Trading With the Enemy: Seduction and Betrayal on Jim Cramer's Wall Street

May 2002

by Nicholas W. Maier

(Harper Business, New York, 2002) $22.95 192 pages.

reviewed by Gregory Bresiger

This is a wild book. This is a ribald book. This is, at times, a book with obscene quotes. This is a raw and uncut book.

This is a book about trading.

Put the little kids to bed when you open the pages of this small tome. Harper Business is hoping this will be a 21st century version of "Liar's Poker." It is actually a literary "Animal House," a tour de force of obscenity served up raw.

If one is to believe the author, Jim Cramer, who ran a controversial hedge fund in the 1990s, begins and ends every sentence using vulgar, four-letter words. About one percent of the comments credited to Cramer by his former trader can be actually quoted in some form here.

James Cramer, the founder of the controversial Street.com, ran an even more controversial hedge fund in the 1990s. He was lionized through most of the decade as a genius who regularly beat indexes.

Inspired Madman

Nicholas Maier, a former trader with Cramer's hedge fund, depicts his erstwhile boss as an at times inspired madman. (Cramer's Street.com has been a volatile index. Recently, its index was down a whopping 26 percent when the S&P was a negative three percent for the year as I write this. Street.com, since the dot.com blowup of over a year ago, has registered triple-digit losses).

Cramer's performance as a hedge fund manager, the author reports, was rocky. One moment Cramer was making brilliant trades, according to Maier, a tyro trader he trained. The next moment Cramer's firm was blowing up.

For seven straight years in the 1990s, Cramer's firm beat the S&P by a country mile. Yet, by the end of the 1990s, the magic was gone. In August 1998, the firm lost 21 percent in just one month. For the year it was down by 16 percent. Investors were pulling out.

In good times and bad Cramer is a howling maniac, Maier tells us. After a bad trade, Cramer tells Maier he wants him "to feel the pain." But Cramer is not happy, the author asserts, unless everyone around him is as uncomfortable as he is.

Cramer is depicted as a virtual paranoid. He blames anyone and everyone in sight. Anything gets under his skin. Even birds by his window enrage him, as do construction workers. His psychiatrist prescribes a medicine to calm him down. He bays that he will not take it.

Cramer is ready to destroy any machine - fax machines within 50 miles of this bird are in imminent danger on an average business day - or kill almost anyone he sees as standing in the way of his potential tens of millions of dollars in profits. In retrospect, Gordon Gecko seems a quiet, timid gentleman compared to Jim Cramer.

In a Foxhole

In the 1990s Cramer constantly hounded his minions at Cramer & Company with a warning. "We are at war. We are in a foxhole. Everyone out there is the enemy," he screamed.

Did his staff get it? Were they ready to go to work with the bellicose attitude demanded by Field Marshall Cramer? Apparently not. Cramer wasn't convinced even though staff members nodded, Maier reports.

"He [Cramer] started smashing his phone over and over on the desk in front of him. He lifted a monitor and heaved it like a shot put. After several feet, it shattered on the floor," Maier writes. (p 29). I don't remember any of this in the movie "Wall Street."

Even for a hedge fund manager, Cramer's techniques were controversial as was his language, most of which can't be reproduced in this review. He ignored costs. He considered anyone who held a stock for even a few days to be hopeless long-term sucker who deserved to lose money.

"A stock was a buy at 20, a sell at 21 and rarely even a hold in between," Maier writes of Cramer (p. 5).

Cramer started rumors, trying to short stocks or pump up companies he was going to jump in and out of. For example, Maier, who had graduated from gofer to doing "research" for Cramer, was assigned to go to a Lehman Brothers conference and ask about Hannaford Brothers stock.

Breakout Session

Cramer told his excited charge to stand up in the middle of the conference and ask: When are you going to have to lower your earnings numbers because of all those stupid (expletive deleted) acquisitions you made?" (p. 41)