The Econophysics Blog

This blog is dedicated to exploring the application of quantiative tools from mathematics, physics, and other natural sciences to issues in finance, economics, and the social sciences. The focus of this blog will be on tools, methodology, and logic. This blog will also occasionally delve into philosophical issues surrounding quantitative finance and quantitative social science.

Tuesday, March 20, 2007

Mad Money Gone Mad?

I have already put in my two cents about (the host of CNBC's ) in a previous blog post: "Mad Money" Should Make Average Investors Mad (March 26, 2006). It seems that Jim Cramer has gone to new levels of madness by revealing how he and other hedge fund managers (Jim Cramer used to be in the hedge fund game) manipulated (either supposedly 'legally' or illegally) market information in order to boost their short-sell positions. One place you can read about this is in the New York Times DealBook blog (March 20, 2007). You can also see the video of the interview at YouTube.

If what Jim Cramer is saying is true, then the Securities & Exchange Commission (SEC) should take a serious look into these practices. One of the tactics, which Cramer calls "formenting," involved feeding deliberately false information into the markets. I'm not sure if this type of activity would fit into the 'fraud on the market' theory of securities law and regulation, but it's worth investigating.

As for Jim Cramer's other comments -- about how he thinks it's a swell idea to basically lie and defraud people as a hedge fund trader -- is so digusting to me that I can't seem to find the words to condemn him. I will say one thing though ... if you notice that my previous blog post warning people about the empirically demonstrated negative impact on the investment returns of those who follow Jim Cramer's Mad Money advice was written about a year ago ... at least my conscience is clear. The Econophysics Blog did a public service in putting up that post. This latest shenanigans by Jim Cramer proves up the wisdom of that year-old warning.

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