Daniel Eran Dilger
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Jon Stewart exposes Apple stock manipulation


Prince McLean, Apple Insider

Proving once again that the best way to reach Americans’ brain is through their funny bone, Jon Stewart of the Daily Show continued his warpath aimed at irresponsible financial reporting by CNBC, specifically calling Jim Cramer out for his comments on how easy it was to profit from misinformation aimed at Apple.

.Calling it “disingenuous at best and criminal at worst,” Stewart grilled Cramer, the host of the frantic energetic “Mad Money” entertainment show, for his act of being “doe-eyed innocent” while celebrating the admittedly illegal shenanigans of hedge fund managers.

Stewart played clips of Cramer describing — shortly before the iPhone was first announced — how hedge fund managers could spread lies about the product through either gullible or willing media sources, creating either fear or excitement that would distort the company’s stock, allowing the fund manager to profit.

Fomenting the market

In the clip filmed for The Street, Cramer notes that this practice of “fomenting the market” is “actually blatantly illegal, but when you have six days and your company may be in doubt because you are down, I think it is really important to foment.” Cramer specifically cited the example of stirring up rumors that Apple’s iPhone would be rejected by both AT&T and Verizon Wireless, and that it wouldn’t be ready to demonstrate in time for Macworld in 2007.

Apple’s stock performance leading up to the 2007 unveiling of the iPhone made it a prime candidate for foment and manipulation, as media figures spewing misinformation could easily cause temporary, panic-induced drops that manipulators could then use to profit dramatically from. Other companies, including Microsoft, had seen so little change in their stock price since the 2000 bubble popped that they simply couldn’t be manipulated as easily.

Fomenting the market against Apple, however, “is very easy, because the people who write about Apple want that story. And you can claim that it is credible because you spoke to someone at Apple, because Apple isn’t in [a position to comment on unannounced products]. It is an ideal short.”

Along with Apple, Cramer also cited RIM as a company that was easy to beat down with false information. “It might cost me $15 to $20 million to knock RIM down,” he said, “ but it would be fabulous because it would beleaguer all the moron longs [investing in RIM’s success].”

“Who cares about the fundamentals?” Cramer said, “Research in Motion just blew out the quarter. But look what people can do. That’s a fabulous thing. The great thing about the market is that it has nothing to do with the actual stocks.”

“It’s important to get people talking about it as if something is wrong with RIM. Then you would call the [Wall Street] Journal and talk to the bozo reporter on Research in Motion and you would feed that Palm has got a killer it is going to give. These are the things that you must do on a day like today. And if you are not doing it, maybe you shouldn’t be in the game.”

Cramer added, “I think it’s important for people to realize that the way that the market really works is to have that nexus of: hit the brokerage houses with a series of orders that can push it down, then leak it to the press, and then get it on CNBC; that’s also very important. And then you’ll have a vicious cycle down. It’s a pretty good game. It can be played for a percent or two.”

Cramer vs Cramer: The Street and CNBC

While playing a comical character on CNBC, Cramer’s articles and video clips on his own “The Street” website reveal an entirely different side. “When I watch that,” Steward said, “I can’t tell you how angry that makes me. Because what it says to me is you all know, you all know what’s going on […] a game you know is going on but that you go on television as a financial network and pretend it isn’t happening.”

The Street’s War on Apple

Following the original iPhone pre-launch rumors Cramer talked about in The Street video clip, his site continued a merciless attack on the iPhone over the next year, including a “report” by Brett Arends which claimed that buying the iPhone would actually cost users $17,670, followed up by Arends’ lists of reason not to buy it, many provided directly by industry flacks working for competing companies.

Cramer himself floated a false story immediately after the iPhone’s launch that Apple’s wireless partner Cingular (later renamed as AT&T) would provide a year and a half of free mobile service for the iPhone. The story was picked up by blogs and widely publicized on syndication sites like Digg. A myth busting report on the scam noted, “Saying that Cingular will give away $1440 worth of free service to perhaps ten million subscribers in order to earn just $480 from them across two years is an insane prediction.”

The Street‘s Scott Moritz also served as a willing accomplice in filing dubious reports aimed at nailing Apple’s stock, including the idea that Apple’s spectacular launch weekend was actually disappointing because the company had really intended to ship a million units within three days, citing unnamed “whisper” sources.

In reality, legitimate analysts had actually expected Apple to ship 150,000 to 350,000 iPhones at launch; Apple reported selling 270,000 in the last two days of June quarter which made up most of the launch weekend. However, Moritz described a bleak scenario where Apple had failed to sell out its inventory, despite very constrained availability of the iPhone at most of Apple’s 200 retail stores and many of AT&T’s outlets over the first month. Because of this supposed failure to launch, Moritz insisted, “There’s a lot of rejoicing at Sprint, Verizon and T-Mobile.”

