Transcript of Jim Cramer Admitting to Market Manipulation

Yesterday I showed the infamous video of Jim Cramer not just admitting to market manipulation, but outright boasting about it. I promised in that article to transcribe the entire video, but first I just want to make sure that everyone understand that this is not satire or parody. He really means everything he says.

CNET:

“Daily Show” host Jon Stewart ran a clip of stock commentator Jim Cramer, in which Cramer explained how to manipulate the markets, including Apple’s shares.

Cramer’s original video is from December, 2006. The above article is from 2009.

Reuters:

NEW YORK, March 20 (Reuters) – Stock market commentator and CNBC television host Jim Cramer has raised eyebrows after describing illegal activities used by hedge fund managers to manipulate stock prices.

In a December video interview on TheStreet.com TSCM.O Web site, a financial news company he co-founded, Cramer described how he could push stocks higher or lower, depending on if he was long or short, at his previous job running a hedge fund.

The interview, which has only now got widespread attention after being posted to online video site YouTube, may be studied by U.S. government and stock market regulators, hedge fund experts and legal sources said.

The interview, which can be seen at (here), described methods including tactical buying, shorting or using options to create an impression in the market that could prompt other traders and investors to buy or sell a stock.

The Reuters article above is from March, 2007, only four months after Cramer’s interview.

NY Times Archived Link:

“Mad Money” host Jim Cramer has gained a huge following, and more than a few critics as well, with his explosive stock-picking patter. But in a revealing video interview with TheStreet.com, the financial Web site he cofounded, Mr. Cramer drops some bombshells that go well beyond his usual chair-throwing, ‘Booyah’-shouting routine. In the clip, which has drawn lots of commentary on YouTube, Mr. Cramer brags about his ability as a former hedge-fund manager to game the stock market and offers what amounts to a how-to to aspiring stock manipulators, The New York Post reported Tuesday.

In the December interview with the site’s “Wall Street Confidential” Webcast, Mr. Cramer describes at least two strategies, including a way of driving stock futures up or down that he explicitly said was legal. “A lot of times when I was short, I would create a level of activity beforehand that would drive the futures. … It’s a fun game,” he told TheStreet.com’s executive editor, Aaron Task.

And finally, the above New York Times piece is also from early 2007. The point of this is to show you that this is very much not something taken out of context. This isn’t the all too common internet shitshow where fake screencaps and buzzfeed-tier “journalism,” gets a pass. No, this happened fifteen years ago, and then there were no consequences.

Let me go ahead and transcribe this little rat.

Cramer: You know a lot of times when I was short, at my hedge fund and I was positioned short, meaning I needed it down. Uh, I would create a – uh, a level of activity beforehand that could drive the futures. It doesn’t take much money.

Similarly – or if I was long and I wanted to make things a little bit rosy I would go in and take a bunch of stocks and make sure they were higher, maybe commit $5 million in capital to do it and I could affect it. What you’re seeing now is maybe, probably it’s bigger market now. Maybe you need $10 million in capital to knock this stuff down. But it’s a fun game. And it’s a lucrative game.

And you can move it up and then fade it, that often creates a very negative feel. So let’s say you take a longer term view, and you’re like ‘listen I’m gonna boost the futures and then when the real market comes in they’re gonna knock it down and create a negative view,’ that’s a strategy very worth doing. When you’re valuing on a day to day basis.

I would encourage everyone in the hedge fund industry to do it. Because it’s legal, and it’s a very quick way to make money, and very satisfying. And by the way, no one else in the world would admit that but I don’t care.

Interviewer: That’s right. And you can say that here.

Cramer: I’m can’t – I’m not going to say it on TV.

Essentially Cramer just flat out admits that they manipulate the market. What he talks about above is more relevant for very short term trading. Buy some of the stock quickly only to start selling it, moving the price down, in order to scare the market. The kind of stuff that provides literally zero value to society, but might earn a hedge fund 1% returns on a stock in a single day, which is absurd when viewed on the long term.

Interviewer: And, there’s so many more hedge funds today than when you were managing your hedge fund. Does that exacerbate the moves or does it make it tougher –

Cramer: Well you know the hedge funds are positioned long-short, not just long like mutual funds. So it’s really vital these next six days, cause of your payday, you’ve really got to control the market. You can’t let it lift. When you get a Research in Motion (RIM) it’s really important you’ve gotta use a lot of your firepower to knock that down because it’s the fulcrum of the market today.

So let’s say I was short. So I would hit a lot of guys with RIM. Now you can’t foment. That’s a violation of 

*talk over each other*

Cramer: 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. So you – I mean it’s – 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. So um, this is different from what I was talking about at the beginning where I’d be buying the *inaudible* and stuff, this is actually just uh blatantly illegal. But when you have six days and your company may be in *inaudible* because you’re down, I think it’s really important to foment if I were one of these guys. Foment an impression that RIM isn’t any good because RIM is the key today.

So you would hit this guy and that guy and you would see an offering. When you would see a guy that’s bidding you would wipe out that guy very quickly. What I used to do if I wanted to go high I would take and bid, take and bid, take and bid. If I wanted to go lower I would hit and offer, hit and offer, hit and offer. And I could get a stock like RIM for maybe – that might cost me maybe $15-20 million anny [annual], to knock RIM down. But it would be fabulous to beleaguer all the moron longs who are all so keen on RIM.

