Cramer's Attack on the Shorts and The Fed's Attack on the Middle Class

As I was running out the door last night, I had made the mistake of not taking the time to turn off the boob-tube before Jim Cramer's MadMoney came on. I know a lot of people love this show and I know a lot of people dis's him non-stop. I don't know much about the guy (purposefully) but if it waddles and quacks like a duck-I call it a duck. Injustice and dishonesty strike a bone-chilling atonal chord with me that literally makes my skin crawl. I'm no saint, but when Cramer, who is watched by far more viewers than he deserves, gets in front of the camera and talks about how he is a champion for the little guy-it literally makes my skin crawl and I feel like I want to jump out of my own skin just to find relief from the creepy hebejebes.

Before going on any further, take 10 minutes of your time (if you are a Cramer viewer, it might be the most insightful 10 minutes of the month for you) and watch this clip of Cramer on The Street's Wall Street Confidential with Aaron Task. http://www.thestreet.com/video/cramermarketupdates/10329438.html#10329438

That makes the "I'm out here for the little guy" crap a bit harder to swallow doesn't it. If you didn't watch the clip, it's Cramer talking about how he manipulated markets, how it was "fun" and his condoning and advocating manipulation for fund managers; even saying Fund managers who won't engage in this unethical practice (if not illegal-certainly should be)-maybe shouldn't be in the game.

Moving on-tonight Cramer was lambasting the SEC over the "up-tick" rule that they lifted last year. Cramer more or less created an atmosphere in which he conveniently blamed the shorts for the market's recent declines. He talked about how the shorts weren't acting in anyone's best interest other than their own. Well what the hell did he just advocate on that video? Excuse me, but when I place a trade-long or short, I'm hoping to grab some of someone else's money. If I feel like giving to charity, I'll do that after I make a paycheck. Who really goes out and risks their capital on a trade in someone else's best interest? Maybe Cramer should explain whose best interest he was looking out for when he manipulated markets or as he put it "Knocked stocks down"? While I'm certainly out for myself in the market-at least I do it with honesty and integrity. I'm trying to make a living by being on the right side of the trade, not by manipulating and cheating people out of their money. I'm one of those horrible shorts, so what does that make Cramer?

Cramer must have had an agonizing internal conflict upon hearing news that Goldman Sachs, of which he is an alumni, was hugely short the subprime market. Poor fellow.

So he goes on to create this atmosphere of "blame the shorts" for the market's woes, blame the SEC for suspending the uptick rule, blame the Hedge Funds (again-of which he was an alumni, blame everyone other than those who most desperately deserve the blame-his Wall Street chums. It's a convenient distraction; maybe he'll get public support behind it. It's a lot easier to understand "blame the shorts" then it is to understand the twisted and contorted Collateralized Debt Obligation web that is so tangled that it seems it would simply be easier to reformat the hard drive or hit the return to zero button. However, that misses the truth, by an incalculable measure.

The greed of those who threw all caution to the wind, kicked stress test modelling and risk management to the curb like an old set of VHS horror movies from the seventies, are the ones who deserve the blame. These big-wig TITANS of Wall Street are the epitome of greed, dishonesty (sound like anyone you know?) and ultimately the source of what portends to be the final straw in America's impending financial crisis. Sound a bit dramatic? Well how does an $84 dollar book value for Bear Strearns Q4 2007, reduced to $2 bucks sound? I'm sure that would have been called, "dramatic" only a week ago.

So lets work with that for a moment- if you were a BSC share holder and had a good chunk of your kid's college fund tied up in their stock, would you have preferred to have BSC slide from $125 to $100 to $75 to $50 over the course of 6 months (plenty of time to realize something wasn't right and make adjustments) or would you have preferred to wake up Monday morning, refreshed from a long relaxing weekend and find your stock that was worth $30 on Friday had been incinerated and under the ashes was a measly $2 bucks? A Ham sandwich-from a Quickie Mart, that's what your share of BSC would buy you Monday morning, but at least you'd know the sandwich was for sure worth at least that. Maybe a bottle of Maalox would be more useful?

