By now I am sure you have seen Jon Stewart eviscerate Jim Cramer on last night’s Daily Show. If not, all 23 excruciating minutes are available at thedailyshow.com. In one of the highlights (lowlights) Stewart shows clips of Cramer in 2006 explaining how he would manipulate the price of Apple stock by “fomenting.” Fomenting, according to Cramer, is when a trader puts out false information or rumors about a company in order to change its price one way or another. If you have a “short position” on a stock, you will make money if the price goes down. Thus you would want to foment bad news (in the clip Cramer says he would tell people that there were problems with the upcoming iPhone).
Manipulating the market is technically illegal, and the SEC’s regulations specifically include “spreading false or misleading information about a company” as an example of manipulation. But as Cramer said on camera:
Now, you can’t “foment.” That’s a violation. You can’t create yourself an impression that a stock’s down. But you do it anyway, because the SEC doesn’t understand it.
The SEC missed a lot of calls in the past few years (Bernie Madoff, R. Allen Stanford, etc.), and so these kinds of violations have gone unnoticed and unprosecuted. This interview shines a light on why you should take “expert” stock trading advice with a truckload of salt. Hedge fund managers and other Wall Street figures who go on CNBC don’t necessarily disclose their own agenda, and they know that what they say on TV can move a stock price significantly. Unless you think you know more than those guys, with their own dedicated research departments stocked with Ivy League mathematicians, don’t try to trade on their advice.
What happens when you follow a TV show’s stock tips?
- Imagine you owned 1,000 shares of Apple (AAPL) on December 22nd, 2006, the day Cramer talked about fomenting his short of the company. Based on his advice, you decided to sell your Apple shares, which on that day were worth $82,200. Your Apple stocks had risen from a low of about $50,000 earlier that summer, so you would have felt pretty good about the sale. However, if you ignored Cramer and held on to your Apple stock, you’d have about $95,000 today. Ouch.
- On March 11th, 2008, Jim Cramer recommend buying Bear Stearns. If you took your Apple stock (worth $127k at that point) and put it in Bear Stearns, you would have had a very rough week watching your investment drop 96%, to $7,499. If you want to lose $120,000 in a week, you don’t need anyone’s help. I recommend Las Vegas, but I hear Macau is nice too.
The stock market can be a dangerous place. That’s why it is important to diversify your assets and not leverage too much of your family’s income. And just like you don’t invest your kids’ college fund based on Terry Bradshaw’s Sunday morning football picks, don’t treat financial television “experts” as if they were preaching the gospel.
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#1 Brian, looks like you need to get a Brain.
Cramer is a foul-looking, shreiking, Banshee. I find him most offensive, abrasive, and full of shi*.
I’m amazed that any rational human being would take advice from this snake oil barker.
It is time we the tax payers who own the air waves need to demand the goverment to pull the permits to fox, cnn , and all those how to invest your money shows off the air, or find them big bucks for there lieing bias news, it is just sicking watching those channels, when they lie you should be able to sue those invest channels.
Interesting how Cramer is set as the scape-goat for all that is wrong while the entire issue was CNBC’s legacy of “playing FOR Wall Street” and their traders.
Gotta’ love how people look for excuses to obfuscate and continue the problems rather then make the media responsible for “protecting America” while at the same time creating loop holes to avoid “personal reponsibility & accountability” for ripping off those they claim they were protecting by plagarizing White House Talking Points and fist pumping “great economy” fraud.
GW’s own appointed operators in the Treasury Dept’s issued their annual report TWO YEARS AGO clearly screaming from the rooftops: ” GW’s and his GOP’s machinations so badly damaged the economy ….. that it will take a MINIMUN OF ONE HUNDRED YEARS TO REPAIR” with a detailed list of why it will take a minimum of 100 years . .
and what did our nation’s media provide? Fist pumping media complicity to IGNORE a dire warning that now we are “bailing out” the very criminals who should be “financial terrorists” enjoying that spa they claim is GITMO
pops Posted:
It is time we the tax payers who own the air waves need to demand the goverment to pull the permits to fox, cnn , and all those how to invest your money shows off the air, or find them big bucks for there lieing bias news, it is just sicking watching those channels, when they lie you should be able to sue those invest channels.
Well Pops heres the snafu in all that…
FOX NEWS attorney’s defending FOX News from two journalists who refused to lie during a news story SUED Fox News for their being fired due to refusing to lie to the viewers.
In those “public record” legal documents FOX attorneys stated clearly in their Florida Court filings . . . FOX claimed the Freedom of Speech laws ALLOW FOX NEWS TO LIE TO THEIR VIEWERS (worry all caps but sometimes required)
Fox makes no secret they lie to their viewers and truly believe their viewers WANT to be lied to on a daily basis.
After all, one can’t believe they are superior beings on planet zoid if they hear the truth about their denizons.
cramer’s show is entertainment. as frenetic as peewee’s playhouse but not nearly as funny. impugning cramer is like shooting fish in a barrel and about as relevant.
And how much is it costing us to follow jon stewart’s advice and bow to dear leader?
About 3 trillion so far. And counting.
Boggles the mind that anyone would have voted for the usurper.
thankfully the legacy of reagan lives on! if we continue to install people in the government who don’t believe in its legitimate functions, we get agencies like the SEC which is dominated by industry hacks and provides no oversight or accountability.
but hey, government is the problem, not the solution.
You’re a joke yo.
As if mcsame would have been better.
anybody stupid enough to listen to cramer deserves to lose their money. just like anybody stupid enough to vote for “change” deserves to get the shafting he/she’s going to get.
stop voting for mainstream two-party bought and paid for corporate lapdogs, stop watching morons on television. until you’re willing to do that, stop whining. you get what you deserve.
Its a TV show. Like all TV shows Cramer is there to sell product. Product sales is what makes or breaks entertainment shows–so look and see who is supporting Cramer and Money shows. Its easy to do if you don’t go to refrigerator for breaks.
Anyway, why take free advice from a sideshow barker when you can pay for an investment broker to loose the same amount of money because the rating of stocks is biased?
Ok so I still own my Apple stock.
Anyone who follows one person’s advice BLINDLY (especially a TV personality) deserves to lose his/her money.
Sound investing requires research into the company that owns a particular stock. There are no shortcuts and there are no guarantees.
I don’t know what’s happened to it, but there used to be an amazing website that kept track of Jim Cramer’s picks vs. picks made by a monkey. My guess is that every time Cramer recommended a stock, they had a “monkey” (or just a computer) pick at random whether it was a buy or a sell. I vividly remember that over the course of a year or so, the monkey had a better winning percentage than Cramer did. Listening to Cramer without doing any research of your own is bad for your portfolio. But in his defense, he does get bombarded with a bunch of questions and he has to provide answers. That’s what people want most.
It’s far better to do your own research and choose your own stocks than listen to the advice of most of these so-called gurus. You’ll do what’s best for you and your financial situation, and probably come out ahead much more than if you blindly take advice from those who may be out to deceive you.
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