The most dangerous untruths are truths slightly distorted.
- G. C. Lichtenberg
Ben Graham worked on Wall Street for 44 years, wrote the book “Intelligent Investor” and was Warren Buffet’s teacher, employer and mentor. Here is a commentary from the book:
“Overall, Graham was as tough and cynical an observer as Wall Street has ever seen. In this rare case, however, he was not nearly cynical enough. Wall Street may have higher ethical standards than some businesses (smuggling, prostitution, Congressional lobbying, and journalism come to mind) but the investment world nevertheless has enough liars, cheaters, and thieves to keep Satan's check-in clerks frantically busy for decades to come. The thousands of people who bought stocks in the late 1990s in the belief that Wall Street analysts were providing unbiased and valuable advice have learned, in a painful way, how right Graham is on this point.”
The Oscar winning documentary “Inside Job” explains how Wall Street and Washington are rife with fraud, corruption and criminals. It explains that even the supposed un-biased economic professors from Ivy League universities, including Larry Summers, cannot be trusted because Wall Street pays them to write reports. At his acceptance speech, the producer reminded us that three years after our worst financial meltdown “not a single financial executive has gone to jail.”
A journalist is supposed to be objective, un-biased and give you the straight goods. Ideally, they are supposed to work for you. However, this is not always the case, according to the documentary “The Corporation”. The reporters are biased or quite often distort their information.
For proper compliance, when a person comments about a stock, he should disclose as to whether he owns that stock or a related stock. As an example, if the commentator is giving bearish (or bullish) comments about GM, he should ideally disclose whether he owns Ford as well.
How about the journalists who work for Wall Street firms that report negatively about certain stocks?
- Do they own any related stocks?
- Are any of their family, friends, associates or hedge fund managers shorting the stock?
- Has anybody pressured them to report with a certain bias?
IBM was a leader in corporate sales, especially in the 1970’s and 1980’s. In their sales training, IBM used to teach their sales reps on how to use FUD (Fear, Uncertainty or Doubt). By spreading FUD about competitors, IBM was able to get customers to be scared of buying from a competitor. It was an effective scare technique.
FUD is also quite effective for short sellers.
Jim Cramer, who is the co-founder, largest shareholder, editor and Chairman of TheStreet.com, can get “infuriated” at negative media bias. See this YouTube video of Jim Cramer. He says the negative articles “twist the facts in order to be negative”.
According to TheStreet.com:
“Since its inception in 1996, TheStreet has distinguished itself from other financial media companies with its journalistic excellence, unbiased approach…”
This is interesting because Jim Cramer has said that every commentator is biased and has an agenda.
CNBC had the motto: “In Cramer We Trust”. Can Jim Cramer, Chairman of TheStreet.com, be trusted? Not according to Jon Stewart of the Daily Show (Comedy Central) who hammered Jim Cramer and CNBC during their fight in 2009. You can watch some of the fight here, showing Jim Cramer’s track record.
The full interview of Jim Cramer is a must-see. Jon Stewart exposes Jim Cramer as a perpetuator of shenanigans and a stock manipulator (stock manipulation is illegal), by showing a video of Jim Cramer being interviewed with "TheStreet.com TV" logo. Here are some excerpts:
Cramer: 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.
Cramer: You can’t create yourself an impression that a stock’s down. But you do it anyway ‘cause the SEC doesn’t understand it. That’s the only sense that I would say this is illegal. But a hedge fund that’s not up a lot really has to do a lot now to save itself.
Cramer: Yeah. Apple’s very important to spread the rumor that both Verizon and ATT have decided they don’t like the phone. It’s a very easy one to do because it’s also you want to spread the rumor that’s it not gonna be ready for MAC World. This is very easy ‘cause the people who write about Apple want that story, and you can claim that it’s credible because you spoke to someone at Apple, ‘cause Apple doesn’t –
Interviewer: They’re not gonna comment...
Cramer: It’s just fiction and fiction and fiction. I think it’s important for people to recognize that the way that the market really works is to have that nexus of hit the brokerage houses with a series of orders that can push it down and we get to the press and then get it on CNBC. That’s also very important.
As in this article, Jim Cramer explains how to create lies, spread false rumors/FUD in the media and manipulate markets:
Here is the full transcript.[Jim Cramer] calls it "a fun game, and it's a lucrative game." He suggests all hedge fund managers do the same. "No one else in the world would ever admit that, but I could care. I am not going to say it on TV," he quips in the video.
He also calls Wall Street Journal reporters "bozos" and says behaving illegally is okay because the SEC doesn't understand it anyway.
Here are some gems:
-On manipulating the market: "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 before hand that could drive the futures,"
-On falsely creating the impression a stock is down (what he calls "fomenting"): "You can't foment. That's a violation... But you do it anyway because the SEC doesn't understand it." He adds, "When you have six days and your company may be in doubt because you are down, I think it is really important to foment."
-On the truth: "What's important when you are in that hedge fund mode is to not be doing anything that is remotely truthful, because the truth is so against your view - it is important to create a new truth to develop a fiction," Cramer advises. "You can't take any chances."
Jon Stewart laced into Jim Cramer. Stewart said he and Cramer are both snake-oil salesman, only "The Daily Show" is marketed as such. He also said:
Why would anybody trust TheStreet.com where its co-founder, largest-shareholder, editor and Chairman admitted to and explained how to lie, spread rumors and manipulate stocks?“I can’t tell you how angry that makes me. Because what it tells me is that you all know. You all know what’s going on. You can draw a straight line from those shenanigans to the stuff that was being pulled at Bear and at AIG…
…You knew what the banks were doing and yet we’re touting it for months and months. The entire network was. Now to pretend that this was some sort of crazy, once in a lifetime tsunami that nobody could’ve seen coming, is disingenuous at best and criminal at worst.”
