Wednesday, March 11, 2009

DIS -Information

The old quote "you should only believe half of what you see and nothing of what you hear" pertains specifically to financial analysts, financial networks, and also to financial blogs. What is not mentioned in the quote is how much you should believe of what you read. I will venture to say it should be somewhere between half and none.

I've come to this conclusion after listening this week to the ongoing battle between Jon Stewart of the Daily Show and CNBC's Jim Cramer. If you are not familiar with these two individuals, then please stop reading this post. It will mean nothing to you.

If you are only vaguely familiar ( a position I strongly recommend in the case of Mr. Cramer), then I will explain.

Jon Stewart is a comedian and unfortunately for our country his show is one of the few places on TV to hear the truth about a news story.

Jim Cramer is an ex-hedge fund manager, over imbiber of caffeine and has a show called Mad-Money where he imparts his market wisdom and savvy to viewers. The slogan of the show is "In Cramer we Trust." I kid you not.

Well, the Daily show did a great bit on how wrongly, outright deceitfully and disastrously the geniuses at CNBC had misinformed its viewing public and Jimmy was offended. Hilarity ensued. As the financial bloggers so often say "Do your own research."


As I was working my way through today's news I came across the following clip. (from 2006) It is Mr. Cramer detailing how hedge funds (perhaps even his hedge funds) were able to manipulate the markets by short selling, option wrangling and futures fomenting. Some of these activities are illegal by the way. A great deal of discussion has been going on at Financial Blogs about the pros and cons of short selling. You can almost always tell the politics of the commentors. In general, Republican free market types say short selling is OK and Democrats say its the devil.

Surely the truth lies somewhere in between, but let me add this. The only point of short selling is to make a profit on the losses of other investors. There is no intrinsic value to short sales but the profits, which are exactly equal to the losses of others. No value is added to the system and no product or benefit comes of the activity with the exception of higher brokerage fees for the transactions. In addition, short sales emanate from margin accounts where more money is required to be held than a straight cash stock buying account. So it is obvious why the stock brokers don't want to do away with short sales. It allows them and their clients (the ones short selling, not the investors holding long positions) to make money even in a crummy down market like the one we have today.

"Traders need short selling to have an option in bear markets" or so the saying goes. Perhaps. But what you'll hear below shows how unethical, greedy, soulless, sacks of Wall Street Crap can game the system to cheat investors and now American taxpayers out of millions of dollars. I am not a fan of giving these bastards any more tools with which to screw us. How about you?


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