Let me diverge for a moment. I have many passions, outside of the market including a salt water reef tank that I love. It's really fascinating and everyone always asks, "Is this really hard to take care of?" My answer, "no" -in fact I have to do very little maintenance. Once you get your system in balance, it virtually takes care of itself. People fall into a trance staring at the reef and they love the colorful fish. However, I've spent time with my reef, I know my tank more intimately and I find different things interesting. For instance, the way that the tank takes care of itself-the eco-system is what I find fascinating. The little ugly hermit crabs that scour the bottom in search of uneaten parcels of food or detritus. The illusive, occasional starfish that sifts below the surface of the sandy bottom peaks my curiosity. However, there is a downside-the sad reality is one in two fish introduced to the community will unfortunately perish. A dead fish introduces ammonia and nitrates as it decomposes; these are toxic substances that left unchecked, will ultimately kill everything else in the tank. This aquatic tragedy leads to what I find really interesting. Consider that I've owned this tank for 10 years, I've probably introduced hundreds of different species of marine aquatics and I remember only a couple of instances in which I've had to remove something dead. Ninety-nine percent of the time a sick fish just disappears over night. I've never seen so much as a fish scale in my tank and I've never had a serious ammonia/nitrate problem. My tank takes care of itself...and that is fascinating.

Back to the shorts for a moment....Short sellers tend to be some of the most well informed professional players on the street-take Goldman Sachs for example. While a trader who buys a long position has a fixed amount of risk (the price paid for the stock), theoretically a short has unlimited risk- a stock's price can rise...? Shorts have a lot more to lose than buyers when they give their opinion a voice by taking a position. And what is price movement? Opinions, not charity or goodwill. For a stock to move, a transaction has to take place- really it is a disagreement. A seller fears price will go no higher and is afraid of losing money so they sell the stock. Buyers fear that the stock is ready to advance without them. A short seller is not much different than the shareholder that feels their stock is done and sells. Ultimately a short seller provides the same liquidity-often they are sellers when buying demand is high and buyers when buyers are scarce.

As for blame? Even without the uptick rule, shorts would be hard-pressed to cause the havoc that went beyond decimation when BSC dropped to two hundred copper pennies Monday morning. Sure shorts were active in BSC and rightfully so, in fact if we want to blame shorts, it should be that they weren't aggressive enough. Just days earlier BSC was selling for 15x more than the FED and JPM deemed it to be worth. While I hesitate to suggest shorts are the bottom feeders and crabs of the markets, I will say that they are an absolutely necessary element in the equation. For a market to operate in a way that is transparent and vibrant, shorts need to be active. In this manner, a market which has natural forces (supply and demand) is much like an ecosystem-it only gets fouled up when we introduce unnatural elements, such as "manipulation"-whether it be Cramer and his pals(CNBC and the investment banks) or the FED.

Right now we are privy to an historic event; unprecedented manipulation by the Fed has crossed the border into the land of full-blown panic (on the part of the Fed). Do we dare suggest that even the Fed, with all its might, can alter the natural forces of supply and demand without detrimental effects, effects that are far worse than the alternate natural course? Apparently the Fed does espouse this view and to draw attention away from the consequences, away from the true cause-Cramer has embarked on a campaign of assailing and smearing the very nature of the market. How avant-garde? How novel? How ridiculously disgusting and absurd is this situation? The irony of CRAMER-mass-manipulator at large-going on the airwaves and blaming shorts for, of all things-"conspiring to manipulate the market" is certainly not lost on me and after having viewed that clip, I'd assume it's not lost on you either! I'm choking on the irony and I'm disgusted by the limitless, unabashed hypocrisy.

Instead of the few companies that created this mess paying the piper, the entire market, the entire economy is being dragged into the depths of dirty despair. And make no mistake-the Fed's unprecedented action, rushed into head long with little regard for the consequences and no real oversight or public discourse, will ultimately leave the charred cinders of reality at the feet of Joe-Taxpayer.

The Captains who drank the toxic grog of greed and arrogance sailed the Titanic of Titanics into a neon-flashing iceberg of subprime. These are the same sailors who have been handsomely rewarded for their utter and complete incompetence. They were set sail on a fully rigged lifeboat-complete with champagne, caviar and a handsome chunk of the purser's lock-box. The Fed vainly and arrogantly tries to stuff the gargantuan hole with a mix of ice and the personal belongings of the paid middle class passengers. The sun is beginning to rise, the ice will melt and ultimately the Fed will have to raid the passenger's cabins once again to stuff more of their personal belongings into the hole. For now, she lists badly to the starboard side and continues to take on water. The truth is, no one person knows exactly what damage lie beneath her waterline, but never mind that-CNBC tells us we'll eventually get enough personal belongings in her hole to sail her back to port by Q4, just in time for another grand voyage. As for irony? Where else in America can someone make millions of dollars for having failed at their job and put their company into risk of collapse along with the rest of the country! As a bonus, you get to sit before Congress and hear from some that your success in business is a wonderful role model for young Americans.

