Misplaced Pages

#737262

116-702: James Joseph Cramer (born February 10, 1955) is an American television personality, author, entertainer, and former hedge fund manager. He is the host of Mad Money on CNBC , and an anchor on Squawk on the Street . After graduating from Harvard College and Harvard Law School , he worked for Goldman Sachs and then became a hedge fund manager, founder, and senior partner of Cramer Berkowitz. He co-founded TheStreet , which he wrote for from 1996 to 2021. Cramer hosted Kudlow & Cramer from 2002 to 2005. Mad Money with Jim Cramer first aired on CNBC in 2005. Cramer has written several books, including Confessions of

232-414: A bull market , distressed investing works best during a bear market . Risk arbitrage or merger arbitrage includes such events as mergers , acquisitions, liquidations, and hostile takeovers . Risk arbitrage typically involves buying and selling the stocks of two or more merging companies to take advantage of market discrepancies between acquisition price and stock price. The risk element arises from

348-439: A counterparty to derivative contracts , and lends securities for particular investment strategies, such as long/short equities and convertible bond arbitrage . It can provide custodial services for the fund's assets, and trade execution and clearing services for the hedge fund manager. Hedge fund administrators are typically responsible for valuation services, and often operations , and accounting . Calculation of

464-1006: A lack of transparency . Another common perception of hedge funds is that their managers are not subject to as much regulatory oversight and/or registration requirements as other financial investment managers, and more prone to manager-specific idiosyncratic risks such as style drifts, faulty operations, or fraud. New regulations introduced in the US and the EU as of 2010 required hedge fund managers to report more information, leading to greater transparency. In addition, investors, particularly institutional investors, are encouraging further developments in hedge fund risk management, both through internal practices and external regulatory requirements. The increasing influence of institutional investors has led to greater transparency: hedge funds increasingly provide information to investors including valuation methodology, positions, and leverage exposure. Hedge funds share many of

580-694: A real-estate broker , and general manager of The Longshoreman, an Italian bistro/restaurant in the borough of Brooklyn in New York City. Cramer lives in Summit, New Jersey . He also has a 65-acre estate in the New Jersey countryside, and a summer house in Quogue, New York , on Long Island . In a 2013 interview on The Carlos Watson Show , Cramer said that he dealt with mental health issues surrounding his anger and his workplace behavior, attributing

696-615: A "Don't Buy" from a "Triple Sell", and then said that the stock was not a "Don't Buy" anymore, but a "Risky". On November 13, 2005, Dan Rather interviewed Cramer on 60 Minutes . Among the topics of discussion was Cramer's past at his hedge fund, including his former violent temper. Cramer has also made appearances on Today , NBC Nightly News , Live with Regis and Kelly , Cheap Seats , Late Night with Conan O'Brien , The Tonight Show with Jay Leno , Late Show with David Letterman , Jimmy Kimmel Live! in February 2008 and as

812-535: A "fundamental growth" strategy invest in companies with more earnings growth than the overall stock market or relevant sector, while funds using a " fundamental value " strategy invest in undervalued companies. Funds that use quantitative and financial signal processing techniques for equity trading are described as using a "quantitative directional" strategy. Funds using a " short bias " strategy take advantage of declining equity prices using short positions. Event-driven strategies concern situations in which

928-405: A "rate of return of 24% after all fees for 15 years," until he retired from the hedge fund in 2001. He self-reported a 36% return in 2000, at the peak of the dot-com bubble . In January 2000, close to the peak of the dot-com bubble, Cramer recommended investing in technology stocks, and suggested a repeat of the stock performance of 1999. In February 2000, the year in which Cramer said he produced

1044-608: A 36% return, Cramer said that there were only 10 stocks he wanted to own, and he was buying them every day. These stocks were 724 Solutions, Ariba , Digital Island , Exodus Communications , InfoSpace , Inktomi , Mercury Interactive , Sonera , VeriSign , and Veritas Software . He also dismissed the investing strategy of Benjamin Graham and David Dodd , and said that price–earnings ratios did not matter. An August 20, 2007, article in Barron's stated that "his picks haven't beaten

1160-440: A CTA from a regulatory perspective and the main divide is between systematic and discretionary strategies. A classification framework for CTA/Macro Strategies can be found in the reference. Directional investment strategies use market movements, trends, or inconsistencies when picking stocks across a variety of markets. Computer models can be used, or fund managers will identify and select investments. These types of strategies have

1276-562: A Philadelphia-based company that sold wrapping paper, boxes, and bags to retailers and restaurants. Cramer and his family moved to Springfield Township , and he attended Springfield Township High School in Montgomery County, Pennsylvania , graduating in 1973. He competed for the high school track team. Among his first jobs, starting in 1971, Cramer sold Coca-Cola and then ice cream at Veterans Stadium during Philadelphia Phillies games. Cramer first began studying stocks in

SECTION 10

#1732782786738

1392-496: A Street Addict (2002), Jim Cramer's Real Money: Sane Investing in an Insane World (2005), Jim Cramer's Mad Money: Watch TV, Get Rich (2006), and Jim Cramer's Get Rich Carefully (2013). Cramer was born in 1955 in Wyndmoor, Pennsylvania (a suburb of Philadelphia ), to Jewish parents. Cramer's mother, Louise A. Cramer (1928–1985), was an artist. Cramer's father, N. Ken Cramer (1922–2014), owned International Packaging Products,

1508-504: A bank, which thus necessitates sales members interacting directly with institutional clients in order to assess their needs, provide general market commentary, and work with other members of the desk such as traders or structurers in order to price and execute their desired trades. The sales and trading function will also typically employ financial analysts that provide trading strategy advice to external as well as internal clients to support sales and trading. This strategy often affects

