Re: 3/1/02 - [James Cramer] Forbes: Talking Up His Own Book; TheStreet.com: SEC Needs to Use Its Muscle on Enron; 3/5/01 - TheStreet.com: There’s No Defense for Jonathan Lebed; A few posts from the James Cramer Skeptic Thread on SI
Book Review
Talking Up His Own Book
Robert Lenzner and Victoria Murphy, 03.01.02, 7:10 PM ET
NEW YORK - Legendary hedge fund operator and confrontational television commentator James Cramer has been getting publicity from news that he's working on a juicy Wall Street story: his own biography. But the real dirt might be elsewhere.
In a soon to be released tell-all tale, former Cramer & Company employee Nicholas Maier accuses TheStreet.com's co-founder of using CNBC anchors and his own television appearances to promote stocks that he would promptly sell, making a quick gain on the upswing.
In Trading With the Enemy, to be published this month by Harper Business, Maier alleges that CNBC anchors Maria Bartiromo and David Faber were used like pawns to talk up stocks that Cramer's hedge fund had purchased. He did this by giving them heads-up on analysts' upgrades and downgrades in particular stocks.
Writes Maier: "We were the first firm most brokerage houses told such news [of upgrades and downgrades], and Jim decided to use this early-call status to help the reporters, who all wanted to break a story."
Maier goes on to explain that after the stocks were touted on television, Cramer would promptly dump the firm's position: "No sooner would Maria be thanking us for the help than we'd be getting a payback--a quick hit thanks to our friends at CNBC."
In one case, recalls Maier, Faber called Cramer and immediately Cramer demanded that the firm buy a hundred thousand shares of MCI Group (nasdaq: MCIT - news - people). "There will be news!" said Cramer's colleague to the broker at Goldman Sachs, who also purchased shares. No more than an hour later, Faber went on the air with news that telecommunications giant MCI was rumored to be an acquisition target. Maier admits he does not know what Faber actually told Cramer during their conversation and writes, "Reporters often called us, asking if we could confirm a rumor in the marketplace."
Cramer's own television appearances also were used to intentionally sway the markets in his favor, Maier writes. For example, while Cramer was on CNBC promoting "a great investment for the long term," Maier writes that Cramer's firm was making quick gains: "Our real strategy, however, was all about taking profits now. Back at the office, we were supposed to dump stocks after a quick half-point gain. On TV, Jim would tout a stock we owned, but if it moved up, we would sell."
"Jim would do the opposite of what he was saying on television," Maier told Forbes. Cramer did this behind the scenes too, says Maier. "He would hear rumors, pass them on and then do the opposite," adds the author, who insists that he has the trading documents to back up his claims. Maier worked under Cramer between 1994 and 1998.
Why put himself on the line? Not for a hefty book advance: "Mine is trivial compared with Jim's $1.5 million," says Maier. "My goal is to show people how Wall Street really works. It left a very bad taste in my mouth."
Cramer used investment banks to get quick gains too, according to passages in the book. Maier details playing pool with one analyst from Salomon Smith Barney who, while polishing off a third beer, hints that his firm was going to make a rating change on a specific company. Sure enough, by the time the stock had been upgraded to a "strong buy," Cramer & Company had purchased 50,000 shares--all executed with Salomon at the urging of the analyst, who said Salomon landed a cut on the trade.
Both sides had incentives to "leak" information. Cramer & Company made a quick profit, and the investment banks landed commissions on the trade.
This way, both sides had incentives. This kind of activity was widespread, says Maier: "Analysts at every one of the major brokerage houses were doing this."
Maier describes arrangements Cramer & Company made with the investment-bank underwriters of "hot" IPOs during the late 1990s: "Nearly all of the major investment banks made us commit to after-market orders, and they kept score …. This was their way of making sure hot deals stayed hot."
By buying ten times more shares than their allocation on the offering, Cramer & Company were helping to drive the price of deals even higher in the stock market. Maier writes that time after time, "I would give the brokerage house 50,000 shares to buy on top of the five [thousand] they gave us."
"It was the brokerage houses that created a facade of legitimacy to manipulate the situation, and ultimately it was the little guy at home, not fully comprehending the process, who bought these stocks at an assuredly inflated value," Maier writes.
Cramer is not new to accusations of recommending stocks in his own portfolio. In 1995, he was investigated by the Securities and Exchange Commission for touting stocks that his firm held positions in. The matter ended with no action.
Cramer was unavailable for comment. Maier claims that Cramer twice attempted to legally thwart the book from going to press. The SEC also declined to comment on the book's allegations.
