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If this isn't a good enough reason to index...
Old 03-25-2007, 12:54 PM   #1
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If this isn't a good enough reason to index...

Jim Cramer on how hedge funds manipulate markets (specifically how he did it in the past!).




My favorite quote: "all the moron longs..."
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Re: If this isn't a good enough reason to index...
Old 03-25-2007, 01:27 PM   #2
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Re: If this isn't a good enough reason to index...

Quote:
Originally Posted by Olav23
Jim Cramer on how hedge funds manipulate markets (specifically how he did it in the past!).




My favorite quote: "all the moron longs..."
His "jibber-jabber" is always very confusing to me. He might as well be speaking Hebrew. So, he's spending $5-10 mill. to manipulate a stock price? All so it looks good at quarter-end? Am I deciphering this correctly? Doesn't make sense if he's actually doing it to make money. i.e. driving the stock price down, so he can buy cheap... it's gonna cost money, on the way down, and then the price is going to go back up when/if he starts buying. I guess if he can get everyone else to sell, then he can buy cheaper, and make money, or if he's "short", but whatever... seems like the inefficiencies would kill ya.

I'm sure I'm missing some detail here.

Or is he doing all this to make 1% on a million "big $ number" or something?

But, back to your original point -- yeah, INDEX!

-CC

Edit: If he was/is so good, why isn't he still running a fund? Or, is he? Personally, I think he's nuts. Another one of my conspiracy theories is that he buys a ton of stock, pumps it up on his show, and then sells it.
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Re: If this isn't a good enough reason to index...
Old 03-25-2007, 04:59 PM   #3
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Re: If this isn't a good enough reason to index...

Some where I heard he burned himself out as a fund manager. Quit, went home to recuperate. Once he got his life back on balance just couldn't stay away from "the game".

Bright, hyper-active, action addicted, ends justify the means personality.

His show is entertainment. When he steps out of the entertainment setting he can be informative - maybe the one person who is willing to talk about what happens behind the screen. I just wouldn't want him managing MY investments. He is much to much action addicted.
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Re: If this isn't a good enough reason to index...
Old 03-25-2007, 09:11 PM   #4
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Re: If this isn't a good enough reason to index...

Cramer was a hugely successful hedge fund manager, so I think he would do well for anyone, despite his antics. He is very smart and has much to offer if you can cut through his ridiculos demeaner

As for indexing it is the natural reaction to a stock market that from the low in 1974 has gone up 20X over 33 years. The perspective of the majority was quite different in 1942 when the market was net flat from 1909. For a 33 year period all that was earned in the DJIA was dividends. So for that reason individual stock picking is not as popular as it was then and stocks no longer yield more than bonds since they are inherently "unsafe".
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Re: If this isn't a good enough reason to index...
Old 03-26-2007, 06:32 AM   #5
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Re: If this isn't a good enough reason to index...

Quote:
Originally Posted by Running_Man
Cramer was a hugely successful hedge fund manager, so I think he would do well for anyone, despite his antics. He is very smart and has much to offer if you can cut through his ridiculos demeaner

As for indexing it is the natural reaction to a stock market that from the low in 1974 has gone up 20X over 33 years. The perspective of the majority was quite different in 1942 when the market was net flat from 1909. For a 33 year period all that was earned in the DJIA was dividends. So for that reason individual stock picking is not as popular as it was then and stocks no longer yield more than bonds since they are inherently "unsafe".
Cramer was very successful while he was a fund manager, so with that I agree.

As for your assertion that indexing is in popular (or meaningful) during rising markets. There are two problems with this.

1. We don't havea huge number of successful fund managers from that time period.
So despite this ease you find with outperforming the indexes, it still appeared to be pretty hard. As a matter of fact, most of the research surrounding indexing was done using the datasets from the time period you mentioned.

2. Investor return will always be the market return minus expenses, so sadly we all can't be above average.

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Re: If this isn't a good enough reason to index...
Old 03-26-2007, 08:49 AM   #6
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Re: If this isn't a good enough reason to index...

Quote:
Originally Posted by saluki9

1. We don't have a huge number of successful fund managers from that time period.
So despite this ease you find with outperforming the indexes, it still appeared to be pretty hard. As a matter of fact, most of the research surrounding indexing was done using the datasets from the time period you mentioned.
And what is the most popular index fund of that 1909-1942 time period? the problem with most funds during that period is that vast majority were dissolved in the 1930's. My point was that if you were to go back to 1942 I don't think you will find the popularity in indexing that it enjoys today as the index was flat for 33 years.... Were the same to happen over the next 33 years I think you would find the popularity of the Vanguard index funds would be much less. The validity of an index fund is always there.

As an example of the stock market heros of that time period you could examine the famed ballplayer Ty Cobb, who never made much in his career but became extrodinarily wealthy in his retirement on his stock selections, primarily Coca-Cola. Indexing was not popular then as it is now
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Re: If this isn't a good enough reason to index...
Old 03-26-2007, 08:55 AM   #7
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Re: If this isn't a good enough reason to index...

Index funds started in 1976.......the stock market started in the 1700's..............

Anybody here that doesn't think Fidelity Magellan and Growth Fund of America are doing "closet indexing"
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Re: If this isn't a good enough reason to index...
Old 03-26-2007, 11:59 AM   #8
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Re: If this isn't a good enough reason to index...

Quote:
Originally Posted by Olav23
Jim Cramer on how hedge funds manipulate markets (specifically how he did it in the past!).




My favorite quote: "all the moron longs..."
I saw that video about a week ago. IMO, Cramer just likes the attention, and likes to appear as a big guy that can move the market. As CC said - how much does it cost to move it, and then how much can you profit from it before *that* action moves it? And you are in a very risky position if some big news outside of your control overpowers your little buys/sells (yes, $10M is 'little' compared to the 'market').

As far as him being a successful fund manager - remember, if you take a lot of risk, you have a chance of looking like a genius. The 99% that fail - we never hear from again (unless they ask us for spare change near the train station). But the 1% that win big go on TV and brag about how smart they are.

Maybe Cramer is the exception, but I'll bet that if you looked at the risk adjusted return of his fund, it wouldn't look so impressive.

-ERD50
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