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I'm Not as Bad as Howie Kurtz Says

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From: Howard Kurtz
To: James J. CramerPosted Wednesday, Sept. 27, 2000, at 9:00 PM ET

In his new book The Fortune Tellers, media critic Howard Kurtz examines the brokerage analysts, fund managers, and news outlets who distribute the information that makes the financial markets rise and fall, and finds many of them conflict-ridden, irresponsible, and glib (click here for an excerpt). In this exchange, James Cramer defends himself and his peers from Kurtz's charges.

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Arrrrgghh!! (Excuse my language. I'm usually a mild-mannered guy.) You keep arguing that I have insensitively lumped you and every other journalist, talking head, and tipster into one great, huge, stinking blob of pointless punditry. In fact, I take great pains to chronicle who's doing a solid job of reporting (CNBC's David Faber, the Wall Street Journal's Steve Lipin, and Bloomberg's Christopher Byron, to take just three examples) and who often falls victim to hype and corporate spin.

Rumors? You want rumors? The Fortune Tellers is bursting with scrutiny of half-baked, quarter-baked, and never-in-the-oven rumors. Business Week reports on its Web site that Yahoo! is in talks to acquire Excite@Home—a report denied by both companies within hours. CNBC's Sue Herera reports on "rumors in the market, unconfirmed of course, that there will be an upcoming Washington Post story about the Fed's long-term concern about the effect of growing interest rates on the economy." (There was no such story.) Dan Dorfman reports on JagNotes.com that Timberland stock is dropping because of an analyst's negative comments—then admits two days later that "some short sellers" were spreading a "bogus story" about the clothing company. (Gee, who'd fall for that?) Even the savvy Ron Insana tells CNBC viewers of "a rumor that Microsoft would miss its quarterly [earnings] number," while hastening to add that a top trader regarded the rumor as "nonsense." Financial journalists insist they have no choice but to spew out market-moving rumors; I contend that these high-decibel reports are adding to the echo-chamber effect and slowly eroding the media's credibility.

Still, let me pause here and give you your due. How many hedge-fund managers would let me in their offices? For a day, plenty (everyone wants publicity in this age of celebrity financiers). For a year and a half, with phone calls and e-mails day and night, candidly answering questions about their successes and failures, internal company warfare, battles with two cable networks, even family pressures? Zero. I made you essentially the same offer I gave Mike McCurry for my book Spin Cycle: Let me into your life and I'll produce an honest, nuanced, warts-and-all portrait. I think I've held up my end.

Now, since you're always after me to name names, Jim, what do you think of the hotshot analysts I write about—Henry Blodget, Ralph Acampora, and Mary Meeker? Are they worth the millions of dollars they're paid, or are they part of what you describe as the "cesspool"?

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From: Howard Kurtz
To: James J. CramerPosted Wednesday, Sept. 27, 2000, at 9:00 PM ET

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James J. Cramer is president of Cramer Berkowitz, a $400 million hedge fund in New York, and a daily columnist for TheStreet.com, a financial Web site he co-founded. Howard Kurtz is the media reporter for the Washington Post and the author of The Fortune Tellers: Inside Wall Street's Game of Money, Media and Manipulation (click here for an excerpt and here to buy it). The author of three previous books, including the best seller Spin Cycle, Kurtz is also the host of CNN's Reliable Sources.

COMMENTS

Reader Comments from The Fray:

Cramer:
You are asking Kurtz to hit the sell-side harder when, in my view, your site, TheStreet.com, goes pretty easy on them. I'm aware that your writers want to make a specific point, but I don't think they should sacrifice facts to achieve that aim. Recently, one of your writers wrote about Blodget's internet sector downgrade and wrote that he was using the Neutral rating for the first time. That was untrue, but it made the downgrade sound like a bigger deal. In the past, I have been interviewed by your writers and provided background analysis of Merrill Lynch research calls. Re: the DCLK example in the book, you could have called Blodget to the mat if you had asked him why he was recommending internet stocks on which his price targets suggested negative returns.

Kurtz:
What's the big deal with ETYS? You are not providing the whole picture. Blodget recommended ETYS at a report price of $37.50 and with a 12-18 month price target of $50 (33% upside) and a near-term Accumulate/long-term Buy rating. Based on typical ML research guidelines, those specs would make the stock eligible for a downgrade at a price as low as $41.67. (The minimum appreciation threshold for a ML Buy rating is 20%.) ETYS actually went up more than 100% from $37.50. The problem was that when ETYS was trading in the $50s, $60s, and $70s, Blodget continued to recommend purchase even though he wouldn't raise the price target from $50. Even more puzzling is that ML let him continue to recommend it. If ML had enforced its own typical guidelines, ETYS would have been downgraded and you would have had to select among 20 or so other similarly bad performing stocks to highlight. By the way, in your book, you say that Blodget downgraded Amazon from Buy to long-term Accumulate. That is wrong. It was from Buy to Accumulate, both near-term (or in official ML language, intermediate-term).

--Bob Kim

(To reply, click here.)

Having read just the excerpt of The Fortune Tellers online, I have to admit that it looks like Cramer has a point. Howard Kurtz is probably right in general where insisting that someone trying to divine the vicissitudes of stock market aggregates or of the individual issues which comprise the aggregates from moment to moment is, more often than not, someone fumbling around in a blizzard--a raging storm of impossible-to-gauge elements which admit of very little visibility alone or in their concatenation.

But surely the more interesting story concerns not the impact of these "fortune tellers" or the conflicts and challenges they pose to market regulatory institutions but the personalities of the actors who have promoted themselves to a standing where pure visibility may equal or be confused with what power and elements drive markets in reality. Cramer is more interesting--and, not incidentally, more revealed--in his own words than he is in Kurtz's depiction.

--Mark S. Devenow

(To reply, click here.)

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