TheStreet.com's Jim Cramer says news is not being properly disseminated, and some people are getting an unfair edge.I love how easily I am misunderstood by people who have about one-tenth the history I have in the markets. I love it, because their dogmatic criticism of me is so unfounded and anti-historical, not to mention totally un-rigorous, that I get a kick out of reading it.
I am talking, of course, about the outrageous trading in Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) over the last few days.
My beef: For most of the last 80 years, when there was "unusual activity" in a stock, as you would certainly have to say there has been here, the New York Stock Exchange or the company or even the SEC would call a halt in trading, the reason being that it is clear there is news that is not being properly disseminated. Halting trading is something that is done to level the playing field, to be sure that some don't know something that others don't.
Here the disinformation has been so ludicrous, the lack of disclosure so ridiculous, the misdirection so nonstop that it is simply inconceivable that everyone has the same information available to trade on. That's the darned law, for heaven's sake. It isn't something I made up. We aren't supposed to have situations where some know information and others don't. Given the nature of the talks involving so many parties and the leaks that are happening left and right, does this feel like a place where the average investor is getting a fair shake? I don't think so. How anyone could even disagree with that notion is the height of naiveté.
Others are criticizing my criticism of Jonathan Laing at Barron's for breaking the story over the weekend about the destruction of Fannie and Freddie common stock.
That's wrong.
That's totally wrong.
Laing and Barron's did great. They did better than great. That was an amazing piece. The reason is that they got some knucklehead in Treasury to do exactly the opposite of what the head man, the boss, was saying. Laing confirmed something that nobody else had, that Treasury is about ready to dismantle FNM and FRE. That's called a scoop.
But here's something we should all know about scoops. The insiders -- and Treasury is an insider here -- didn't disseminate this information correctly. You don't give it to some reporter unnamed. We wouldn't tolerate that leak at Hewlett-Packard (NYSE: HPQ) (Cramer's Take) or General Mills (NYSE: GIS) (Cramer's Take) or any other stock. Someone might argue that the Treasury isn't an insider, but that's like saying that the lawyers on a deal or the bankers aren't insiders. That's nonsense, too.
So, to recap, I want a halt in trading, not because these stocks shouldn't be traded but because some know information and should be investigated to see if they are trading on it, and others know nothing and are being blindsided. That's just a rig, and we should all be angered about a rig.
The Barron's article? Good reporting, but outrageous leaking by Treasury. That department should be right now investigating who talked to Laing, or they should have point-blank said it was wrong. Instead, we got some not-for-attribution alleged denial.
You know what the real outrage here? It's that I am the only one outraged by something that, if it had happened under Bill Clinton's watch with an aggressive SEC, would have already been referred to Justice for insider trading.
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RELATED LINKS:
Financial Winners & Losers: Merrill Lynch
Fannie, Freddie Find Legs in Shorts
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
8-22-2008 @ 10:31AM
HENRY MOCZYDLOWSKI said...
MR. CRAMER,
I KINDA' AGREE WITH YOUR COMMENT REGARDING THE HALTING OF "UNUSUAL TRADING ACTIVITY". BUT, WHAT CRITERIA CONSTITUES "UNUSUAL ACTIVITY" ?
2-3 TIMES THE AVERAGE 30 DAY VOLUME?
IF THAT'S THE CASE, TAKE A LOOK AT TMA, TRADING IS ALMOST AT THE 30 DAY AVERAGE AS OF NOW 10:30 A.M.
SHOULD TRADING BE HALTED ON THORNBURG MORTGAGE?
8-22-2008 @ 12:18PM
Sheldon L said...
Good post.
I agree with your sentiment Jim, but you stood up a straw man to say you were the only one outraged. Perhaps the loudest voice that was outraged.
BTW: This would halt many of the financial stocks for a period and MBI went up over 100% in a few trading days for reasons that I only could speculate about.
Peace
8-22-2008 @ 12:10PM
Elizabeth said...