1624-410: A book review. After first profiting from the stock picks he heard on Cramer's answering machine, Peretz gave Cramer $ 500,000 to invest. In two years, Cramer made $ 150,000 for Peretz. During his years at Harvard Law School, Cramer worked as a minor research assistant for Alan Dershowitz . He assisted Dershowitz's campaign to acquit alleged murderer Claus von Bülow , even though Cramer believed von Bülow

1740-496: A chart, under the headline "Action Alert PLUS is CRUSHING the S&;P 500", showing that the picks returned about 39% from the portfolio's inception through last March 31, compared with 15.5% for the S&P 500 over the same nine-year, three-month period. But the S&P figure did not include reinvested dividends. With them, the S&P 500 returned 38.3%." A study by Wharton researchers Jonathan Hartley and Matthew Olson found that in

1856-431: A computerized system, known as "systematic/quantitative". The amount of diversification within the fund can vary; funds may be multi-strategy, multi-fund, multi-market, multi-manager, or a combination. Sometimes hedge fund strategies are described as " absolute return " and are classified as either " market neutral " or "directional". Market neutral funds have less correlation to overall market performance by "neutralizing"

1972-700: A coronavirus relief bill, Cramer expressed doubt over the deal saying, "I mean, what deal can we have, Crazy Nancy?" He then quickly added "I'm sorry, I—that was the president. I have such reverence for the office, I would never use that term." "But you just did," Pelosi replied. In 2022, in response to a long-running series of unrelated humorous social media comments suggesting to invest against Cramer's stock recommendations, The Financial Times published SEC filings which revealed that Tuttle Capital Management –the same firm behind Tuttle Capital Short Innovation ETF (which bet against Cathie Wood 's Ark Invest ) fund– had filed to launch two funds with one labeled "LJIM" and

2088-521: A fund has too much exposure to a particular investment, sector, trading strategy, or group of correlated funds. These risks may be managed through defined controls over conflict of interest , restrictions on allocation of funds, and set exposure limits for strategies. Many investment funds use leverage , the practice of borrowing money, trading on margin , or using derivatives to obtain market exposure in excess of that provided by investors' capital. Although leverage can increase potential returns,

2204-446: A fund manager "drifting" away from an area of specific expertise, manager risk factors include valuation risk , capacity risk, concentration risk , and leverage risk . Valuation risk refers to the concern that the net asset value (NAV) of investments may be inaccurate; capacity risk can arise from placing too much money into one particular strategy, which may lead to fund performance deterioration; and concentration risk may arise if

2320-470: A good year. Earnings at the very top are higher than in any other sector of the financial industry, and collectively the top 25 hedge fund managers regularly earn more than all 500 of the chief executives in the S&;P 500 . Most hedge fund managers are remunerated much less, however, and if performance fees are not earned then small managers at least are unlikely to be paid significant amounts. In 2011,

2436-403: A greater appetite for risk , with the intention of maximizing returns, subject to the risk tolerance of investors and the fund manager. Managers will have an additional incentive to increase risk oversight when their own capital is invested in the fund. Hedge fund management firms typically charge their funds both a management fee and a performance fee . Management fees are calculated as

SECTION 20

#1732782786738

2552-604: A greater exposure to the fluctuations of the overall market than do market neutral strategies. Directional hedge fund strategies include US and international long/short equity hedge funds, where long equity positions are hedged with short sales of equities or equity index options . Within directional strategies, there are a number of sub-strategies. " Emerging markets " funds focus on emerging markets such as China and India, whereas "sector funds" specialize in specific areas including technology, healthcare, biotechnology, pharmaceuticals, energy, and basic materials. Funds using

2668-533: A guest judge on The Apprentice in January 2007 and was interviewed by Jon Stewart on The Daily Show in March 2009 (see Jon Stewart–Jim Cramer conflict ). Cramer also appeared in the 2008 motion picture Iron Man spoofing Stark Industries on his show Mad Money , and he also appeared in the movie Wall Street: Money Never Sleeps . He also says he consulted for the original Wall Street movie by telling

2784-439: A large amount of flexibility (due to their ability to use leverage to take large positions in diverse investments in multiple markets), the timing of the implementation of the strategies is important in order to generate attractive, risk-adjusted returns. Global macro is often categorized as a directional investment strategy. Global macro strategies can be divided into discretionary and systematic approaches. Discretionary trading

2900-445: A management fee of 2% on total assets and a 20% fee on realized gains. In the 1970s, hedge funds specialized in a single strategy with most fund managers following the long/short equity model. Many hedge funds closed during the recession of 1969–1970 and the 1973–1974 stock market crash due to heavy losses. They received renewed attention in the late 1980s. During the 1990s, the number of hedge funds increased significantly with

3016-400: A manager is only rewarded if the fund generates returns in excess of the returns that the investor would have received if they had invested their money elsewhere. Some hedge funds charge a redemption fee (or withdrawal fee) for early withdrawals during a specified period of time (typically a year), or when withdrawals exceed a predetermined percentage of the original investment. The purpose of

3132-422: A manager will sometimes close a fund that has suffered serious losses and start a new fund, rather than attempt to recover the losses over a number of years without a performance fee. Some performance fees include a " hurdle ", so that a fee is only paid on the fund's performance in excess of a benchmark rate ( e.g. , LIBOR ) or a fixed percentage. The hurdle is usually tied to a benchmark rate such as Libor or

3248-636: A means to generate returns. At one point in a clip from December 22, 2006, he said, "I would encourage anyone in a hedge fund to do it." He called it a very quick way to make money and very satisfying. He continued, "By the way, no one else in the world would ever admit that, but I don't care, and again, I'm not gonna say it on TV." Stewart responded, "I want the Jim Cramer on CNBC to protect me from that Jim Cramer." Cramer again admitted that he could do better and that he should try to change. The interview ended when Stewart pointedly suggested: "Maybe we can remove

