I remember the first time I saw James Cramer on TV. I thought , ” Man , whatever is the opposite of yoga, this guy is doing it.” Mr. Cramer was(andremains) everything Om Shantih isn’t: uncool bordering on berserk, manic, churlish and very, very smart. Mr. Cramer’s Confessions of a Street Addict is the first well-written account of the 90′s bull market-insider’s tale, and also a remarkably vivid self-drawn cartoon. The book tells how a “liberal arts leaning guy” ended up an alpha-male neurotic running a hedge fund; and how a man with a congenital sneer and a car alarm for a voice became a media darling. As it turns out, the explanations dovetail.
James Cramer completely mastered the art of noise.
Let’s define our terms: “Noise” is the short-term movement in the price of a stock, a random fluctuation that has little or nothing to do with the real value of the underlying business. Mr. Cramer ran his successful hedge fund as a fast-buck trader, rarely holding onto positions for more than a few days. He’s the anti–Warren Buffett: Instead of searching public companies for hidden value, Mr. Cramer played the tape, picking up on the little shifts in rhythm and mood that can signal the direction of market-set prices. “Part of our great strength,” Mr. Cramer admits, “was the recognition that investing is almost all psychology and very little substance.” Mr. Cramer gave stocks nicknames (“Fizzy” for Pfizer, “Mr. Softee” for Microsoft), then traded them-selling them, buying them back, selling them, buying them back-in furious slugs, day after day.
Noise has its aural as well as its statistical dimension: talking loudly and senselessly and at length on TV is noise, too. With the stock market evolving from national pastime to national mania, Mr. Cramer began to blanket the airwaves, appearing on Good Morning America , CNBC, Fox. Consider a typical Cramer day: waking up sometimes as early as 2 or 3 in the morning, trading overseas markets before dawn, reading 20 financial sections, penning a column for his start-up financial Web site, TheStreet.com, while getting pancaked up for his appearance on Good Morning America .
This omnipresence was meant to draw traffic to Mr. Cramer’s Web site. Looking back on it, though, his emergence as the public face of Wall Street was a turning point. Encouraged by homespun buy-and-hold verities from Mr. Buffett, and some little-guy flattery from Peter Lynch, the 90′s bull market began with prudence and husbandry and real value; it was a win-win contract with the nation’s widows and orphans. But by the late 90′s, with Cisco legging up to infinity and I.P.O.’s minting overnight billionaires, velocity had taken over. As a result, the two senses of noise converged: Say it , and it happens . Say Amazon.com is worth $400, and it shoots up to $400. As someone playing to a mass audience, then returning to his trading desk to play the dips and swerves of the market, the noise convergence gave Mr. Cramer enormous power. One question has dogged him throughout his career: Did he abuse this power?
In 1998, with the markets swooning precipitously and his fund facing, for the first time, total disaster, Mr.Cramerwentonlineand penned, virtually in real time, a column entitled “Get Out Now.” The piece was posted on TheStreet.com, and almost immediately Mr. Cramer’s fund began to buy, buy, buy. Well, Mr. Cramer was a notorious bull: He had minted money as an aggressive buyer-on-dips. By declaring the bull dead, did he help force capitulation and create a bottom to bounce off of?
Mr.Cramer has been investigatedbythe S.E.C. and various journalists-and alwaysvindicated. Earlier this year an ex-employee, NicholasMaier, wrote an incendiarybook, claiming that his bossroutinely cheatedinorderto achieve his eye-popping returns. In a nutshell, Mr. Maierclaimed that Mr. Cramer’s shop operated as a nexus for non-publicinformationwhichMr. Cramer could then profit from: In exchange for outlandish commissions, brokers told him ahead of time what they would be upgrading and downgrading; journalists leaked market-moving stories before they were published. (Mr. Maier’s credibility took a hit when a first printing had to be pulped after one particularly juicy accusation turned out to be false.) Mr. Cramer’s book is an implicit rebuttal, but of a fascinating variety: He confesses to dancing right up to the line-but denies crossing it. “We became merchants of the buzz,” he writes, “getting long stocks and then schmoozing with analysts …. We would work to get upgrades or downgrades because we knew cynically, that Wall Street was simply a promotion machine.”
Repeatedly throughout his Confessions , it’s Wall Street that’s corrupt; Mr. Cramer is simply along for the ride. The most revealing chapters involve the I.P.O. for TheStreet.com, which Mr. Cramer started with Martin Peretz, publisher of The New Republic . “How could the markets be that stupid?” Mr. Cramer asks. “And would they stay stupid long enough for TheStreet.com to come public?” They did, though TheStreet.com eventually cratered, just like the rest.
Confessions of a Street Addict is a great, pummeling read, every bit as barbed, intense and unrelenting as its author. As an undergraduate at Harvard, Mr. Cramer was elected president of the The Harvard Crimson . He started out his professional life as a journalist. Though the hypermaniacal routine he cultivated as a Wall Streeter hardly allows for many contemplative asides (we rarely leave the confines of either Mr. Cramer’s complex ego or his trading war room), his memoir is packed with good writing. His literary flourishes actually work, which is rare in a business book (Roger Ailes, for example, has “tungsten eyes” when he gets mad).
Who better than a man of contradictions, a wounded egomaniac blessed at once with a cast-iron constitution and an exquisite sensitivity to public image, to profit from the madness of crowds? A chippy, insecure kid from the working middle class of Philadelphia, he still draws a kind of competitive energy from his second-class status at college-though when in need, he never fails to call on his Harvard connections. An incorrigible narcissist, he repeatedly credits others with his success: principally his wife, herself a genuinely gifted trader, and his business partner, Jeff Berkowitz. Mr. Cramer is, by his own and Mr. Maier’s account, a gruesome boss with a seemingly endless appetite for destruction (he smashes phones with startling regularity). Another confession: His financial career turned him into a narrowly focused obsessive and all-around bore. “Up until this year there wouldn’t have been anything about me in my thumbnail [biography] that anyone could be proud of.”
Thrilled as he is by the pissing contests on Wall Street, Mr. Cramer is haunted by the journalist he failed to become. His mother wanted him to be a writer, and his family seems confounded by the competitive fury that fuels his money-making. Until he retired, he was driven by the awful possibility that someone might ask him, “If you’re so smart, why are you so poor?” How nice if we were heading, along with Mr. Cramer, into a decade driven by a different question: “How can an intelligent man making so much money be such a jackass?”
Stephen Metcalf writes for Slate , The New Republic and The Nation .