The Street would also frequently take factual reports and add a hysterical, frantically panicked spin, sometimes to directly bring the stock down and other times to create impossible expectations invented to cause a temporary bubble. One suggested that Apple’s AT&T revenue sharing deal was “unheard of,” despite the fact that similar revenue sharing had long been underlying RIM’s BlackBerry success. That provided Cramer with the timing to announce “I am being abject and adamant: Sell some Apple ahead of earnings.”

Never mind the iPhone 3G: Steve Jobs is sick!

Last year, the Street continued badgering Apple, brushing aside the global launch of the iPhone 3G to try to focus coverage on Steve Jobs’ health in a video segment titled “Without Steve Jobs, There is No Apple.”

“This is a company that thrives on innovation, and the innovation is all being driven by one man.” Cramer said of Apple. “That’s okay, the one man is not a stock. I mean, you can’t. The multiple of one person is zero. Well, one. But I would warn people that this company… I don’t want to call it nothing without him, but it is not investible without him, because he is the driver of ideas. Now behind anybody there’ll be other ideas, but I remember the original Apple, and it was all him, too.”

Cramer has largely been successful in spreading the meme that Apple is wholly dependent upon Jobs for its survival, but the idea that Apple’s success has all been flowing all from the veins of one man is as absurd as the idea that the original Apple of the early 1980s did, too. “Jobs was regarded as a pariah in the business community, a maverick that drove down profits to advance technology and the state of the art. Had Cramer been anything of note in the mid 80s, he would have been slamming Apple for not acting quicker to rid itself of Jobs,” a report on Cramer’s take noted.

  • jfatz

    Sweet Eru, but Thursday night was AMAZING… I was holding my breath through a lot of those passages, and at one point I almost through Cramer was going to cry. It was… intense.

  • John E

    so then there are two obvious questions: why isn’t Cramer under criminal investigation by the SEC? and why hasn’t CNBC suspended him pending a full ethics investigation? on video tape he admitted and described in detail criminal and unethical acts.

  • KathyLee

    After seeing that original video clip a year or so ago when Daniel first unearthed it, I did write to the SEC about Cramer. I’m sure they got right on that – maybe they were busy with the Bernie Madoff case – useless agency.
    CNBC should fire Cramer – and Cramer should be brought up on market manipulation charges. The country needs to see some justice soon.

  • http://www.transchristians.org Ephilei

    Indeed, how do you confess to illegal activity and not face any justice? My small faith in mainstream media is now even smaller.

  • Lee R.

    Nice article Daniel. You are a “prince” of a writer.

    Cramer has demonstrated he can talk well, not tell the truth, and navigate despite the lack of a moral compass. I believe he’s preparing to run for congress!

  • jfatz

    Cramer WAS tagged by the SEC at one point… http://en.wikipedia.org/wiki/Jim_Cramer#SEC_Subpoena

    It didn’t stick.

  • gus2000

    It’s sad when I must get my hard-hitting news from a comedian (and I don’t mean you, Dan, lol).

    The entire financial media is in bed with the people they cover. If you were a big time CEO, would you rather make an appearance on “Sixty Minutes”, or lounge around with an attractive young woman who throws softball questions? No corporate executive would ever voluntarily hold themselves up to scrutiny. The media covers what Wall Street lets them cover, just like the newspapers can say anything they want about the practice of selling cars, as long as it’s nice.

  • GwMac

    What was really exposed was the duality of the entire system. There is one for the average Joe Schmoes who try and do their best to buy stocks in companies they think will succeed over the long haul and do not have the time to buy and sell on a daily basis. And then there is this secret world involving shorts and market manipulation who buy and sell not based on any fundamentals, but speculation, deception, and greed.

    We have always had this system in place. The problem is that with technology and the internet, rumors suddenly can effect a stock price within a few minutes. I am not smart enough to suggest what should be done to correct the system, but I do know that we need some new regulations in place or to at least enforce what we already have. All these brokers and analysts who make millions off of the backs of the rest of us has got to end. Based on pure fundamentals. AAPL should still be around $130 to $150 a share

  • kerryb

    I’ll even further and say just about everything in TV is either a commercial or a lie. Time magazine even include the cable network HGTV as a player in feeding the housing frenzy by telling everyone in America that our homes are too small and really worth twice what we paid for it after two years of ownership and new granite counter tops. Even people old enough to have lived through the housing crashes of 80’s and early 90’s drank in the real-estate cool-aide. We are all guilty for not questioning where the money was coming from as long as it kept on coming.