3364-460: A month. On February 8, 2023, Cramer recommended viewers to buy Silicon Valley Bank stock, just a month before its collapse . On March 10, he praised First Republic Bank as a "very good bank" in a Twitter post. First Republic's stock dropped by more than 80% in the days following Cramer's tweet and on May 1, it also collapsed, becoming the third and final bank to collapse in the 2023 banking crisis . Cramer says that, between 2002 and May 2009,

3480-400: A percentage of the fund's net asset value and typically range from 1% to 4% per annum, with 2% being standard. They are usually expressed as an annual percentage, but calculated and paid monthly or quarterly. Management fees for hedge funds are designed to cover the operating costs of the manager, whereas the performance fee provides the manager's profits. However, due to economies of scale

3596-665: A position based on the predicted movement of the security or securities in question. Large institutional investors such as hedge funds are more likely to pursue event-driven investing strategies than traditional equity investors because they have the expertise and resources to analyze corporate transactional events for investment opportunities. Corporate transactional events generally fit into three categories: distressed securities , risk arbitrage , and special situations . Distressed securities include such events as restructurings, recapitalizations , and bankruptcies . A distressed securities investment strategy involves investing in

Jim Cramer - Misplaced Pages Continue

3712-433: A president". In response to a reporter's question, Press Secretary Robert Gibbs replied, "If you turn on a certain program, it's geared to a very small audience. I'm not entirely sure what he's pointing to make some of the statements..... You can go back and look at any number of statements he's made in the past about the economy and wonder where some of the back-ups for those are, too." On March 5, 2009, Cramer responded to

3828-410: A single strategy or multiple strategies for flexibility, risk management , or diversification. The hedge fund's prospectus , also known as an offering memorandum , offers potential investors information about key aspects of the fund, including the fund's investment strategy, investment type, and leverage limit. The elements contributing to a hedge fund strategy include the hedge fund's approach to

3944-627: A state of maturity that is consolidating around the larger, more established firms such as Citadel, Elliot, Millennium, Bridgewater, and others. The rate of new fund start ups is now outpaced by fund closings. In July 2017, hedge funds recorded their eighth consecutive monthly gain in returns with assets under management rising to a record $ 3.1 trillion. Hedge fund strategies are generally classified among four major categories: global macro , directional, event-driven , and relative value ( arbitrage ). Strategies within these categories each entail characteristic risk and return profiles. A fund may employ

4060-515: A stock's price. Cramer said that one strategy to keep a stock price down is to spread false rumors to reporters he described as "the Pisanis of the world", in reference to CNBC correspondent Bob Pisani , whom Cramer insinuated was able to be manipulated, saying "You have to use these guys." He also discussed giving information to "the bozo reporter from The Wall Street Journal " to get an article published. Cramer said this practice, although illegal,

4176-401: A strategy based on predicting the final approval of new pharmaceutical drugs ; and legal catalyst strategy, which specializes in companies involved in major lawsuits. Relative value arbitrage strategies take advantage of relative discrepancies in price between securities. The price discrepancy can occur due to mispricing of securities compared to related securities, the underlying security or

4292-496: A substantial portion of the asset management industry, with assets totaling around $ 3.8 trillion as of 2021. The word "hedge", meaning a line of bushes around the perimeter of a field, has long been used as a metaphor for placing limits on risk. Early hedge funds sought to hedge specific investments against general market fluctuations by shorting other, similar assets. Nowadays, however, many different investment strategies are used, many of which do not "hedge" risk. During

4408-431: A year when the S&P 500 Index rose 29%. The underperformance in 1998 led to significant investor withdrawals. In 1999 the fund returned 47%, and in 2000 it returned 28%, beating the S&P 500 by 38 percentage points. Cramer said he produced a 24% average annual return over 14 years, and "routinely [took] home $ 10 million a year and more." However, his results have been disputed . In 2001, Cramer retired from managing

4524-679: Is a different kinda market. And the Fed is asleep." When the transcript from the August 7, 2007, meeting of the Federal Reserve Open Markets Committee was subsequently released on August 28, 2007, it showed that Cramer's comments elicited laughter from participants during a comment from Dennis Lockhart , president, and CEO of the Federal Reserve Bank of Atlanta. "I believe that the correct policy posture

4640-602: Is carried out by investment managers who identify and select investments, whereas systematic trading is based on mathematical models and executed by software with limited human involvement beyond the programming and updating of the software. These strategies can also be divided into trend or counter-trend approaches depending on whether the fund attempts to profit from following market trend (long or short-term) or attempts to anticipate and profit from reversals in trends. Within global macro strategies, there are further sub-strategies including "systematic diversified", in which

4756-666: Is common for hedge fund investment strategies to aim to achieve a positive return on investment regardless of whether markets are rising or falling (" absolute return "). Hedge funds can be considered risky investments; the expected returns of some hedge fund strategies are less volatile than those of retail funds with high exposure to stock markets because of the use of hedging techniques. Research in 2015 showed that hedge fund activism can have significant real effects on target firms, including improvements in productivity and efficient reallocation of corporate assets. Moreover, these interventions often lead to increased labor productivity, although

Jim Cramer - Misplaced Pages Continue

4872-414: Is common in the hedge fund industry as well. He also stated that some hedge fund managers spread false rumors to drive a stock down: "What's important when you are in that hedge-fund mode is to not do anything remotely truthful because the truth is so against your view, that it's important to create a new truth, to develop a fiction." Cramer described a variety of tactics that hedge fund managers use to affect

