Kit, that sounds much too sensible for Cramer to have written. Are you sure it didn't come from Hank Greenberg?
Because Cramer has played that game himself and touted his holdings on tv, to boot, as a way to make them go up in price.
The mutual funds are not totally to blame. These new issues that only offer 5% of the total capitalization are designed to create an instant shortage.
This is simply a form of the greater fool theory. As long as everybody chases the same stocks and doesn't disgorge them, it can work for awhile. However, when they get redemptions, like last summer, then the funds have to sell some of the crap. With a total lack of real investors willing to buy garbage wrapped in a big red bow, the prices drop very fast. And the funds disappear for a decade or so. I can remember when some of the largest funds in U.S. were named Ivest, Enterprise, Manhattan, etc. I worked for the guy who pulled off the Manhattan disaster, after that point in time, and worked with the manager of the Enterprise Fund, though he wasn't the guy who did the shady stuff like using letter stock. I also worked with the successor managers of The Equity Funding scam funds. All of those funds still exist, but they are a shadow of their former capitalizations, at least in real terms. And they had to be managed completely differently by real money managers.
A lot of it goes back to the hypocrisy of fund managers saying they are long term investors who buy great cos, when they are really just after the currently hot trading sardine. The good news is, the first bear market, assuming we ever have another one, all of these guys become unemployed and unemployable. |