On Friday evening CNBC issued the following statement:
"CNBC has the highest journalistic standards in the business. Any insinuations about our reporters' journalistic practices have been any thing less than completely ethical are outrageous. These accusations are filled with innuendo and insinuation. They portray as improper, routine phone calls that may or may not have happened. David Faber and Maria Bartiromo have the utmost integrity. They have always operated with the highest of standards. We have discussed the accusation on the five pages we've seen with Jim Cramer and he has told us that these charges are completely unfounded and that they are leveled by a disgruntled former employee of his who he dismissed for poor performance."
forbes.com
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Friday March 1, 11:06 am Eastern Time
SEC Needs to Use Its Muscle on Enron
By James J. Cramer
I read about what happened at Enron and Global Crossing and Qwest in The Wall Street Journal and The New York Times today, about all of the massive pumping and dumping for billions and billions of dollars that happened, and I keep thinking, what the heck? How come the Securities and Exchange Commission doesn't do to them what it did to me?
Seven years ago this week the federal government, with all its might, opened an investigation into whether I pumped and dumped a group of four stocks into the open market. ...
biz.yahoo.com
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Recommend this Post - This post has 1921 recommendations
by: arrowhead77 03/02/02 07:08 pm
Msg: 144979 of 147106
Recommend this post if you believe CNBC should be taken off the air. Come on people lets send a message to GE and set a record for recommends.
messages.yahoo.com
Note: As of 5pm on Sunday, March 3, the post above had 500 recommendations.
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From one year ago...
There’s No Defense for Jonathan Lebed
Wrong! for Monday
By James J. Cramer
Commentary from
The Street.com
N E W Y O R K, March 5 — The Feds got sandbagged big time in that New York Times Sunday magazine cover story on Jonathan Lebed, the teenage day-trader who got nabbed by the Securities and Exchange Commission for pumping and dumping.
If you didn't read it, a quick summary of the story is in order. Michael Lewis, of Liar's Poker fame, wrote a viciously cynical piece that argued that, because Mary Meeker and Henry Blodget and everybody else were so wrong about stocks but made a fortune, why can't Jonathan Lebed, who made money for people, get away with writing what he wants about stocks and make a fortune, even if it turned out not to be true.
In other words, why can't Lebed have the freedom to do whatever the heck he wants and why are the Feds picking on him?
The subtext was even worse: The Feds knew they had a bad case and they didn't even coordinate it. Lewis implied that aging Securities and Exchange Commission Chairman Arthur Levitt didn't know what the heck was going on, and when asked about it, he made stuff up.
Predicted Stuff He Didn’t Know
OK, you may have read it as less damning for the Feds and more positive about Lebed. I know you couldn't have read it as that the Feds did their job and that Lebed was a bad pump-and-dumper. Yet that's what really happened. Jonathan Lebed bought stocks, went on message boards, predicted stuff he didn't know and blew the stocks out into his predictions.
Henry Blodget at Merrill Lynch went out to his sales force and predicted stuff he didn't know and some of it happened and some of it didn't. In Lewis' opinion, the Feds would have done better going after Blodget. Or shutting up entirely.
I don't live in Lewis' world. I live in a world where people pump and dump all of the time. I live in a world where I have been investigated by the Feds for pumping and dumping and I never even dumped! And the Feds were right to investigate.
Let's understand why the Feds exist. First, nobody disputes the right of people to say whatever the heck they want. That's because of the First Amendment. But you also can't dispute the right of the Feds to regulate in order to protect other interests, notably the right for people to buy and sell stocks without being scammed.
That right can, at times, trump the First Amendment. It did in Lebed's case.
We Have Laws in This Country
We have laws in this country against getting long and loud and making stuff up and dumping it into the hoopla you created. Arguably these laws aren't easily enforced. Arguably these laws are a bit Pollyanna-ish. People come on television all of the time and do this. We know it. That doesn't make it right. It doesn't mean that the Feds shouldn't investigate it because it is "too prevalent." It just means that the Feds try to pick their spots and stop as much pumping and dumping as they can.
The Feds, in this case, called Lebed in and tried, in their own cumbersome way, to get the kid to stop. Their way is to grill. The kid didn't get scared by it. Glory be, more power to him. I debated committing suicide — as everyone close to me knows — when the Feds called me, because I was so mortified and embarrassed. Hey, maybe I am smarter. Maybe Lebed has better drugs. Maybe we should all think that when the Feds call they are a bunch of jerks, like we are the Sopranos or something.
But at some level, the federal government — yeah, the guys who still wear the cheap suits and have that kind of TJ-Maxx-sport-coat look about them — deserve our respect and our obedience. They represent the will of the people, which is to try to do their best to keep me from stealing from you using securities.
Like a Bunch of Jokers Pursuing a Good Kid
The real tragedy here is that the Feds didn't simply say, "Lebed was a habitual pumper and dumper and we will pursue pumping and dumping whether it is found at the Baddda Bing Club where they peddle Wobistics, or online where they peddle small-cap nonsense." That would have ended it for me and probably for you, too.
