March 22, 2007
Jim Cramer: Insert Foot in Mouth?
Jim Cramer, the host of CNBC's Mad Money, may have said too much in a recent interview. He is getting quite a bit of attention for his discussion of hedge fund managers manipulating stock prices. From the NY Times:
In the December interview with the site’s “Wall Street Confidential” Webcast, Mr. Cramer describes at least two strategies, including a way of driving stock futures up or down that he explicitly said was legal. “A lot of times when I was short, I would create a level of activity beforehand that would drive the futures. … It’s a fun game,” he told TheStreet.com’s executive editor, Aaron Task.
But Mr. Cramer spends most of the interview describing a practice called “fomenting,” where a hedge fund manager essentially creates a false impression about a company in order to drive its stock one way or another — which he says is “blatantly illegal,” but adds that “the Securities and Exchange Commission doesn’t understand it.” While he claims this practice is widespread, he never says he has used it himself.
Here’s how fomenting works, according to Mr. Cramer: Say a hedge fund manager is holding a short position — a bet that a stock will decline — in Research in Motion, which has just announced blockbuster quarterly earnings results. An enterprising fund manager might call several brokerage houses and either feed them bad information or order a slew of short sales. Then he or she could call up a “bozo reporter” with a fake news tip about Resarch in Motion rival Palm.
The result, he says, is a perfect storm of bad news that temporarily lowers R.I.M.’s stock price, long enough for the manager to reap a tidy profit. He recommends a similar procedure with Apple (the video was filmed before the company introduced its iPhone at its annual Macworld convention in January).
“These are all the things that you should be doing on a day-to-day basis and if you’re not doing it, maybe you shouldn’t be in the game,” Mr. Cramer tells Mr. Task.
Mr. Cramer sums up his philosophy this way:
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.
Whether this turns heads over at the SEC is one question. But whether Cramer breached his contract with CNBC is another. If you watch the video, you'll see that Cramer describes his rumor spreading strategy and names CNBC correspondent Bob Pisani, who reports from the NYSE. There is talk that naming Pisani may have breached a "disparagement clause" in Cramer's employment contract with CNBC. The disparagement clause bars employees from publicly criticizing on-air talent.
[Meredith R. Miller]
March 20, 2007
From the Shameless Commerce Division . . .
A shameless plug for a new teaching supplement in which one of our members had a hand, Global Issues in Contract Law. The book is sending shockwaves across the legal academy, as contracts professors succumb to its moral and intellectual force. Many of us have long known that we have a duty to incorporate more international and comparative perspectives into our first-year contracts courses. Now, professors are acknowledging that we no longer have an excuse for not doing so.
The first time I taught conracts, I made no attempt to incorporate international or comparative perspectives. But after attending an all-day session at the AALS in January 2006 on Integrating Transnational Perspectives into the First-Year Curriculum, I have become a true-believer. The key to my conversion was the materials shared with us at the panels, including edited cases and lecture notes from William S. Dodge (for references, look here) that made incorporating the new material into my course very easy.
Here's this interesting story about a free land give-away in Anderson, Alaska, part of the state's frozen interior:
City phones were ringing nonstop all weekend and were still going strong Monday. Thousands of people called from all 50 states and other places, including Canada, Taiwan, India and South America, according to locals including Anderson high-school teacher Daryl Frisbie, whose social studies class developed the homesteading idea to boost the town's dwindling population.
Frisbie said his own residential phone has been ringing round the clock. Interest was high despite the brutal winters of the interior, where temperatures can plunge to 60 below. Never mind that there's no grocery store or gas station in Anderson, 75 miles from the regional hub of Fairbanks.
Callers from around the world were all focused on two words: free land.
According to the story there were 26 lots being given away, and those who showed up in person, waited in line, paid a $500 fee (toward their taxes?), and agreed to build a house on the land received preference. I just wonder how much this land was actually worth? Was this really such a jackpot or more like a gimmick (hey, free land!) even though it was probably not worth all that much, given the remote, rural, cold nature of the area?
March 19, 2007
Limerick of the Week
Every once in a while, an important case comes out of my state of residence. Here's one that I think reflects very nicely on the Hoosier medical profession:
Hurley v. Eddingfield
Though his patient's complexion was green,
The doctor would not intervene.
This no-house-calls sort
Was indulged by the court,
Which considered his conduct obscene.
University of Memphis Looking for Vistors
The University of Memphis Cecil C. Humphreys School of Law is seeking to fill several visiting positions for the 2007-2008 academic year. Primary course needs include Contracts I (fall semester), Contracts II (spring semester), Business Organizations (fall semester), Civil Procedure I (fall semester), and Secured Transactions (spring semester). Other possible areas of need include Remedies, Advanced Civil Procedure, Professional Responsibility, and Environmental Law.
At this point we have substantial flexibility regarding one-semester or full-year visitorships. The School of Law has a strong institutional commitment to the diversity of its faculty and is very interested in receiving expressions of interest from persons who will add to its diversity. Please contact Professor Kevin H. Smith, Chair, Faculty Recruitment Committee, Cecil C. Humphreys School of Law, The University of Memphis, Memphis , Tennessee 38152 .
Electronic expressions of interest are strongly encouraged and should be submitted here. The University of Memphis , a Tennessee Board of Regents institution, is an EEO/AA University. The School of Law does not discriminate on the basis of race, color, religion, national origin, sex, age, handicap or disability, or sexual orientation.