All analogies aside, the Fed is pumping money into these companies and the truth is it is YOU and the waitress who works 2 shifts to feed her kids, the construction worker who breaks his back to make a buck over minimum wage, the garbage man, the plumber, the newspaper boy, the elderly couple trying to scrape by on their meager retirement, the auto mechanic, the college student working a night job, the nurse still trying to pay back her school loans, the under-paid teachers, the pimply-faced teenager working his first summer job, the grandmother who has to choose her medication over food, the family who just immigrated to the US, the house-painter going through a divorce, the family who can't afford their mortgage payments, and most shamefully- YOUR newborn child....WILL BE RESPONSIBLE FOR PAYING FOR THE MISTAKES, GREED AND THE DEBT THAT THESE WORMS CREATED! That's right, these CONGRESSIONAL ROLE MODELS(Cramer's buddies) will have sailed off into the sunset with a care package bigger than the annual-combined salary of all those previously mentioned. The people who work their hands raw, that stand on their feet 12 hours a day, only to come home and run a household and struggle to provide for their children, those honest, hard-working Americans will pay the debt for these creeps.

The Shorts didn't do this to America, we all know who did this to America and we all know that they weren't looking out for anyone's interest other than themselves. Why don't these guys give back their care-packages? I'm quite sure that they can better afford the contribution towards making this right, than the average middle class American. This is a bailout-there can be no other terminology better suited for this. And like all Government bailouts, Americans pay for it one way or the other. Whether it be your hard earned tax money or whether it be through the deflation of the dollar and the inflation of everything you need to buy to survive. Isn't it convenient that the Fed's key measure of inflation is devoid of "volatile food and energy" costs? These two things hit middle class America the hardest. You want to know what true inflation means for the average family-go to the pump, go to the grocery store-that's where you'll find the true measure of inflation. So rather than those who created the mess taking responsibility, it is diluted among hundreds of millions of Americans. That means you won't be getting the bridge that you need, the police and fire departments will be understaffed and have to make due, schools and teachers won't get what they need-you get the picture. Most Americans struggle with what's already on their plate and they don't need this. Just think, a few years from now, the Wall Street "Boys Club" can get back to their multi-million dollar bonuses.

One more little shady trick that has been stuck into this deal while everyone is distracted-the US dollar used to be backed by real gold and silver. Eventually the Gold Standard was replaced by the Fed's Treasury Notes. Due to the Fed's bailout, a few neat little schemes that skirt US law have emerged. They allow the Fed to take the CDOs and other toxic investments off the balance sheet of the companies who created them and replace them with the full faith of the US Government-Treasuries. So where did all the toxic investment vehicles that caused this whole mess go? Well, in effect, the Fed bought them and they are on the Fed's balance sheet-or rather, they are on "our" balance sheet as we get to pay for them one way or the other. But wait-these Fed programs are only for 28 days! Yeah, technically speaking, that's right. However, the Fed can and has rolled over the loans and they can do that indefinitely-kinda like the governments accounting with Social Security-just smear the junk all around the nation and finance it indefinitely and there you have it-neat huh? Back to the point-the Gold Standard that backed the worthless piece of paper called a Dollar, was replaced by the "Full faith of the US...blah, blah, blah". So now that the Fed has exchanged it's Treasury Notes for the worthless, toxic junk that the investment banks created-GUESS WHAT BACKS OUR MIGHTY $US DOLLAR NOW? The toxic, worthless CDOs and other garbage the Fed has accepted as collateral. A phrase comes to mind, "Out of the frying pan and into the fire". The Fed creates these problems and then creates another trying to fix the last one. No wonder some call for their abolition.

So Cramer-keep on keeping-on! Keep watch for us, the "little guys". Keep blaming anything and anyone imaginable-except for the very few who truly deserve the blame-probably including yourself. Make no mistake about this, had the Fed simply did what the Fed is charged with doing, had the Fed simply passed on the creative subterfuge that allowed them to skirt around the very laws that prevent them from doing what they are doing-then we would have seen a meltdown in a large segment of the Financial markets. Some big banks would probably go under-a lot of brokers would have been badly thrashed and the shorts would have had a grand old time. It would be ugly, but eventually the market would take care of itself.

Instead of a meltdown in the financials that caused all the trouble, we are probably going to see a meltdown across our entire economy. The Fed is running out of band aids. The day that the market realizes that Fed has done all it can do and it's nowhere near enough, then you'll see what economic ruin looks like. And guess what? You'll get to pay for it-how's that for transparent-free markets?

And one more thing, as the Fed takes on the risk that these creeps have passed along, realize that they are in fact investing and betting in the market-WITH YOUR MONEY. When we (the players in the market) take risk, there is an expectation of reward. It's your money, don't you think you should be asking about the potential reward for all the risk being laid at your feet? It's election year and it's time to start asking these questions. A measly onetime $600-$800 bucks won't do.

Pass this along to your family and friends-we're all paying for it, we should all at least understand what "it" is.