Fomenting at the mouth
By Matthew Lu.
We at Prospective Value have, of late, mentioned in passing the role rating agencies played in catalyzing this crisis and the role they continue to play. Taking those agencies broadly under the heading of “media” as well, I’d like to point to Jon Stewart, the anchorman of Comedy Central’s Daily Show, anything-but-facetious interview with Jim Cramer.
Jim Cramer, the host of CNBC’s investment show “Mad Money”, and Jon Stewart, the host of Comedy Central’s “The Daily Show with Jon Stewart”, spent twenty minutes together on Stewart’s show. Actually, to be precise, Cramer spent twenty minutes with Stewart being lectured to.
I looked a the comments below the video. I think some people are missing the point of the interview:
1. “I’ve been watching Cramer’s show for years, and I’ve read his books. He always says, “Do your homework”. So anybody who buys stocks “because Jim said so” is not following his lessons. Since Oct. ‘08 the market has lost 40-50%, and I’ve lost only 20% because I followed his rules, not his stockpicks. In a recession you get into high dividend stocks, food and drug stocks, and cash. Don’t chastise him because most of his stock picks went down. 90% of the market went down. He teaches the fundamentals of the market. Thanks to his lessons, I stayed away from banks. They were too volatile, even if Jim thought they would rebound. He always said they were high risk. Jon is disregarding Jim’s frequent disclaimers.
by wally48159″
2. “MONDAY, FEBRUARY 9, 2009 Cramer’s recommendations underperform the market by most measures. From May to December of last year, for example, the market lost about 30%. Heeding Cramer’s Buys and Sells would have added another five percentage points to that loss, according to our latest tally http://online.barrons.com/article/SB123397107399659271.html
by johndaman”
They miss the point. Mr Stewart is not angry that Mr Cramer was wrong; Mr Stewart is incensed because Mr Cramer, along with the financial experts hosted by news corporations, don’t act as reporters but as entertainers. Mr Stewart plays video clips of Mr Cramer, taken in context, advising hedge fund managers to spread disinformation to cause the stock market to go broadly down so that hedge funds can make money off short selling. Mr Cramer then, in the same video, uses Apple as an example to explain in greater detail how to spread disinformation.
Mr Cramer has since left the financial sector to join a media giant. Media is supposed to side with the powerless; they report and expose what the powerful are doing and how it might hurt the powerless. Instead of pointing out disinformation regularly and taking men like Dick Fuld to task, Cramer and his counterparts in other media giants like CNN and MSNBC host shows called “Fast Money” and “Mad Money”, becoming themselves an outlet for disinformation and market manipulation.
Mr Stewart points out, quite rightly, at the end of the interview that Mr Stewart, the comedian, should be making fart jokes and toilet jokes, not doing the serious reporting that Mr Cramer, as a financial expert, ought to be doing. The point is not that Mr Cramer made mistakes; the point is that Mr Cramer was and still is in a position to publicly expose different market movements as disinformation to protect the public though he chooses not to.
Mr Cramer may claim all he wants that he always opposed manipulation: video evidence proves the contrary. But even more to the point, Mr Stewart said it best when he said that the mark of a man is not what he says after the fact but what he does in the eye of the storm.
That fund managers use the media to spread disinformation for their own profit at the expense of 401ks and pensions, and that many people in the media know this but choose not to expose it publicly, is the point of Mr Stewart’s interview with Mr Cramer.
A more detailed look at The Street’s interview of Jim Cramer:
http://www.roughlydrafted.com/2007/08/05/more-on-scott-moritz-and-the-jim-cramer-street-misinformation-engine/
Some quotes from Jim Cramer –
1. “…fomenting the market [the act of using disinformation to manipulate stock prices[... [is] actually blatantly illegal, but when you have six days and your company may be in doubt because you are down, I think it is really important to foment.”
2. “It’s important to get people talking about it as if something is wrong with RIM. Then you would call the Journal [The Wall Street Journal] and talk to the bozo reporter on Research in Motion and you would feed that Palm has got a killer it is going to give. These are the things that you must do on a day like today. And if you are not doing it, maybe you shouldn’t be in the game.”