  • Silver

    There’s a great site that covers Jim Cramer’s crime (his and other’s), owned by Overstock’s CEO. It is called Deep Capture (http://www.deepcapture.com)
    The article about Daily Show & Jim Cramer: http://www.deepcapture.com/what-we-should-learn-from-jim-cramer-vs-the-daily-shows-jon-stewart/
    The biography of Jim Cramer: http://www.deepcapture.com/jim-cramer-is-a-complicated-man/
    The crime: http://www.deepcapture.com/category/4-the-crime-naked-shorts-other-insincere-ious/

  • http://www.jphotog.com leicaman

    With the demise of major newspapers, this is just the beginning of how bad it’s going to get. There is going to have to be a model for paying for good news, or there will be no news.

    Journalists have to eat, support their families and retire. If they cannot, they will disappear and we will lose one of the pillars of democracy that has sustained (however imperfectly) this nation and our freedoms.

  • http://www.geoffrobinson.net geoffrobinson

    Jon Stewart bothers me here too. He only went after Kramer, an Obama supporter, because Kramer dared speak ill of Obama’s policies. Not even his policies, but the timing of his policies.

    So instead of focusing on the content of Kramer’s critique, Stewart shifts to a personal attack on Kramer. And he may be a nice guy or a huge jerk, but that doesn’t mean his comments regarding Obama’s policies are destroying wealth are false.

    So that’s what happens when someone dares cross the fearless leader. He will be crushed for daring to speak up.

    [This is such an absurd right wing talking point. Is it just so impossible for conservative thinkers to formulate logic that they must always parrot the same few things they hear on repeated on Fox/AM radio? Please, think for yourself. You don’t have to accept progressive values, but don’t accept Rush Limbaugh as your leader and repeat everything you’re told like a tape recorder.

    Cramer “dared to speak up” about Obama’s “destruction of wealth”? More like the right wing destroyed America’s wealth through short sighted selfishness and greed, and is now appalled that Obama is working to make the government function as it is supposed to: governing and applying the rule of law. Cramer and his ilk are lying about what’s going on, and Stewart called him on it. The right wing is now trying to attack Stewart and Obama for “daring to speak up” about the lawless corruption that turned the US into a fascist dictatorship ruled by group of corporate lobbyists.

    Wake up mildly affluent people: Republicans don’t represent your interests, they’re just keeping you emotionally riled up about “socialism” fears so that you don’t catch on to the fact that you’re poorer now because of Bush federal government’s War on Iraq/Drugs/Gays/”Terrurists” has bankrupted the US and right wing efforts to starve the nation’s education and infrastructure have resulted in the US becoming a second rate country. It’s reality time. Don’t cry about needing to pay for progressive bandages to cover your Republican wounds.- Dan ]

  • Grand Moff Tarkin

    @ geoffrobinson — Sorry to burst your right wing bubble, but that is absolutely false. Jon Stewart went on his crusade against the CNBC network – not Jim Cramer – after he was infuriated by Rick Santelli’s rant against “loser homeowners”. It was never directed at Cramer, and the only reason Cramer became the face of it is that he chose to respond on the air on CNBC and then, when Santelli cancelled his appearance on The Daily Show, Cramer agreed to appear instead. It had NOTHING to do with Cramer’s criticism of Obama’s budget or other comments, and everything to do with the network’s overall malfeasance and malpractice as a neutral arbiter of financial information.

  • http://www.geoffrobinson.net geoffrobinson

    And people were upset by the Rick Santelli comments because they were anti-fearless leader. Same difference.

  • Grand Moff Tarkin

    Uh, no. Santelli’s comments were offensive, coming from someone who represented the moneyed establishment which is currently receiving unprecedented bailouts (still demanding their bonuses) after playing Casino with the financial markets and losing everything, and then having the gall to bitch about homeowners getting a TINY FRACTION of assistance at a time of peril, peril caused largely by those very same Masters of the Universe ruining the financial system losing as much as a third of the value of their house.

  • danpoarch

    Santelli actually attacked me as a homeowner. I can afford my mortgage today, but what if the economy continues to tank and I find that I cannot keep my home afloat? Then, according to Santelli, I’m a loser homeowner. Even though I’ve kept my clients with a lot of hard work through this recession… And I might point out that I bet Santelli knows more people being foreclosed upon than myself [I don’t know anyone losing their home]. I would assume that Santelli’s friends are all under-collateralized at this point. Having buried all of their wealth in a market that can’t, and won’t for some time, right itself. Santelli is an idiot that doesn’t deserve his job.

  • http://www.geoffrobinson.net geoffrobinson

    Santelli apologized for that language, but his basic point has a lot of support. People don’t want to bailout homeowners who made stupid decisions, which is different than just simply falling on hard times. People didn’t support TARP either.

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