4988-539: Is easy to do "because the SEC doesn't understand it." During the interview, Cramer referred to himself as a "banking-class hero". On the March 11, 2008, episode of Cramer's show Mad Money , a viewer submitted the question "Should I be worried about Bear Stearns in terms of liquidity and get my money out of there?" Cramer responded "No! No! No! Bear Stearns is not in trouble. If anything, they're more likely to be taken over . Don't move your money from Bear." On March 14, 2008,

5104-557: Is reduced but cannot be eliminated. According to a report by the Hennessee Group, hedge funds were approximately one-third less volatile than the S&P 500 between 1993 and 2010. Investors in hedge funds are, in most countries, required to be qualified investors who are assumed to be aware of the investment risks , and accept these risks because of the potential returns relative to those risks. Fund managers may employ extensive risk management strategies in order to protect

5220-478: Is the major case relating to fund administrator liability for failure to handle its NAV-related obligations properly. There, the hedge fund administrator and other defendants settled in 2016 by paying the Anwar investor plaintiffs $ 235 million. Sales and trading In market making , traders will buy and sell financial products primarily to facilitate the investment and trading activities of its clients with

5336-496: Is to let the markets work through the changes in risk appetite and pricing that are underway, but the market observations of one of my more strident conversational counterparts—and that is not Jim Cramer [laughter]—are worth sharing." Cramer was vindicated for his negative outlook when the 2007–2008 financial crisis and the Great Recession took hold. On Hardball with Chris Matthews on September 19, 2008, Cramer blamed

5452-810: The Tallahassee Democrat in Tallahassee, Florida , where he was one of the first people to cover the Ted Bundy murders since he lived only a few blocks away. Then-executive editor Richard Oppel said: "[Cramer] was like a driving ram. He was great at getting the story." He subsequently worked for the Los Angeles Herald-Examiner writing obituaries. During this time, his apartment was robbed and he lost everything, forcing him to live out of his car for nine months. He also worked for Governor of California Jerry Brown . Cramer

5568-479: The 1990s stock market rise , the aligned-interest compensation structure ( i.e. , common financial interests), and the promise of above average returns as likely causes. Over the next decade, hedge fund strategies expanded to include credit arbitrage, distressed debt , fixed income , quantitative , and multi-strategy. US institutional investors , such as pension and endowment funds , began allocating greater portions of their portfolios to hedge funds. During

5684-628: The mortgage deduction at a time when U.S. house price depreciation is behind much of the world's morass and certainly the devastation affecting our banks, and pushing an aggressive cap and trade program that could raise the price of energy for millions of people." By the end of Obama's term in office, major stock market indexes had more than doubled from the levels of March 2009. Referring to March 8, 2009, charges leveled against Cramer by The New York Times columnist Frank Rich, Cramer said that he does not understand how Obama and his staff planned to raise taxes, institute cap-and-trade limitations, and rework

5800-408: The net asset value ("NAV") by the administrator, including the pricing of securities at current market value and calculation of the fund's income and expense accruals, is a core administrator task, because it is the price at which investors buy and sell shares in the fund. The accurate and timely calculation of NAV by the administrator is vital. The case of Anwar v. Fairfield Greenwich (SDNY 2015)

5916-553: The 'financial expert' and the 'In Cramer We Trust' and start getting back to fundamentals on the reporting, as well, and I can go back to making fart noises and funny faces." Cramer responded: "I think we make that deal right here". On August 3, 2007, in what was described a "rant" Cramer made a plea for the Federal Reserve to cut interest rates. Cramer said of the Fed Committee, "They're nuts. They know nothing. This

SECTION 50

#1732782786738

6032-726: The 1,226 people on the Forbes World's Billionaires List for 2012, 36 of the financiers listed "derived significant chunks" of their wealth from hedge fund management. Among the richest 1,000 people in the United Kingdom, 54 were hedge fund managers, according to the Sunday Times Rich List for 2012. A portfolio manager risks losing his past compensation if he or she engages in insider trading . In Morgan Stanley v. Skowron , 989 F. Supp. 2d 356 (S.D.N.Y. 2013), applying New York's faithless servant doctrine,

6148-486: The CNBC host's "silly and/or embarrassing and/or stupid financial observations." Moreover, he said CNBC shirked its journalistic duty by believing corporate lies rather than being an investigative "powerful tool of illumination". Cramer disagreed with Stewart on a few points, but acknowledged that he could have done a better job foreseeing the economic collapse: "We all should have seen it more." Stewart also said short-selling

6264-470: The ETF would not last long before stating he wouldn't be making further comments on the company. He apparently reversed this decision, though, and continued to make comments before seemingly reversing course and "welcoming" the fund, though further touting his reputation. From 1988 to 2009, Cramer was married to Karen Backfisch, with whom he had two children. On April 18, 2015, Cramer married Lisa Cadette Detwiler,

6380-604: The Federal Reserve for the United States housing bubble . On September 15, 2020, during a TV interview with U.S. Speaker of the House Nancy Pelosi , Cramer addressed her as "Crazy Nancy", and then sent several tweets in which he defended his actions. He later apologized for using the phrase, which was also employed frequently by President Donald Trump . During a discussion about the likelihood of

6496-648: The New York office of the S.E.C. , inasmuch as Cramer was a writer for a general-interest publication, an argument can be made that Cramer did not breach any obligations. In 1996, Cramer and Peretz launched TheStreet , a financial news and investment website. In August 2019, TheMaven acquired the company for $ 16.5 million. Cramer was a frequent guest commentator on CNBC in the late 1990s. From 2002 to 2005, Cramer co-hosted Kudlow & Cramer (first called America Now ) with Larry Kudlow . Mad Money with Jim Cramer first aired on CNBC in 2005. The stated goal of

6612-601: The US bull market of the 1920s, there were numerous private investment vehicles available to wealthy investors. Of that period, the best known today is the Graham-Newman Partnership, founded by Benjamin Graham and his long-time business partner Jerry Newman. This was cited by Warren Buffett in a 2006 letter to the Museum of American Finance as an early hedge fund, and based on other comments from Buffett, Janet Tavakoli deems Graham's investment firm

