Jim Cramer, former hedge fund manager and TV personality, blithely explains how the market is manipulated, including illegal activities, by telling us what he did and would do as a hedge fund manager.
Here are some of his most revealing statements (emphasis mine):
“You know, 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 beforehand that could drive the futures. It doesn’t take much money. Or 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’re higher and maybe commit $5 million in capital to do it and I could affect it. What you’re seeing now is probably a bigger market now. Maybe you need $10 million in capital to knock the stuff down, but it’s a fun game and it’s a lucrative game.“
“I’m gonna boost the futures and then when the real sellers come in, the real market comes in, they’re going to knock it down, it’s going to create a negative view. That’s a strategy very worth doing when you’re valuing on a day-to-day basis. I would encourage anyone in the hedge fund game to do it, because it’s legal, it’s a very quick way to make money, and very satisfying. By the way, no one else in the world would ever admit that, but I couldn’t care. I’m not gonna say it on TV.“
“When you get a Research In Motion, it’s really important to use a lot of your firepower to knock that down, because it’s the folcrum of the market today. So I mean, let’s say I were short. What I’d do is I’d hit a lot of guys with RIM. You can’t foment, you can’t create yourself, an impression that a stock’s down. But you do it anyway, because the SEC doesn’t understand it. That’s the only sense I would say it’s illegal.”
“When your company’s in a survival mode, it’s really important to defeat Research in Motion and get the Pisanis of the world and the people talking about it as if there’s something wrong with RIM. Then you would call The Journal and you get the bozo reporter on Research in Motion and you would feed that Palm’s got a killer that it’s going to give away. These 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.”
“Apple’s very important to spread the rumor that both Verizon and AT&T have decided they don’t like the phone. That’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’s credible because you spoke to someone at Apple, because Apple’s not going to issue a statement. It’s really an ideal short.”
“What’s important when you’re in that hedge fund mode is to not do anything remotely truthful, because the truth is so against your view, and it’s important to create a new truth to develop a fiction.“
“The great thing about the market is it has absolutely nothing to do with the actual stocks.”
[...] Instead of spending your money and possibly putting more people back to work, more money is given to companies so that the executives at the top can award themselves more in stock options and bonuses, and hedge fund managers can make a killing off of manipulating the market, as Jim Cramer candidly admits. [...]