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)
Maier, who was instructed by his masters not to obtain a nametag at this conference, was also supposed to ask the same question at the breakout session.
A Hannaford Brothers official declined to answer the question because the stock was in a quiet period just before it was going to report earnings. Maier, the up and coming Cramer henchman, announces that the company must have something to hide.
Did it?
It doesn't matter. The same as an unanswered scurrilous question that might have been stricken from a record but not from someone's memory, Cramer's flunky had accomplished his mission. He had made a suggestion that something was amiss.
The market took notice. Hannaford Brothers stock dropped a point. Cramer was shorting it. He made his bucks, then quickly sold out, departing with his gold.
But this was only one act in Cramer's three-ring hedge fund circus. He used the media with the skills of an FDR or a Ronald Reagan. He played CNBC like a fiddle. He wrote a column of stock recommendations for SmartMoney, expecting readers of this bigtime pub would be impressed, buy the stocks and pump up the value of Cramer's portfolio. Not a bad bet given the awe and admiration of the average investor for tech stocks in the last decade and for anyone who was perceived as having expertise in this area.
Writing about the SmartMoney cause celebre Maier, the former Cramer lackey who seems to be using this book to break out of his former role of servitude, suddenly lapses back into his previous master/slave role. "In Jim's defense, SmartMoney had neglected to run a disclaimer stating that he might own any of the specific stocks written about." (p.110)
Say what?
In "defense" of a man he spends almost 200 pages describing as a raving lunatic? It's a strange comment coming from a man who all but says that his former boss should be in a straight jacket. And there you are, it was all the magazine's fault! Who could blame Cramer for these strange kinds of episodes? Well how about the regulators? They were nosing around, Maier reports, looking at the fund's techniques.
But Cramer cursed and alternatively laughed at every investigation by the Securities and Exchange Commission. "What a bunch of jokers," he says, dismissing the credibility of the regulators. How is one to assess the credibility of this book?
It should be mentioned that Cramer says Maier was fired for "gross incompetence." Also, several pages of the original book had to be spiked after Cramer charged that it contained a false episode in which he was alleged to have committed insider trading. The pages were dropped, but HarperCollins gleefully continues to sell the book.
On one level, this book is worth the time and money. It is highly entertaining and interesting in the same way that car wrecks, train derailments, reruns of old idiotic TV shows and wars tend to attract one's attention even as one grimaces while reading every last detail of the disaster.
But the bigger issue is Maier's verisimilitude, or lack of. He was happy to take Cramer's fat bonuses in the 1990s and didn't ask too many questions of his bosses when he was sent out on his mission of mayhem: asking impertinent questions at business conferences.
History Repeats
Cramer's character is obviously in dispute, but the charges of a former employee as the basis of a book – the tried and true formula for selling books – are a very difficult kind of issue to resolve. However, genius and madness have a way of reproducing their disasters time and again. (When history repeats for a second time, Marx said, it is a farce.)
Street.com, the product of Cramer, "the journalist," has been an expensive farce. The performance of this dot.com index, after shooting out the lights in the late 1990s, has been nothing short of disastrous.
Four letter words won't help the people at Street.com and those who took their buy tech at any price recommendations. They worked for a while in the late 90s, but eventually imploded.
To these poor people who were burned, the name Cramer isn't synonymous with genius. It is a name that is synonymous with obscenity.