6728-499: The United States and Europe following the financial crisis of 2007–2008 with the intention of increasing government oversight of hedge funds and eliminating certain regulatory gaps. While most modern hedge funds are able to employ a wide variety of financial instruments and risk management techniques, they can be very different from each other with respect to their strategies, risks, volatility and expected return profile. It

6844-547: The United States collectively held $ 1.335 trillion. In April 2012, the hedge fund industry reached a record high of US$ 2.13 trillion total assets under management. In the middle of the 2010s, the hedge fund industry experienced a general decline in the "old guard" fund managers. Dan Loeb called it a "hedge fund killing field" due to the classic long/short falling out of favor because of unprecedented easing by central banks . The US stock market correlation became untenable to short sellers . The hedge fund industry today has reached

6960-461: The White House, saying, "Backup? Look at the incredible decline in the stock market, in all indices, since the inauguration of the president, with the drop accelerating when the budget plan came to light because of the massive fear and indecision the document sowed: Raising taxes on the eve of what could be a second Great Depression , destroying the profits in healthcare companies, tinkering with

7076-426: The benefits may not fully accrue to workers in terms of increased wages or work hours. A hedge fund usually pays its investment manager a management fee (typically, 2% per annum of the net asset value of the fund) and a performance fee (typically, 20% of the increase in the fund's net asset value during a year). Hedge funds have existed for many decades and have become increasingly popular. They have now grown to be

SECTION 60

#1732782786738

7192-479: The bonds or loans of companies facing bankruptcy or severe financial distress, when these bonds or loans are being traded at a discount to their value. Hedge fund managers pursuing the distressed debt investment strategy aim to capitalize on depressed bond prices. Hedge funds purchasing distressed debt may prevent those companies from going bankrupt, as such an acquisition deters foreclosure by banks. While event-driven investing, in general, tends to thrive during

7308-638: The city is a high-speed rail connection with New York City. He is a passionate Philadelphia Eagles fan, and cried after the team was victorious in Super Bowl LII . He has held season tickets for 20 years and has met former Eagles coach Doug Pederson many times. Hedge fund A hedge fund is a pooled investment fund that holds liquid assets and that makes use of complex trading and risk management techniques to improve investment performance and insulate returns from market risk . Among these portfolio techniques are short selling and

7424-599: The climax of the 2007–2008 financial crisis , Cramer recommended investing in bank stocks. On October 6, 2008, on Today , when the S&P 500 Index was valued at 1,056, Cramer suggested to investors, "Whatever money you need for the next five years, please take it out of the stock market." Five months later, the market bottomed at 666, a 36.9% decline. A February 9, 2009, article in The Wall Street Journal said that betting against Cramer's Buy recommendations using short-term options could yield 25% in

7540-503: The common stock might be worthless, but I would never tell you to pull your money out of the bank because I was worried about its solvency. Your money is safe in Citi as I said it was in Bear. The fact that I was right rankles me even more." An article by author Michael Lewis for Bloomberg News said that TheStreet listed Bear Stearns as a "Buy" at $ 62 per share on March 11, 2008, which was

7656-541: The court held that a hedge fund's portfolio manager engaging in insider trading in violation of his company's code of conduct, which also required him to report his misconduct, must repay his employer the full $ 31 million his employer paid him as compensation during his period of faithlessness. The court called the insider trading the "ultimate abuse of a portfolio manager's position". The judge also wrote: "In addition to exposing Morgan Stanley to government investigations and direct financial losses, Skowron's behavior damaged

7772-609: The effect of market swings whereas directional funds utilize trends and inconsistencies in the market and have greater exposure to the market's fluctuations. Hedge funds using a global macro investing strategy take large positions in share, bond, or currency markets in anticipation of global macroeconomic events in order to generate a risk-adjusted return . Global macro fund managers use macroeconomic ("big picture") analysis based on global market events and trends to identify opportunities for investment that would profit from anticipated price movements. While global macro strategies have

7888-431: The fee is to discourage short-term investing, reduce turnover, and deter withdrawals after periods of poor performance. Unlike management fees and performance fees, redemption fees are usually kept by the fund and redistributed to all investors. Hedge fund management firms are often owned by their portfolio managers , who are therefore entitled to any profits that the business makes. As management fees are intended to cover

8004-450: The filmmakers how he would get through to Gordon Gekko . In 2000, Cramer and TheStreet settled a lawsuit with Fox News Channel in which Fox had claimed Cramer had reneged on a deal to produce a show for Fox, and Cramer had counter-sued. The conflict began when Fox complained that Cramer promoted TheStreet stock on its network without giving advance notice to the program's producer. As manager of his hedge fund, Cramer said he realized

8120-483: The findings showed significant underperformance or outperformance when adjusting for a variety of factors, but did say "It's a commendable attempt to dig more deeply into the style that underlies Cramer's stock picks." In a December 2006 interview, Cramer described activities used by hedge fund managers to manipulate stock prices—some of debatable legality and others illegal. He described how he could push stocks higher or lower with as little as $ 5 million in capital when he

8236-540: The firm's operating costs, performance fees (and any excess management fees) are generally distributed to the firm's owners as profits. Funds do not tend to report compensation, and so published lists of the amounts earned by top managers tend to be estimates based on factors such as the fees charged by their funds and the capital they are thought to have invested in them. Many managers have accumulated large stakes in their own funds and so top hedge fund managers can earn extraordinary amounts of money, perhaps up to $ 4 billion in

