CNBC Protects Jim Cramer

In the following clip, which doesn't seem to be available on CNBC's website, a guy named Sylvain Raynes had the audacity to suggest that CNBC's previous guests had been acting as PR guys for Goldman. This provoked outrage from Jim Cramer and a firm admonishment from Erin Burnett. No doubt he will never be asked again.



Unfortunately the clip doesn't show all of Cramer's comments which were critical of the suckers who bought the CDO's. Cramer referenced his days as a hedge fund manager and said the the buyers should have understood that there was someone on the other side of the trade who might not be interested in the buyer's welfare.

This is of course bullshit. As a professional trader, I understand that when I trade options or futures the guy on the other side of the trade is hoping that I will lose money on it. However, this is not the case with all investments. When I buy a stock, the guy on the other side may be completely indifferent to whether I make money on the purchase since he is simply selling the stock because he needs the money for something else. If I purchase a mortgage backed security, the guy who is ultimately on the other side is the guy who borrowed the money to buy a house and he is hoping that I will get my money back.

This case is completely different though. This is like a case where I buy shares in a mutual fund and the guy who is managing the fund, i.e., the guy to whom I am paying a fee to pick the stocks that the fund will buy, is shorting those same stocks in his personal account. Anyone who defends that kind of conduct rightly deserves to be considered a shill for Wall Street

How Wall Street Works

"I thought Bear Stearns was honest." Jim Cramer.

I don’t believe this.

I think that Jim Cramer believed that the guys who ran Bear Stearns would pull the same kind of deceptive shenanigans in order to line their own pockets that Cramer pulled when he ran his own hedge fund. Cramer might have thought that there was some limit to what those guys would pull and that wherever that limit lay, there would still be a piece of the pie left over for the shareholders. That is not at all the same thing as thinking they were honest.

This is where I think Jon Stewart nailed it. I don’t think Jim Cramer knew that Bear Stearns was going to collapse. I do think he knew the kind of things that people on Wall Street do to make money and I think he understood the ways in which the interests of the guys running the firms diverge from the interests of the shareholders. The problem is not that the executives at Bear Stearns were not exposed to declines in the stock. The problem is that the benefits of short-term high-risk strategies were enjoyed to a much greater extent by the executives than by the shareholders while the risks were shared equally. This is what I think Cramer understood without ever trying to make his audience understand.

The bonuses at AIG illustrate the problem perfectly. The compensation of the executives who wrote the credit default swaps was structured in such a way that they are entitled to millions of dollars in bonuses even though there actions brought down the company and cost the taxpayers of the United States billions upon billions of dollars. The scale may be enough to shock Cramer, but the basic methodology shouldn't be.

Olberman and Maddow: Corporate Sell-Outs?

I found it very disappointing that Keith Olberman did not mention Jon Stewart's interview of Jim Cramer and that Rachel Maddow only mentioned that it had gotten a lot of press without showing any clips from it or explaining what had happened. It is very difficult to escape the conclusion that someone up the corporate ladder decided that no one on any of the NBC networks should mention the story.

On the Daily Kos, Olberman denied any such censorship and claimed that he simply did not consider it to be an important story. He pointed out that he had featured CNBC's Rick Santelli as a "Worst Person in the World," but that seems pretty thin. Santelli is a very minor CNBC contributor while Jim Cramer is one of its best known personalities with an hour-show of his own everyday. Santelli's rant did not reflect upon the the network's coverage as a whole.

For all the right wing ranting about the liberal media, the content is still controlled corporations like NBC parent GE who can nix any story that strikes too close to home

Jim Cramer on the Daily Show

As a market-maker on the trading floor of Chicago Board Options Exchange, I knew lots of people like Jim Cramer. He has the trader's mentality that the stock market is a game to be played. As long as a trader plays by the rules (which Cramer may or may not have done when he was running a hedge fund), there is nothing wrong with that. The problem comes when the people who are playing trading games pretend that they are champions of capitalism who are investing in America and creating wealth. The problem with CNBC is that it shills for the Wall Street players and helps perpetuate the deception.

Jon Stewart did a brilliant job of exposing that deception last night in his interview with Cramer on The Daily Show. Stewart usually takes it easy on his guests regardless of their political leanings. Even someone as detestable as Josh Bolton or Doug Feith need not worry about much more than a pointed question or two. However, Stewart never let Cramer off the hook, forcing him to watch video clips of a three-year old web interview in which Cramer explained many of the tricks he played as a hedge fund manager. Stewart was not having fun and neither was Cramer.

So what turned Stewart into a pit bull last night? I don't think he held any particular animosity towards Cramer who seems to be a personable rogue. I think he did it because nobody else does. There are tons of people out there who are going after the Boltons and Feiths of the world, so Stewart doesn't mind going for laughs when they come on his show. However, nobody is going after the financial pundits and Stewart knew that someone should.

It was an impressive performance. Watch Part 1, Part 2, and Part 3 of the unedited interview.

Erin Burnett: CNBC's Twit of the Day 3/10/09

Erin Burnett gets my vote for CNBC’s biggest twit today although her twittiness was on display on NBC’s Today Show rather than her usual gig on CNBC’s Street Signs. Burnett appeared with CNBC’s Jim Cramer who was struggling to defend himself against another beat down from Jon Stewart on The Daily Show. In a column on MainStreet.com, Cramer had accused Stewart of taking his comments about Bear Stearns out of context. Cramer said that he had not been encouraging viewers to buy Bear Stearns stock one week before it collapsed as the clip played on The Daily Show implied; he had merely assured viewers with accounts at Bear Stearns that the money and securities in those accounts were safe. Stewart acknowledged the error, but the Daily Show’s researchers found that Cramer had recommended Bear Stearns stock at $69

Ever Cramer's loyal side kick, Burnett piped in with “Just to defend you Jim: Jim has to go out everyday and make these calls.”

Apparently, for Erin Burnett, the fact that Cramer gets paid to go out and shoot off his mouth about stocks everyday absolves him for any responsibility for pretending to know more than he really knows. I suppose that same logic would absolve all the mortgage brokers who sold subprime loans to unqualified home buyers. After all, they had to go out and recommend negative-amortization/interest-only/no-down-payment/teaser-rate loans to fools because that was what they were getting paid to do.

Burnett’s logic is actually quite consistent. Nobody should complain about China selling poisonous products because people are willing to pay for them. Nobody should complain about Cramer talking out of his ass because CNBC is willing to pay him to do it.