Friday, September 25, 2009

Reflections On Jim Cramer's "They Have No IDEA" Rant

It is almost hard to believe that it's been over two years since Cramer famously went apeshit on CNBC during that August of 2007 warning flash, shortly after the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund, its sister vehicle, and Sowood all blew up, seemingly out of left field.

Banks had not yet begun to fail. Cramer, believe it or not, even alluded to Bear and other investment banks facing the likelihood of failure. This was in the face of Bear's stock trading for over $100/share! Amazingly, despite his well founded concerns, the market would go on to achieve new highs in October.

Cramer, we're sure, calmed down and went back to his typical schlocky pump and dump self. But for one afternoon in that summer of warnings, Cramer had prescience. He showed insight, knowledge, and connections. He was everything that he ought to be. It was fleeting and despite being the laughing stock of Wall Street in the days that followed this rant, nobody is laughing now. Watch the clip and ask yourself, "how did such a moron nail it so hard?"

When you watch this, it almost makes you respect Cramer. If he would stop with his typical showmanship schlock and do more of this, people would respect him.

What follows is from the afternoon that immediately followed Bear Stearns' conference call when it attempted to defend itself publicly and tell everyone, "there's nothing to see here. Move along."

Also, huge unintentional comedy in Cramer just totally disregarding Erin Burnett and steamrolling her.

In Cramer's own words:
"I don't want to create fear; I like Bear Stearns very much, but I think that at this stage this is not a good call, they shouldn't have done it, and they should have just said 'you know what, we're doing well' and don't say another thing. Just don't say it because it does does not inspire confidence...

"Alan Greenspan told everyone to take a teaser rate and then raised the rate seventeen times, and Bernanke is being an academic...he has no idea how bad it is out there! He has NO IDEA! HE HAS NO IDEA!! I have talked to the heads of almost every single one of these firms in the last seventy two hours and he has no idea what it's like out there! NONE! And Bill Poole has no idea what it's like out there! My people have been in this game for twenty five years!! And they are losing their jobs and these firms are going to go out of business and he's nuts, they're nuts! They know nothing!!!"

Erin, "Cramer...I, I..."

"I have not seen it like this since I went five bid for half a million shares of Citigroup and I got hit in 1990. This is a different kind of market and the Fed is asleep. [Erin tries to interrupt] Bill Poole is a shame. He's shameful. [Erin tries to interrupt] He ought to go and read the Accredited Home document...You can't get a darn loan unless you're rich like me."

Then Erin tries to calm Cramer down, telling Cramer that if the Fed enacts an emergency rate cut we'll have Armageddon.

Cramer, "no, we have Armageddon. I wouldn't try to cause that. We have...we have Armageddon. In the fixed income markets we have Armageddon. We haaaavvve Armageddon...

"This is crazy. I am sorry to be upset about someone for heaven sake...I worked at Fixed Income at Goldman Sachs. This is not the time to be complacent. I mean darn, sometimes I wish I didn't know anybody so I could just sit here and say, 'you know what, just go buy some Washington Mutual and take that yield.' Unfortunately I know too many people and I'm too darn old...I've been around too long... And Bill Poole? Bill Poole. Bill Poole listen to me: there was a president by the name of Hoover. And no one thinks much of him now: The Great Engineer..."

Anyway, enjoy the trip down Memory Lane. The rant is hard to view through the lens of August 2007, but you have to try.