a stock’s down. But you do it anyway, because the SEC doesn’t understand it… This is just blatantly illegal.

But when your company may be in doubt because you’re down, I think it’s really important to foment an impression that Research in Motion isn’t any good, because Research in Motion is the key today. When your company is in survival mode, it’s really important to get the people talking as if there’s something wrong with RIM. Then you would call the Journal and you would get the bozo reporter on Research in Motion. And you would feed him a rumor that Palm’s got a killer it’s going to give away. Theses are all the things you must do on a day like today, and if you’re not doing it, maybe you shouldn’t be in the game.

What’s important when you’re in 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… The great thing about the stock market is that it has nothing to do with the actual stocks… It’s just fiction and fiction and fiction".

He also mentions ways in which someone could affect Apple’s (AAPL) stock via iPhone rumors.

Now the moralists out there are seething. "This is pure manipulation!" They are screaming. Yeah, and the sun will rise today also. This stuff has and will happen for ever. The moralist out there will throw up their hands in disgust and walk away from the game, the pragmatist will profit from it. An unexplained drop in a stock is now explained, a run with no news now make sense. In the past where you may have hopefully panicked and sold, you now will hold on and eventually profit.

I have said many times before that I am not a fan of Jim's bipolar trading style but I do think when he takes off the "tv persona" and calmly talks about the markets and their machinations, no one is better. You can call it bragging, honesty or manipulation if you want, but the guy has been at the center of the game and anytime anyone from there "spills the beans", learn from it.


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