Instead, they came off like a bunch of jokers pursuing a good kid and a money maker. That makes me want to puke.
Pumping and dumping is wrong wherever it is done. That's common sense and the law. If you violate it, you better expect the Feds will come calling. When they do, you should stop your behavior or pay the price — not get a magazine article about you in your defense that makes your opponents look like Keystone Knuckleheads.
In the Lebed case the good guys won. Don't ever forget that.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for the network of TSC sites and serves as an adviser to the company’s CEO.
See TheStreet.com’s full site for more of its unique insider perspective on Wall Street.
abcnews.go.com
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From the SI "James Cramer Skeptic Thread"
To:bull who started this subject
From: ThomasJeferson Wednesday, Nov 25, 1998 7:17 PM
View Replies (4) | Respond to of 1248
Cramer recommended to short IBM in the January 15, 1996 issue of New
York magazine. Instead of going down, the stock took off, and in the
February 5 issue he explained what went wrong. "I did not invent
these problems. They were fed me by bearish analysts, experts who
cover IBM and had been led to believe that the company would make
a dour forecast after it issued its most recent earnings numbers."
Who were the bearish analysts?
Why did they feed him the tip?
Trading on tips is not legal, and they should not be used as the basis
for recommendations in magazines because they are not reliable and not
ethical.
Message 6569244
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To:ThomasJeferson who wrote (970)
From: James J. Cramer Friday, Nov 27, 1998 8:48 AM
View Replies (9) | Respond to of 1248
I only respond on these boards when someone suggests illegal activity on my part. WmGladstone has done so. He is wrong. What I wrote about was publicly available information from analysts who were in print saying IBM would disappoint. Mr. Gladstone, you impugn my reputation, you can expect that I will come after you. I want an apology and your comments withdrawn. If you dont want to apologize, you can be so kind to give me an address so I can serve you as this is libel in these here United States and I don't take it sitting down. I await your response.
Message 6581365
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To:James J. Cramer who wrote (972)
From: ThomasJeferson Friday, Feb 12, 1999 8:56 PM
View Replies (1) | Respond to of 1248
JJC: I have a question for you -- you know what it is. In the February 1995 Column in SmartMoney, you wrote that Rexon insiders had snapped up more than 100,000 shares of the stock. The actual number was 25,000. Rueling purchased 5,000 on December 9, 1994, and Genessi purchased 10,000 on December 13 and another 10,000 on December 14, according to their form 4 disclosure statements on file with the SEC.
So the question is, why did you write that more than 100,000 shares were snapped up by Rexon insiders?
Of course I know the answer and may post it on the thread. If anyone else can figure it out, my congratulations. It took me a year and a half.
For thread participants who are not aware of this situation, Rexon was one of the four pour orphans which Cramer recommended in that column.
Rexon went bankrupt in September 1995.
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To:James J. Cramer who wrote (972)
From: ThomasJeferson Thursday, Mar 25, 1999 9:10 PM
View Replies (1) | Respond to of 1248
Cramer: According to Mark Haines of CNBC, trading on take-over rumors is a violation of the SEC's 10b-5 rule per the Supreme Court opinion in US vs O'Hagan. The reason is because the right to benefit from the knowledge of a pending but secret take-over is reserved exclusively for the owners of the bidding corporation. Also, Powell's footnote 13 in Dirks vs SEC says that non-public information should not be traded on if it is obtained by stealth (unless the information is disclosed).
You wrote a column in the September 15, 1997 issue of the New York Observer about receiving a take-over tip from a broker. You wrote that you did not make a trade because his information was not reliable, and you also wrote about "Fifteen years of trading on rumors, during the greatest period of takeovers ever...."
Sure, everyone does it and everyone gets away with it. Does that make it legal and ethical?
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To:James J. Cramer who wrote (972)
From: ThomasJeferson Saturday, Apr 3, 1999 2:12 PM
Respond to of 1248
Cramer: Can you take you kid to the bathroom without thinking about if you should be long or short on toilet paper? Long is better. To be caught in a short squeeze could be a disaster. (This is inspired by your column on shorting halloween costumes.)
siliconinvestor.com
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To:mr.mark who wrote (1022)
From: James J. Cramer Monday, Dec 7, 1998 1:29 PM
View Replies (7) | Respond to of 1248
First of all, I am not trying to save anybody from anything. I am a libertarian by trade. Second, I hate when people put words in my mouth, when my words are readily available in www.thestreet.com. Third,the cynicism in this thread is reaching new heights. Fourth, I am really shakin from these negative comments from you guys. I just wish you would make more fun of my bald head or the fact that I have gained some weight. Then I could better peg you as second, third, fourth or fifth graders. Right now I just figure you guys are elementary schoolers, and I can't pin it down whether you are older or younger than my eldest daughter.
jjc
Message 6724829 |