Many “average” Americans have tried to invest prudently and ethically for the long term. FRE and FNM have thus been a significant part of their retirement portfolios. Recently, despite Paulson's expressed intention to preserve them in their private shareholder-owned form (upon which many in or nearing retirement relied) these GSE's have taken a major hit from opportunistic short-sellers and rumor mongers motivated by their own selfish greedy agendas. Someone had better be very carefully looking at the financial impact of ruining the many individuals who invested in FRE and FNM for the long term based on the representations of their elected and appointed financial leaders. Wiping out the shareholders will put thousands (probably millions) of small investors, many Seniors, in extreme financial difficulty. Most will not be able to rejoin the labor force. This will, of course, greatly exacerbate the current financial crisis. Many of these formerly very solvent shareholders will also lose their homes. Yet, no one in the Administration, at the Fed, or in Treasury seems to recognize this. If small investors cannot believe government officials why will they ever invest? If they are deceived - then prudent goals of increasing investment through private savings vehicles will be seen as specious and a scam like "trickle-down" economic policy. The obvious short term cure for this mess is to open the Fed Discount Window to the GSE's as long as needed. Both to provide stability and discourage speculators and to provide much needed long term liquidity to help the long term recovery of the mortgage and housing markets with a cap of perhaps $250,000 per household. Of course, such a course of action must also be accompanied by stringent regulatory reform to eliminate sham and fraudulent mortgage origination and re-selling practices.
8-22-2008 @ 2:35PM
barbara said...
I am so glad you verified that the stock trading under these circumstances were normally halted in the past. I'm not an expert, just some old lady who has followed this stuff for years. I thought I fell behind the curve in the changes in trading rules. At least I know I haven't lost my mind, just my money.
Thanks Jim
8-22-2008 @ 3:07PM
Maria said...
I'm such a huge fan to your blogs. Keep up the good work.
Aquarian One-New Zealand
8-22-2008 @ 3:39PM
Fred Woodke said...
What planet are you on Jimbo? You are so wrong.
8-22-2008 @ 3:44PM
tom randt said...
Jim Cramer, you do us all a service with your intuitive opinions. Thanks. Tom R
8-22-2008 @ 7:31PM
Gumby said...
Jim Cramer
Your tenfold experience doesnt count!
You know what stock certifcates is really for?? Wall decorations? NO!
Stock certificates means actual physical delivery of your shares to your home address that no short sellers can touch your shares or borrow to sell them. It also means that you can walk to another broker to sell it ,
Stock certifcates works ONLY IF EVERYONE TAKES DELIVERY OF THEIR SHARES AND LOCK THEM UP IN VAULTS OR SAFES! THEY CAN MAKE PHOTOCOPIES OF THEM IN CASE THEY ARE STOLEN OR LOST.
that is plain why brokers CHARGE YOU $50 FOR PHYSICAL DELIVERY OF YOUR STOCK .. OH RMEMEBER TO PAY $10-15 FOR CERTIFIED MAIL WHEN YOU SOLD THE STOCK OR YOU HAVE TO PAY A VISIT TO YOUR BROKER OR ANOTHER ONE IN PERSON TO HAND IN YOUR CERTIFICATE.
SURE WE HAVE ADVANCED ELECTRONIC TECHNOLOGIES WHICH MEAN WE CAN DO STOCK CERTIFICATES ONLINE. SURE THING! BUT NOBODY IS DOING IT!
WHY? THEY WANT YOUR MONEY TO INVEST IN DIFFERENT STOCKS WHILE KEEPING YOUR STOCKS IN STREET NAME....
STREET NAME IS JUST A CLEARINGHOUSE WITHOUT CARING WHO OWNS WHAT AND THE EFFECTS OF BIDS AND ASKS..
NOW YOU TELL ME WHO IS M ORE EXPERIENCED ... YOU OR ME?
YOU PUSSY!!
8-31-2008 @ 5:22PM
bryan said...
SO, all this info about unfair trading, is this a good time to NOT buy or BUY? What would you readers recommend?