The Fortune Tellers: Inside Wall Street's Game of Money, Media, and Manipulation - Couverture rigide

Kurtz, Howard

Couverture rigide

ISBN 10 : 0684868792 ISBN 13 : 9780684868790

Editeur : Simon & Schuster, 2000

A propos du livre

Extrait :

Chapter One: The King of all Media

It was the worst day of Jim Cramer's life.

For fourteen long years, the flamboyant Wall Street trader had worked insane hours, getting to the office by 5:00 each morning, shouting orders, playing each hiccup in the market to make money for himself and his small coterie of investors. He had become fabulously wealthy, grabbed a bit of fame as a magazine writer and television commentator, even launched a thriving Internet news service. He had also gotten into a couple of ethical scrapes, juggling his roles as both media hotshot and market guru, but there was no question he was at the top of his hard-fought game.

And now, on the morning of October 8, 1998, Cramer was watching it all unravel. The once-soaring stock market had been in a stomach-churning decline since July, slicing nearly 2,000 points off the Dow and making fools of those who had so confidently placed their bets on the exhilarating ride up. Suddenly, inexplicably, one investor after another had been calling Cramer and demanding his cash. Before long, half the one hundred investors in the hedge fund, Cramer, Berkowitz & Company, were bailing out. There was talk that Cramer was losing his focus, that he was spread too thin with his various media ventures. Cramer's confidence was badly shaken. No one, not a single investor, had ever bolted on him before. What had he done wrong? True, he was having a bad year; the fund had earned just 2 percent since January, compared to a 30 percent rise in the Standard & Poor's 500 index. But these mass defections were his worst nightmare. All of the fund's money was invested in the ailing market, yet Cramer was required to wire the cash to his disgruntled clients by 1:00 p.m. He had six hours to come up with more than $50 million.

Most of the time, Cramer was cool in a crisis. Sitting at the trading desk in his eighth-floor office at 100 Wall Street, surrounded by four computers and a Bloomberg terminal flashing the fate of stocks in green and red, he would bark directions to his staff, scan the papers, listen to CNBC on the television set behind him, write his online columns, and scroll through his e-mail, sometimes all at once. He would pick up the black phone with the open line to Max Levine, his broker, and buy "five AOL" or sell "ten Sun Micro" as easily as a couple of lottery tickets, when he was actually betting hundreds of thousands of dollars on companies with amazingly volatile stocks.

But today was different. Cramer had triggered the crisis himself, by trying to help out Eliot Spitzer, an old pal and law school classmate. Spitzer was the Democratic candidate for New York state attorney general, and he badly needed money to finance his campaign. Spitzer's cash was tied up in the hedge fund, and Cramer agreed to let him withdraw it. Under federal rules, however, hedge funds had to treat all investors equally, and so Cramer had to announce a day on which all his clients would be eligible to pull their cash. The due date fell on October 8, which happened to come during a near-panic on Wall Street. The Dow had dropped from more than 9,300 to less than 7,500 in just 10 weeks. Cramer had persuaded a few of the defectors to stand by him, but most were determined to pull the plug. He had $20 million in cash on hand, but he needed to sell enough stocks to pay out $70 million?and he had to sell them in a frenzied environment in which prices were dropping like a rock.

In the worst blow of all, one of those abandoning ship was Martin Peretz, the owner of The New Republic magazine and one of Cramer's closest friends. Cramer thought of himself as having been like a son to Peretz. They had been tight since his days at Harvard Law School in the early 1980s, when he took one of Peretz's classes. Even then Cramer had a feel for the market; Peretz had found himself making money from the weekly stock tips that Cramer would leave for callers on his answering machine. Peretz was so impressed that he had given the headstrong young man $500,000 to invest, and Cramer had tripled his money. The friendship blossomed -- Peretz was the best man at Cramer's wedding -- and in 1996 they had teamed up in launching TheStreet.com, a financial news Website that was attracting a loyal following. For Peretz's fiftieth birthday, Cramer had raised $50,000 for the Jerusalem Foundation, a favorite cause for the fiercely pro-Israel publisher.

But their relationship had grown increasingly strained. Cramer was tired of the mentor-student paradigm; he was forty-three now, and he wanted Peretz to regard him as an equal. And he felt that Peretz had reneged on his word by putting up less than the full share he had promised for financing TheStreet.com, an accusation that Peretz strongly disputed. Cramer felt he was busting his butt on the new company and that Peretz was doing little or nothing. Yet he needed Peretz because the Securities and Exchange Commission had insisted that, as a trader, Cramer had to be aligned with a legitimate publisher in a Web operation covering the very market in which Cramer was so heavily invested. Frustrated, Cramer told Peretz that their fifty-fifty split in TheStreet.com had to change, and demanded a million more shares in the company. Peretz balked, viewing this as a rather piggish move by his one-time pupil, but reluctantly went along.

