In an interview on the website TheStreet.com, Jim Cramer of Mad Money fame talks about how he and other hedge fund managers can manipulate stock prices for easy profit. Check out the video, it’s very enlightening:
Although this actually aired online a few months ago, he’s now getting heat from various media sources that recently discovered it – including articles from USA Today and the New York Times, which provide a nice recap:
Cramer described how he would make bets that gave the impression knowledgeable investors were predicting a stock’s future. Cramer said everything he did was legal but added that illegal activity is common in the hedge fund industry, where regulation is lax.
Cramer said some hedge fund managers spread false rumors about a company to large trading desks and the media to drive a stock price lower. He said this practice is illegal, but easy to do “because the SEC doesn’t understand it.”
He also said Research In Motion and Apple are easy targets.
Mr. Cramer said he had used some of the tactics himself, including lying to ?bozo? reporters to get them to report misinformation on particular stocks. He singled out CNBC?s Bob Pisani. He separated legal activities from illegal ones (such as ?fomenting?), and never quite says he ever took part in the latter.
Let’s take a step back here. Cramer openly admits that he and others can manipulate the markets by spreading misinformation. And people actually watch his show for investing tips?!? Somebody’s getting rich, but it ain’t his viewers… Yet another reason not to trade stocks in the short term.