8352-736: The firm's reputation, a valuable corporate asset." A hedge fund is an investment vehicle that is most often structured as an offshore corporation , limited partnership , or limited liability company . The fund is managed by an investment manager in the form of an organization or company that is legally and financially distinct from the hedge fund and its portfolio of assets . Many investment managers utilize service providers for operational support. Service providers include prime brokers, banks, administrators, distributors, and accounting firms. Prime brokers clear trades and provide leverage and short-term financing . They are usually divisions of large investment banks. The prime broker acts as

8468-604: The first decade of the 21st century, hedge funds gained popularity worldwide, and, by 2008, the worldwide hedge fund industry held an estimated US$ 1.93 trillion in assets under management (AUM). However, the financial crisis of 2007–2008 caused many hedge funds to restrict investor withdrawals and their popularity and AUM totals declined. AUM totals rebounded and in April 2011 were estimated at almost $ 2 trillion. As of February 2011 , 61% of worldwide investment in hedge funds came from institutional sources. In June 2011,

8584-471: The first hedge fund. The sociologist Alfred W. Jones is credited with coining the phrase " hedged fund" and is credited with creating the first hedge fund structure in 1949. Jones referred to his fund as being "hedged", a term then commonly used on Wall Street to describe the management of investment risk due to changes in the financial markets . Jones also developed the popular 2-and-20 structure of hedge funds, in which hedge funds charged investors

8700-585: The four main categories, there are several strategies that do not entirely fit into these categories. For an investor who already holds large quantities of equities and bonds, investment in hedge funds may provide diversification and reduce the overall portfolio risk. Managers of hedge funds often aim to produce returns that are relatively uncorrelated with market indices and are consistent with investors' desired level of risk. While hedging can reduce some risks of an investment it usually increases others, such as operational risk and model risk , so overall risk

8816-435: The fourth grade, and continued the habit through high school. In 1977, Cramer graduated magna cum laude from Harvard College with a Bachelor of Arts in government. While at Harvard, he was the president and editor-in-chief of The Harvard Crimson . Additionally, Cramer was a National Merit Scholar . After college, Cramer was an entry-level reporter, making $ 15,000 per year. Beginning March 1, 1978, Cramer worked for

8932-652: The fund and investors. According to the Financial Times , "big hedge funds have some of the most sophisticated and exacting risk management practices anywhere in asset management." Hedge fund managers that hold a large number of investment positions for short periods are likely to have a particularly comprehensive risk management system in place, and it has become usual for funds to have independent risk officers who assess and manage risks but are not otherwise involved in trading. A variety of different measurement techniques and models are used to estimate risk according to

9048-413: The fund estimates to have a "high turnover rate". The fund gained additional coverage upon Meta Platforms ' Q3 2022 earnings miss and Cramer's subsequent apology, which outlined another loss for the company and was seen by some that Cramer's apology was seen as a sign to buy Meta stock. Upon the launch of the fund, prior to Meta's earnings, Cramer responded on Twitter by touting his reputation and claiming

9164-654: The fund trades in diversified markets, or sector specialists such as "systematic currency", in which the fund trades in foreign exchange markets or any other sector specialisation. Other sub-strategies include those employed by commodity trading advisors (CTAs), where the fund trades in futures (or options ) in commodity markets or in swaps. This is also known as a "managed future fund". CTAs trade in commodities (such as gold) and financial instruments, including stock indices . They also take both long and short positions, allowing them to make profit in both market upswings and downswings. Most global macro managers tends to be

9280-436: The fund's net asset value , whereas private-equity funds generally invest in illiquid assets and return capital only after a number of years. Other than a fund's regulatory status, there are no formal or fixed definitions of fund types, and so there are different views of what can constitute a "hedge fund". Although hedge funds are not subject to the many restrictions applicable to regulated funds, regulations were passed in

9396-464: The fund's leverage, liquidity, and investment strategy. Non-normality of returns, volatility clustering and trends are not always accounted for by conventional risk measurement methodologies and so in addition to value at risk and similar measurements, funds may use integrated measures such as drawdowns . In addition to assessing the market-related risks that may arise from an investment, investors commonly employ operational due diligence to assess

9512-401: The goal of making an incremental amount of money on each trade. The Sales component refers to the investment bank's sales force within the sales and trading division. Generally, sales members will be placed on dedicated desks just as traders are and will have a dedicated list of clients that they are responsible for managing. The sales role is the client-facing role of the S&T division of

9628-435: The healthcare system all during a recession. The article said: "It isn't that Cramer disagrees with Obama's vision for the country – he even agrees with taxing the rich – but now is not the time to put those plans into action. The president needs to solve our housing, employment, and financial problems, and only then turn his attention to healthcare and changing the mortgage deduction." Cramer wrote in 2009 that Nouriel Roubini

9744-418: The hedge fund management firms with the greatest AUM were Bridgewater Associates (US$ 58.9 billion), Man Group (US$ 39.2 billion), Paulson & Co. (US$ 35.1 billion), Brevan Howard (US$ 31 billion), and Och-Ziff (US$ 29.4 billion). Bridgewater Associates had $ 70 billion in assets under management as of March 2012 . At the end of that year, the 241 largest hedge fund firms in

9860-402: The hedge fund manager must identify an upcoming event that will increase or decrease the value of the company's equity and equity-related instruments. Other event-driven strategies include credit arbitrage strategies, which focus on corporate fixed income securities; an activist strategy, where the fund takes large positions in companies and uses the ownership to participate in the management;

9976-432: The hedge fund. The fund was then taken over by his former partner, Jeff Berkowitz. Cramer was also an "editor at large" for SmartMoney magazine. He was accused by some of an unethical practice when he made a $ 2 million personal gain after buying stocks before his recommendation article was published, though he was candid in the article that he had purchased the stock; however, according to Ira Lee Sorkin , former head of