3. “I think it’s important for people to realize 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, then leak it to the press, and then get it on CNBC; that’s also very important. And then you’ll have a vicious cycle down. It’s a pretty good game. It can be played for a percent or two.”
This all reminds me of this little sound clip
That’s from the movie Wall Street, where Gordon Gekko tells Bud Fox to call up a reporter at the Wall Street Journal to spread disinformation to manipulate the price of Anacot Steel, a fictional company listed on the NYSE. Spoiler alert: the fictional Mr Gekko, by the way, ends up behind bars by the end of the movie.
Economists often describe the stock market as ‘perfect’ because it reacts instantly to reflect new information. The problem is that the information the stock market reflects may not be genuine. Mr Cramer has explicitly confirmed what many of us have long suspected or heard about: that fund managers often employ disinformation to manipulate prices. Jon Stewart has taken that train of thought to its logical conclusion: that “the game” — usually played with short-selling — Mr Cramer speaks of is being played at the expense of common investors.
Has the media lost touch with its responsibilities? A comment left on my blog, Free Exchange, suggested that Mr Cramer is an entertainer; well and good, but should a news corporation focus on entertainment or journalism designed to expose those who undermine society?
No related posts.
A few arguments.
1. “The point is not that Mr Cramer made mistakes; the point is that Mr Cramer was and still is in a position to publicly expose different market movements as disinformation to protect the public though he chooses not to.” – You say that he was in the position to expose disinformation. I presume this comment lies primarily with Bear Sterns and AIG. The problem stems from how quickly the system lost faith and credit spreads widened. Situations were dynamic and especially in the fall of 2008, what was the day before may not be the next. If markets were not as dynamic as people have said, then a few CEOs lied to Cramer on his show and to his face. Secondly, I think it is easy to say that financial reporters should have exposed disinformation as the dangers of excess credit now seem apparent but who really expected this? There are very few people who had money on the line and actually foresaw this. Some of these people are permanently bearish and I would argue it is even harder to give them credit. As such, when the ‘best of the best’ often did not see this coming and lost billions, why should some reporters? The lack of regulation in the CDS market had a lot to do with all of this.
2. “That fund managers use the media to spread disinformation for their own profit at the expense of 401ks and pensions, and that many people in the media know this but choose not to expose it publicly…” – If you actually believe this, how do you account for the fact that so few of these people profited in 2008? Does the government hold any responsibility for their apparent lack of regulation? Why then is our current president not dramatically (barely at all actually) increasing the budget for regulation?
3. “Economists often describe the stock market as ‘perfect’ because it reacts instantly to reflect new information. The problem is that the information the stock market reflects may not be genuine.” – I would argue that it has less to do with the information being genuine as people behaving irrationally. If the information is not genuine as you are arguing, the SEC or one of its variants should take action which goes back to my previous point. The best thing for our economy and country is for consumers to spend and yet the savings rate is the highest since the 80’s.
A good article that brings up some very valid points. Jim Cramer seemed humbled when I watched the video and I do believe he wants the best for his viewers. People make mistakes and I think they are better to have someone who can interest them in the subject even if it only means they can better discuss their financial situation with their advisor.
I watched perhaps the 12 most painful minutes of TV I have ever seen as a free-market capitalist when Stewart was interviewing Cramer. Cramer acted like a deer caught in the headlights of a tractor trailer going 80 mph, and he didn’t even try to move out of the way. I think that could have been because there was nowhere to hide, the actions of the hedge funds and trading desks of the large banks have been absolutely inexcusable over the last 4 years. They have been the most dishonest and sleazy group of corporate idiots the world has seen in a long time. The important thing to remember though is they are NOT free-market capitalist, it may be popular in the media to say that they embody the modern day capitalist, but this is no more accurate than saying Alex Rodriguez represents all of baseball. There are so many well run banks and hedge funds in the US it is a shame that the select few tarnish the reputation of the others. If you (and I mean “you” as a general term, not directed against anyone) are not a believer in the American system of capitalism I dare you to short Goldman Sachs, JPMorgan, and Morgan Stanley… Go ahead try it! Report back to me in 5 years and let’s see how much money you have left. Out of every crisis comes an opportunity, the opportunity from this crisis is to learn that retail banks suck at being investment banks.