At these videos, Jim Cramer explains how the game works:
"...the bears have to shoot first in order to color the earnings and get you frightened into selling. If you're not frightened, you won't panick. When the quarter comes out, it's absolutely imperative that the bears lie. It's imperative that they plant stories in the media that will then send the stocks down regardless of how great the earnings are. It's a life or death struggle out there, and the truth is the first casualty. Don't believe me? Think I'm being too cynical? Can't believe the system could be so corrupt or stupid that the regulators aren't out to help you, that the SEC is not all over this? Now come on. I've been in this game for decades and trust me, when the bears are out to destroy a stock, for a very brief time, they can do it. This is how it's played. A quarter isn't immediately defined by the numbers. It's defined by whoever manages to convince the press and the street that it was good or bad, but knocking the stock down, by selling or buying and then planting stories. To heck with the numbers. This is what's called painting the tape in the business and the bears will paint the tape bright red, as in SELL! It's what they do...after they do this, after they push the stocks down, after the analysts come in with their number cuts and they react to the same thing. They see the stocks go down and they panic too so then they downgrade. That's the kind of game that we're in."
What if you are a hedge fund manager and you needed to spread rumors and lies to drive down prices? It would seem ideal if you controlled a media firm that can help you spread those rumors and lies.
This blog explains in further detail, Jim Cramer's shady past and how he makes money by using CNBC to help manipulate stocks and drive prices down with naked shorting:
"This is Cramer's big secret. He figured out early that the way to make money betting on stocks was to rig the game - control the news and you control a stock's value. Now he has his own TV show."
Here is another blog that explains how Jim Cramer manipulates stocks:
Maier worked for Cramer until 1998, then left and wrote a tell-all book about his years with Cramer: Trading with the Enemy: Seduction and Betrayal on Jim Cramer’s Wall Street.
...Trading with the Enemy is replete with examples of how analysts release information to favored insiders before a formal report is released. Maier recounts a social evening with a Smith Barney analyst. The analyst tells Maier that the Smith Barney analyst is going to change a “hold” rating on a stock to a “buy,” then adds this:
What about TheStreet.com? Do people make trades immediately before TheStreet.com releases articles? According to the above blog:[Smith Barney analyst:] “Listen, Sherlock, just remember one thing. If you’re going to buy it, buy it with us. We get a cut of every trade you do in the stocks we cover."
[Maier:] Thus there was a quantifiable reason that such information was ‘leaked’ to good clients like Cramer & Company. This senior analyst received a direct kickback from getting Cramer & Company to traffic in stocks his company covered. Joe helped me to make money, and I was expected to return the favor. By the time the stock was upgraded from a hold to a strong buy, Cramer & Company had bought fifty thousand shares. All the trades were placed with Smith Barney. (Trading With the Enemy, page 90.)
Note the consistency in this progression from Michael Steinhardt to Karen Backfish to Jim Cramer. Steinhardt had a taste for “The Edge,” that is, knowing what analysts were going to say before the public knew. Then for Karen Backfish and Jim Cramer the Edge became telling analysts what to say. Eventually Cramer’s “edge” became writing the news himself and having it appear in his own columns, or spoon-feeding it to compliant reporters who would regurgitate it on cue.
This blog explains how journalists can fail you and describes the shady characters at TheStreet.com:"A question the reader might ask at this point is, did these hedge fund managers (Cramer and Rocker) own TheStreet.com because they thought it would be a good investment? Or is there anything in our story thus far that would suggest a benefit a money manager might enjoy in not just knowing what analysts are going to say before they make it public (e.g., Steinhardt’s “Edge”), not just being able to count on CNBC’s Maria Bartiromo to regurgitate tips she is passed, or even, writing one’s own columns in SmartMoney (i.e., Cramer’s techniques in the 1990’s), but in becoming an actual publisher of financial news?"
"...if you have seen a negative story about a public company in recent years, the odds are greater than even that it was written by a friend-of-Cramer.
Many of Cramer’s friends are former employees of TheStreet.com, a financial news website substantially owned by Cramer. They have included the editor and top columnists for The Wall Street Journal “Money & Investing” section, top business writers for The New York Times, reporters at Fortune magazine and BusinessWeek, the editor of The New York Post business page, the editor of MSN Money, and others. Herb, a CNBC commentator and a star columnist for MarketWatch.com, was among the founding editors of TheStreet.com – “Murderers Row,” they called themselves.
I have analyzed well over a thousand stories written by this clique of journalists. The vast majority of them were sourced from a small group of short-sellers who are also friends of Cramer. Other popular sources for this group of journalists include convicted felons, mobsters, dubious private investigators, crooked lawyers, hired stock bashers, and gun-toting goons – most of whom are tied to the Cramer constellation of short-sellers.
in February 2006, the Securities and Exchange Commission would like to know whether a financial research shop called Gradient Analytics conspired with short-selling hedge fund managers...to disseminate false information about public companies as part of a scheme to manipulate stock prices. The investigators believe that Jim Cramer and Herb are central to this conspiracy and have issued them both with subpoenas. TheStreet.com got a subpoena, too.
A guy named Jon Markman was for some time running a hedge fund out of Gradient’s back office. So-called “independent” research shops aren’t supposed to run hedge funds. If Markman was trading in advance of Gradient’s research and Herb’s stories, as the firm’s former employees claim he was, this is yet another jailable offense....Markman is one of Herb’s close friends. He was, along with Herb [Greenberg], a top editor of TheStreet.com."