Jim Cramer, Donald Trump & CNBC

This morning brought another grandstanding, self-involved performance by Jim Cramer on CNBC's morning program, Squawkbox. If you needed to see more evidence of why CNBC is in the "business entertainment," rather than the "business news" business, this would have been it.


Cramer's appearance was directly connected with a purely entertainment topic- his inclusion in one of Donald Trump's "Apprentice" episodes. From a trailer I saw a few days ago, Kodak was involved, and I'll probably write about that later. Suffice to say, both Trump and Cramer extolled the firm's 'successful' move into digital photography.

I think that would be news to Kodak shareholders.


As a sort of benchmark on Cramer's, and Trump's, judgments, let's look at Kodak's trailing two-year price chart, compared with the S&P500.

It looks to me as if both "The Donald," and his new acolyte, Cramer, reside on another planet. Kodak has managed to lose some 20% of its value over the past two years, while the S&P rose just under 10%.



In fact, if you look even longer term, as this chart does, you see that Kodak has never really regained its footing, in terms of shareholder returns, from the decades of the 1960s and 1970s.

After a mediocre tracking of the S&P throughout the 1990s, Kodak's share price has sunk as digital photography eviscerated the firm's business model. At best, from a long term perspective, you might charitably say that the worst bleeding has ended by 2001. But, since then, it's still drifted downward in a rising equity market.



So much for Cramer's- and Trump's- business judgments.



Now, back to this morning's performance by the Mad Money Maniac. For however long it lasts, here's the link to CNBC's video clip of this morning's rant. After viewing it myself, I see it begins after Cramer's comments about Bush and Bernanke.



Cramer took questions from the CNBC co-anchors and guest host, Greg Ip of the Wall Street Journal. Prominent among Cramer's jabs were, as expected, that Fed Chairman Ben Bernanke has performed abysmally, and that President Bush is equivalent to President Herbert Hoover. The latter comparison was obviously Cramer's way of announcing that he believes we are in economic straits similar to, and fully the equal of, the 1930s Great Depression. His cute way of doing this was to say,


"...President Hoover...uh....I mean Bush....."



Cramer catalogued the recent decimation of capital at Merrill Lynch and Citigroup, declaring that we were now turning to,



'communist countries and countries that fund terrorists'



to recapitalize our banks. He then announced that, but for these funding sources, the two large 'banks' would be, in fact, bankrupt. Along the way, he savaged, appropriately, Stan O'Neal, Sandy Weill and Chuck Prince. This would lead you to believe that Cramer blamed them for nearly wrecking Merrill and Citigroup.



He then decried the Fed's actions in 2007, implying that Merrill's and Citigroup's near-failures were the fault of Bernanke & Co.



Quite a flip-flop, n'est pas? It seems Cramer couldn't keep his views straight from minute to minute this morning.



When CNBC co-anchor Becky Quick asked Cramer about the moral hazard of bailing out the institutional investors, and their firms, who made unwise bets on CDOs and other, mortgage-related structured financial instruments, Cramer's faced showed a silly little grin and he said something like,



'I think you just have to do it.'



This, of course, is vintage Cramer. Going back to my post here, he has consistently railed against the Fed for not bailing out his friends who made injudicious financial bets on bad paper. There's a reason why people like Cramer aren't on the Federal Reserve system Board. They'd ladle out liquidity anytime their neighbor lost money on a business venture. It's essentially a modern version of William Jennings Bryant's "Cross of Gold" free silver coinage position.



Cramer then goes on to savage MBIA, AMBAC, and the whole idea of their insuring structured finance instruments. Most of Cramer's comments center on his own hallowed status as the 'only' person to be honest about this.



In fact, the seizing up of credit markets demonstrated that their backing didn't really matter. I won't claim to have predicted the failure of either insurance firm here, but I pointed out here that they had strayed very far from their original, sound business model. The fact that the equity values of the two firms have plummeted so far, so quickly, tells you that the market already knew, and knows, what Cramer claims to be alone, martyr-like, in stating this morning.



Next, Cramer does another rather stunning piece of waffling. He goes ballistic so fast that it's hard to keep his remarks straight, but I believe he begins his rant about the sales of structured finance instruments in response to Rick Santelli's reasonable retorts to Cramer's overall hand-wringing. More on that a little later in this post.



Cramer then begins by saying that, while at Goldman, he and his colleagues packaged junk paper and 'jammed' it on customers. He tells brief, clipped anecdotes of himself and his fellow Goldman workers laughing at how they dumped junk investments on Australian or German banks and other Goldman customers. It's actually quite reminiscent of Michael Lewis' similar stories in his excellent first book, Liar's Poker. As well as the now-infamous, long-ago 'jamming' of overpriced, needless derivatives by Bankers Trust salesmen onto companies such as Gibson Greeting Cards and P&G, which led to the bank's demise, Charlie Sanford's ouster, and its eventual sale to Deutsche Bank.



Cramer then does an about face and claims that he never 'jammed' anyone at Goldman, and that's why he didn't make more money there. That he 'had a conscience.' And that Goldman taught him and others not to 'jam' customers, because everyone else did, so the one firm that did not would win their loyalty.



This from a guy who admitted, years later, to manipulating information flows, while a hedge fund manager, including the Wall Street Journal and CNBC, in order to pump equity positions he had already taken, then dump them into the resulting follow-on buy orders.



Frankly, this little episode left me reeling in confusion. I think Cramer cut loose on the real stories, then realized what he'd admitted, and, in unfazed, continued manic fashion, attempted to retract the truth and claim that he and Goldman never actually did what he'd just said they did.



Rick Santelli brought sanity back in the final moments of Cramer's appearance by reminding him that adult institutional investors willingly bought structured financial instruments, thinking they were conning the sellers, as I noted here, and in prior related pieces on what I call the "double con."

In fact, going back a few days ago, Santelli noted that the futures traders in the Chicago pits were already indicating that more Fed action was moot. They were pricing in their expectations of a weakened, but still growing economy, through which companies would simply have to work, and no further rate cuts would really affect this. Santelli said as much again this morning, adding that all Cramer was asking was for bad investments by institutional professionals to be bailed out by the Fed.



I'm sure that having Cramer appear on CNBC's morning program increases its viewership, and probably stampedes many of them into a worried exit from the exit markets. But, viewed from a more dispassionate, broader perspective, Cramer, in my opinion, lacks credibility in his basic business judgments, and typically makes himself, and his own imagined ethics, the center of his manic performances. It's entertainment, pure and simple.



Thirty seconds of Rick Santelli in the same video space as Cramer, and you see the difference between business entertainment, and business news, information and analysis.