At a Street.com Christmas party in 1997, Cramer gave a teary-eyed speech, praising the staff for having gotten the fledgling company off the ground. He invoked Henry Luce, the legendary founder of Time magazine. When it was Peretz's turn to speak, he said: "One thing's for sure. Like Luce, Cramer's a bastard." Cramer was stunned and walked out of the party. His wife, Karen, told him never to speak to Peretz again.

Now, at Cramer's most vulnerable moment, Peretz was striking back. A couple of other investors told Cramer that Peretz had urged them to pull out of the hedge fund, saying that he knew Cramer better than anyone, that Cramer didn't care about the business anymore and was spending all his time on TheStreet.com. Peretz would later say he had told only one person to leave the fund, but Cramer was convinced that his longtime friend was responsible for this terrifying run on his bank. It was, in Cramer's eyes, the ultimate betrayal. He had not cried since his mother's funeral, but at night he had found himself bawling over this massive vote of no confidence.

It was, for the moment, a matter of survival. If Cramer could not come up with the money in time and the market crashed, he would be personally liable for the losses suffered by his disaffected investors. The biggest potential defector was financier Max Palevsky, whom Cramer believed had bought Peretz's argument that he had lost his focus. That was nearly impossible for Cramer to refute, since Peretz was presumed to know him so well. Palevsky's stake in the fund was so large that if he bailed, Cramer would have to close his doors. It was as simple as that. After furious negotations, Cramer worked out a settlement that persuaded Palevsky to stay.

For the first time in four years, Cramer called his wife Karen, a former trader with whom he had cofounded the hedge fund, and asked her to leave their home in Summit, New Jersey, and come to work. Get a sitter for the kids, he said, find a way to get down here. When Karen Cramer showed up, her husband's shirt was soaked through with sweat. The computer screens were all flashing red. Declining stocks outnumbered the winners nine to one. Was this a good buying opportunity -- or another 1987 crash? Cramer had little time for such speculation; he had to sell if he was to raise the cash he needed. By lunchtime the Dow was down another 264 points. On CNBC's Power Lunch program, host Bill Griffeth was talking about how all the bulls had turned bearish. Cramer thought the stock market would definitely crash. Karen said their only hope for saving the firm was for Alan Greenspan to somehow rescue the sinking market. But Greenspan had been saying that business was doing just fine and had made no move to halt the market's fall.

Ralph Acampora, the superstar analyst at Prudential Securities, was fanning the flames, telling his sales force that the Dow, which he had thought could drop to 7,000, could now go as low as 6,735. This forecast was crucial because Acampora was one of Wall Street's greatest bulls; if he was losing confidence, then the downturn had to be for real. Abby Joseph Cohen, the fiercely bullish analyst at Goldman Sachs, stayed upbeat about the invincibility of the American economy, but even she made a downward adjustment in her 1999 projections for the S & P 500. Trading desks everywhere echoed the message: "Cohen's getting off."

From his cluttered desk, Cramer was taking his cues from Ron Insana, a veteran anchor at CNBC whom Cramer had been watching since his Harvard days. Insana had incredible contacts and always seemed to have a sixth sense about what was happening. But despite his relaxed on-air persona, Insana, too, was nervous. Days earlier, he had called his father-in-law and told him to take his money out of the bank. He was considering putting some of his own savings into gold. No one was sure how low this market could go.

Early that morning, Insana had reason to call one of his best sources, Lyle Gramley, a former Federal Reserve governor who was still plugged into monetary policy. Someone told Insana that Gramley had heard the Fed was planning some kind of conference call, a highly unusual event between scheduled meetings. The call would be to discuss a possible easing of interest rates. The Fed had already cut rates at the end of September with no response from the market, so a second rate cut would be a major surprise. Gramley hedged a bit when Insana reached him, saying only that such a call was possible. But Insana believed this was probably spin, for his source was insisting that Gramley had it solid. The Fed had to do something, Insana thought. Too many people believed that the wheels were coming off the market.

Cramer was selling stocks all morning -- many of his best stocks, the ones he hated to lose -- to come up with the cash he desperately needed. Karen manned the desk while he frantically tried to talk the last few defectors out of leaving him. But even as he liquidated much of his fund and wired the money he owed, he agonized over whether to seize the opportunity to buy other stocks at bargain prices. He would have to do so on margin, with borrowed money, and if the market kept sinking he could be wiped out, as so many of his friends had been during the '87 debacle. Weeks earlier, the massive hedge fund Long Term Capital Management had collapsed. Who knew where the bottom was? Cramer was scared. Traders were never supposed to admit that, but this was a truly frightening moment.

At 1:15, Ron Insana came on the air with some breaking news. Cramer, watching the set on the file cabinet behind him, thought the mere sight of Insana would cause further losses, since he had been delivering consistently bearish news in recent days. But wait! Insana was talking about his conversation with Lyle Gramley. "Shut up," Cramer shouted, hitting the volume button. Insana reported that Gramley believed that the Fed members were arranging a conference call. The Dow moved up 30, 40, 45 points as Insana delivered the news. Now the day's loss was less than 200. Cramer had just filed a bearish column for TheStreet.com. "What if Insana is right?" Karen asked him. "You will never live this piece down."