10092-436: The incident: "I did tell an emailer that his deposit in his account at Bear Stearns was safe, but through a clever sound bite, (Jon) Stewart , and subsequently (Frank) Rich —neither of whom have bothered to listen to the context of the pulled quote—pass off the notion of account safety as an out-and-out buy recommendation. The absurdity astounds me. If you called Mad Money and asked me about Citigroup , I would tell you that

10208-539: The management fee from larger funds can generate a significant part of a manager's profits, and as a result some fees have been criticized by some public pension funds, such as CalPERS , for being too high. The performance fee is typically 20% of the fund's profits during any year, though performance fees range between 10% and 50%. Performance fees are intended to provide an incentive for a manager to generate profits. Performance fees have been criticized by Warren Buffett , who believes that because hedge funds share only

10324-575: The market in part because of the excess risk in his picks. "If we adjust for his market risk, we come up with an excess return that is essentially zero", Bolster said, adding that "zero", in this case, means his returns are roughly in line with the risk he's taking on. Another criticism of Actions Alerts Plus was that it did not compare itself to indexes that include dividend reinvestment (as the SEC requires for stock-oriented mutual funds). According to Kiplinger's article "One recent [Action Alerts PLUS] and included

10440-456: The market overall. Hedge fund managers can use various types of analysis to identify price discrepancies in securities, including mathematical, technical , or fundamental techniques. Relative value is often used as a synonym for market neutral , as strategies in this category typically have very little or no directional market exposure to the market as a whole. Other relative value sub-strategies include: In addition to those strategies within

10556-592: The market, the particular instrument use, the market sector the fund specializes in ( e.g. , healthcare), the method used to select investments, and the amount of diversification within the fund. There are a variety of market approaches to different asset classes , including equity , fixed income , commodity , and currency . Instruments used include equities, fixed income, futures , options , and swaps . Strategies can be divided into those in which investments can be selected by managers, known as "discretionary/qualitative", or those in which investments are selected using

10672-563: The market. Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%." Cramer was criticized for repeatedly giving erroneous advice during the 2007–2008 financial crisis . He recommended investing in Bear Stearns , Merrill Lynch , Morgan Stanley , Wachovia , and Lehman Brothers before the stocks fell in value significantly and several went out of business. On August 8, 2008, before

10788-539: The offices of hedge fund manager Michael Steinhardt . Early investors included friend and Harvard classmate Eliot Spitzer , Steve Brill , and Martin Peretz . Cramer raised $ 450 million in $ 5 million increments and received a fee of 20% of the profits he generated. Cramer says he sold all of his stocks on the Friday before Black Monday (1987) . From 1988 to 2000, Cramer says he had only one year of negative returns – 1998,

10904-413: The one-year Treasury bill rate plus a spread. A "soft" hurdle means the performance fee is calculated on all the fund's returns if the hurdle rate is cleared. A "hard" hurdle is calculated only on returns above the hurdle rate. By example the manager sets a hurdle rate equal to 5%, and the fund return 15%, incentive fees would only apply to the 10% above the hurdle rate. A hurdle is intended to ensure that

11020-499: The opportunity for larger gains is weighed against the possibility of greater losses. Hedge funds employing leverage are likely to engage in extensive risk management practices. In comparison with investment banks , hedge fund leverage is relatively low; according to a National Bureau of Economic Research working paper, the average leverage for investment banks is 14.2, compared to between 1.5 and 2.5 for hedge funds. Some types of funds, including hedge funds, are perceived as having

11136-427: The other "SJIM", representing "Long Cramer" (which would bet with all of Cramer's recommendations) and "Inverse Cramer" (betting against everything that Cramer recommended) respectively. The Inverse Cramer ETF listed in its filings that aside from jokes or obviously meritable investment recommendations, in general, the fund would bet against all of Cramer's recommendations both on Mad Money and Cramer's Twitter feed, and

11252-513: The performance of his "Action Alerts PLUS" charitable trust outpaced the S&P 500 Index and the Russell 2000 Index . The charitable trust realized a return of 31.75%, the S&P 500 had a return of 18.75%, and the Russell 2000 had a return of 22.51%. On an annual basis, the trust outperformed the S&P 500 by 7.35%, and the Russell 2000 Index by 3.33%. Paul Bolster said that Cramer beats

11368-481: The possibility that the merger or acquisition will not go ahead as planned; hedge fund managers will use research and analysis to determine if the event will take place. Special situations are events that impact the value of a company's stock, including the restructuring of a company or corporate transactions including spin-offs , share buy backs , security issuance/repurchase, asset sales, or other catalyst-oriented situations. To take advantage of special situations

11484-643: The problem to his childhood experiences with his father. In 2009, Cramer and four other investors purchased the DeBary Inn in Summit, New Jersey. He and his wife also own Bar San Miguel, a restaurant and bar serving Mexican cuisine in Carroll Gardens, Brooklyn . Cramer was one of about 200 candidates for the Time 100 in 2009. Cramer loves Philadelphia, and has said the key to an economic resurgence of

11600-491: The profits and not the losses, such fees create an incentive for high-risk investment management. Performance fee rates have fallen since the start of the credit crunch . Almost all hedge fund performance fees include a " high water mark " (or "loss carryforward provision"), which means that the performance fee only applies to net profits ( i.e. , profits after losses in previous years have been recovered). This prevents managers from receiving fees for volatile performance, though

11716-416: The risk that error or fraud at a hedge fund might result in a loss to the investor. Considerations will include the organization and management of operations at the hedge fund manager, whether the investment strategy is likely to be sustainable, and the fund's ability to develop as a company. Since hedge funds are private entities and have few public disclosure requirements, this is sometimes perceived as