Up until this point Cramer has essentially been exploiting a feature of the market whereby large institutions manipulate the market simply by investing. Individual traders, Warren Buffet aside, can’t create these false impressions in the market. But once you start throwing $10 million around at a single stock you can build false signals in that other investors can misread.

Interviewer: I think we’re seeing that today.

Cramer: Yeah we’re seeing that. Again, when your company is in a survival mode it’s really important to defeat RIM and get the Pazanis of the world to get people talking about it like there’s something wrong with RIM. Then you would call The Journal and you’d get the bozo reporter on RIM and you’d feed a “PALM’s got a killer and they’ll be giving it away.” These are all the things that you must be doing these days and if you’re not doing it maybe you shouldn’t be in the game.

Interviewer: Another stock that a lot of people are focused on seems to be Apple.

Cramer: Yeah Apple’s very important to spread the rumour that both Verizon and ATT have decided they don’t like the phone. That’s a very easy one to do because it’s – you want to spread the rumour that it’s not gonna be ready for Mac World. And this is very easy because the people who write about Apple want that story and you can claim that’s credible because you spoke to someone at Apple and Apple isn’t –

Interviewer: Yeah Apple’s not going to comment.

Cramer: Right, so it’s really an ideal short. And I would, again, if I were shorting Apple I would be working very hard today to get that. And the way you would do that is you’d pick up the phone and you’d call six trading desks and you’d say “look, I just got off the phone with my contact with Verizon and he’s already said ‘look, we’re a Samsung LGG house. We’re Motorola. There’s no room for Apple they want too much. We’re not gonna let them in. This is not, we’re not gonna let them do what they did to music.'”

This is where he shifts to a different market manipulation tactic, beyond simple buying and selling. By creating false rumours that x company is having difficulties, he can manipulate the stock price not just of that corporation, but of many other corporations who have deals that may or may not go through with the first corporation. All of this is lies, and works because his (((cousins))) at these (((financial news orgs))) are willing to go along with the bit.

And you know I think that’s a very effective way of keeping a stock down. I might also, by the way, cause this stock at $84-85. With a little bit of capital you could go buy some January $80 puts that makes it look like there’s something gonna be going on. So maybe give Morgan an order to buy maybe a thousand Jan $80 puts. Then go position them with – use a hat firm that doesn’t know what the heck it’s doing – you just create an image that there’s gonna be news next week. And that’s gonna frighten everybody. They all go out and say “large put buyer, UBS,” and then you call Pazani[journalist] again.

Again, more of the same. Combine buying patterns with rumours.

And this is all really what’s going on in the market that nobody sees. But what’s really important in that hedge fund mode is to not do anything remotely truthful. Because the truth is so against your view that it’s important to create a new truth, to develop a fiction. And the fiction is developed by almost anybody who’s down like 2%, you can’t take any chances. You can’t have the market up any more if you’re up like 6% [and shorting]. So what you would do in that situation and you feel like you’re desperate you would do these kinds of actions.

Interviewer: But talking about the mechanics of the market.

Cramer: The mechanics are more important than the fundamentals. 

Interviewer: But in terms of the fundamentals.

Cramer: Who cares about the fundamentals? RIM just blew out the quarter, but look what people can do. I mean that’s the fabulous thing. The great thing about the market is that it’s nothing to do with the actual stocks. 

Okay maybe two weeks from now the buyers figure out that everything they heard was a lie. But then again Fannie Mae lied about their earnings for six billion dollars. So it’s just fiction and fiction and fiction.

I think it’s important for people to recognize is the way the market really works is to hit the brokers houses with a series of orders that can push it down, then leak it to the press, and then get it on CNBC, that’s also very important. And then you have a kind of a vicious cycle down, and it’s a pretty good game. And it can be pay for a percent or two. 

Interviewer: And then do you get long for Mac World and the expectation?

Cramer: Well yeah, you’ve certainly got to use the other side. And you know there’s a case where the January $80 puts can be justified because after I knock this down to $80 I can buy a lot of *inaudible* and then at the Mac World they’re probably going to introduce the phone and then Verizon’s gonna take it.

And he gets paid when the stock moves up and down. When he’s shorting, say, Apple stock, he creates the false rumour that Verizon doesn’t want the phone. This causes the stock price to drop. After his shorts clear, he buys the artificially reduced price stock, and profits when it goes back to what it ought to have been in the first place.

Interviewer: But you think the cell phone market –

Cramer: Well the problem with the cell phone market frankly is that these guys are all killing each other. Someone’s gonna have to take a dive. Motorola and Nokia have to get in a room and just fix price. They’ve been reluctant to do that because of the various justice departments.

Interviewer: And it’s illegal.

Cramer: Woah, hasn’t stopped a lot of other companies. This seems to be a case where they seem to be directly worried about the authorities. It’s almost as if they have a lawyer that matters, unlike say the Bristol-Meyers lawyers. And eventually what happens is the shareholders demand that you get phony lawyers and you sit in a room. And it’ll happen soon.

Said white collar crime is not limited just to stock price manipulations, of course. Cramer casually discusses price fixing before they go on to talk about the fed, US automotive corporations, and other topical issues that don’t matter sixteen years later. 

This is old news, but I felt I needed to invest a couple hours transcribing all this and putting it together, just so everyone can see how unserious the people who run the economy take the pro-corporate “American Dream,” bullshit that they foist on everyone else.