Still, Cramer remained reluctant to buy. That, he soon realized, was a colossal mistake. Insana had been right about the conference call, and the Fed would lower interest rates days later. Cramer felt he should have moved the minute he had an inkling of possible Fed action. Prices were moving up; the long slide was over. The Dow began what would be a steady climb back over 9,000. It was remarkable, Cramer thought, the first time a market bottom had been created by a TV reporter's scoop.

The carnage was over. Cramer had saved the company, but he had lost millions of dollars in the process. He had lost Marty Peretz, who had humiliated him and brought him low. This was an ugly way to make a living, Cramer thought, an utterly soulless business. It had made him rich, but at a breathtaking price.

From his first days as a rookie trader, James J. Cramer had craved respect. He had grown up in the Philadelphia suburb of Wyndmoor, the son of a man who sold gift wrap for a living, and had attended public schools there. He had sold ice cream and sodas at Veterans Stadium during Phillies baseball games. When Cramer got to Harvard in 1973, thanks to a scholarship and financial aid, he was conscious of his modest background among the bluebloods of Cambridge, and determined to make it through sheer hard work.

Cramer was immediately drawn to journalism and began churning out dozens of stories for the Harvard Crimson. He even added a middle initial, though he had no middle name, because an editor at the Crimson, Nicholas Lemann, thought it sounded more distinguished. When he ran for president of the Crimson in 1975, Cramer felt very much like an outsider. He was challenging a student from a more elite background, Eric Breindel, a Manhattan private-school graduate, and was convinced there was a stop-Cramer movement aligned against him. But he won the job by one vote and set about trying to make the paper profitable. Faced for the first time with questions about payrolls and revenues, Cramer launched a weekend magazine and used the advertising proceeds to stem the paper's losses.

When it came to his own finances, though, Cramer was something of a loser. After college, he found himself back in Wyndmoor watching Phillies games. He called his college pal Michael Kinsley, who was then editing The New Republic. Cramer was introduced to Marty Peretz and became a contributor to the magazine. He soon realized, though, that he couldn't support himself on $150 an article.

Cramer worked briefly for Congressional Quarterly, living with his aunt in Washington, and then took a reporting job at the Tallahassee Democrat for $155 a week. He was toiling away at the usual mix of local stories when serial killer Ted Bundy struck at a sorority house down the block from where Cramer lived. Cramer's manic work on that story brought him an offer from a bigger paper, the Los Angeles Herald-Examiner.

But the move west did nothing to change Cramer's irresponsible ways with money, and he ran up plenty of debts. At one point he had just one thousand dollars to his name, went to Las Vegas, and gambled away half of it. He was living in a bad neighborhood, and when his apartment was burglarized he lost everything, including his checks. Cramer spent months sleeping on a friend's floor, or in his car with a gun beside him. He came down with mononucleosis and a jaundiced liver. He had hit bottom.

Desperate for a break, Cramer got a call from Steven Brill, who was launching a magazine called The American Lawyer and had been given Cramer's name by a mutual friend. Cramer moved to the floor of his sister's Greenwich Village apartment, and Brill doubled his salary to a princely $25,000 a year. Back on his feet, Cramer began investing in the stock market. While in California he had made some forays to National Semiconductor and other firms in what would later be called Silicon Valley, and he put some cash into these fast-growing companies.

Brill was such a tenacious boss that when Cramer decided in 1980 to go to Harvard Law School, Brill called the dean and told him that Cramer would have ...

Présentation de l'éditeur :

From the author of the New York Times bestseller Spin Cycle comes this engrossing, entertaining exposé of how the media -- from television to newspapers to the Internet -- drive the financial markets today.
The booming economy and mass investing have produced an insatiable demand for financial news and given rise to a group of "fortune tellers" eager to scoop and spread the latest intelligence. In this riveting, unsettling book, Howard Kurtz introduces the powerful journalists, commentators, and analysts whose reports -- too often based on rumor, speculation, and misinformation -- have a real-time impact on the rise and fall of stocks and on the financial health of millions of investors.
Focusing on such well-known figures as cable TV's Ron Insana, Maria Bartiromo, and Lou Dobbs; Christopher Byron and other print reporters who specialize in exclusives; and superstar analysts Ralph Acampora and Henry Blodget, The Fortune Tellers is an incisive, often amusing, and sometimes terrifying report by a journalist well known for his sharp-eyed observations and behind-the-scenes access. In a time of head-spinning volatility, The Fortune Tellers is essential reading for all of us who gamble with our savings in today's overheated stock market.

À propos de cette édition

• Éditeur: Simon & Schuster
• Date d'édition: 2000
• ISBN 10: 0684868792
• ISBN 13: 9780684868790
• Reliure: Relié
• Numéro d'édition: 1
• Nombre de pages: 352