11832-466: The same day as the caller's question and a day before the collapse of Bear Stearns. During the Jon Stewart–Jim Cramer conflict , on The Daily Show on March 12, 2009, Cramer admitted he made mistakes on his Bear Stearns calls. On March 2, 2009, Cramer said that President Barack Obama was on a "radical agenda", and said that was responsible for "the greatest wealth destruction I have seen by

11948-454: The same types of risk as other investment classes, including liquidity risk and manager risk. Liquidity refers to the degree to which an asset can be bought and sold or converted to cash; similar to private-equity funds, hedge funds employ a lock-up period during which an investor cannot remove money. Manager risk refers to those risks which arise from the management of funds. As well as specific risks such as style drift , which refers to

12064-500: The show is to provide people engaging in do-it-yourself investing with "the knowledge and the tools that will empower you to be a better investor". According to CNBC, Cramer is not allowed to own stocks that could be discussed on the show. Cramer hosted a one-hour radio show, Jim Cramer's Real Money , until December 2006, which spawned Mad Money . In 2005, Cramer appeared as himself in two episodes of Arrested Development . He announced that he had upgraded Bluth Company stock to

12180-432: The stock lost more than half of its value on news of a Fed bailout and $ 2/share takeover by JPMorgan Chase . On March 17, 2008, Cramer said his statements were made in regards to the liquidity of accounts held at Bear Stearns as opposed to the stock. Cramer said he was not recommending the common stock, but allaying concerns about the account holder's liquidity held in a Bear Stearns brokerage account. Cramer later wrote about

12296-439: The timeframe of August 2001 to March 2016, Cramer's charitable trust underperformed the S&P 500 primarily as a result of underexposure to market returns in years after the 2007–2008 financial crisis . As of March 31, 2016, Cramer's trust since inception had a cumulative return of 64.5%, whereas the S&P 500 fewer dividends returned 70% during the same timeframe. Wharton finance professor Robert Stambaugh said he didn't think

12412-490: The top manager earned $ 3 billion, the tenth earned $ 210 million, and the 30th earned $ 80 million. In 2011, the average earnings for the 25 highest-compensated hedge fund managers in the United States was $ 576 million while the mean total compensation for all hedge fund investment professionals was $ 690,786 and the median was $ 312,329. The same figures for hedge fund CEOs were $ 1,037,151 and $ 600,000, and for chief investment officers were $ 1,039,974 and $ 300,000, respectively. Of

12528-404: The underlying investment opportunity and risk are associated with an event. An event-driven investment strategy finds investment opportunities in corporate transactional events such as consolidations, acquisitions , recapitalizations , bankruptcies , and liquidations . Managers employing such a strategy capitalize on valuation inconsistencies in the market before or after such events, and take

12644-743: The use of leverage and derivative instruments . In the United States, financial regulations require that hedge funds be marketed only to institutional investors and high-net-worth individuals . Hedge funds are considered alternative investments . Their ability to use leverage and more complex investment techniques distinguishes them from regulated investment funds available to the retail market, commonly known as mutual funds and ETFs . They are also considered distinct from private equity funds and other similar closed-end funds as hedge funds generally invest in relatively liquid assets and are usually open-ended . This means they typically allow investors to invest and withdraw capital periodically based on

12760-542: The way the firm will operate in the market, the direction it would like to take in terms of its proprietary and flow positions, the suggestions salespersons give to clients, as well as the way structurers create new products. Banks also undertake risk through proprietary trading (though this is subject to regulation within the US and certain European markets), done by a special set of traders who do not interface with clients and through "principal risk", risk undertaken by

12876-444: Was "intoxicated" with his own "prescience and vision", and should realize that things are better than he predicted. Roubini called Cramer a "buffoon", and told him to "just shut up". Cramer responded by inviting Roubini to appear on his show, and say that to his face. In 2021, Roubini called Cramer "a total f---ing idiot". On March 12, 2009, Cramer appeared on The Daily Show with Jon Stewart . Stewart reiterated earlier claims regarding

12992-510: Was "supremely guilty". In 1984, Cramer worked in sales and trading at New York investment bank Goldman Sachs . Cramer was admitted to the New York State Bar in 1985, but did not practice. After he did not renew his registration, his license to practice law was suspended on April 2, 2009. In 1987, Cramer left Goldman Sachs and started a hedge fund , Cramer & Co. (later Cramer, Berkowitz & Co.). The fund operated out of

13108-427: Was detrimental to the markets and investors. Cramer agreed that short-selling was detrimental, stated his opposition to it, and said that he had never engaged in it. This contradicted earlier statements in which he described going short while managing a hedge fund. In a December 2006 interview from TheStreet' s "Wall Street Confidential" webcast, Cramer said, "A lot of times when I was short at my hedge fund. ... When I

13224-480: Was one of the first reporters at American Lawyer . In 1984, Cramer received a Juris Doctor degree from Harvard Law School . Cramer started investing in the stock market while he attended law school. He made enough from trading to cover his tuition. Cramer began promoting his holdings by leaving stock picks on his answering machine. While at Harvard, alumnus Michael Kinsley introduced him to The New Republic owner Martin Peretz , who contacted Cramer to write

13340-451: Was positioned short—meaning I needed it down—I would create a level of activity beforehand that could drive the futures ." He said, "I will say this: I am trying to expose this stuff, exactly what you guys do, and I've been trying to get the regulators to look at it." However, Stewart played several video clips from 2006 where Cramer discussed the spreading of false rumors to drive down stock prices and encouraged short-selling by hedge funds as

13456-418: Was running his hedge fund. Cramer said, "A lot of times when I was short at my hedge fund ... When I was positioned short—meaning I needed it down—I would create a level of activity beforehand that could drive the futures ." He also encouraged hedge funds to engage in this type of activity because it is "a very quick way to make money." Cramer stated that everything he did was legal, but that illegal activity

#737262