Book review: Confessions of a street addict

I just finished reading this book written by Cramer in 2002. In it he tells the stories of his carreer including how he broke into the business along with major ups and downs he went through with his hedge fund and his website thestreet.com. It was an entertaining read for the most part and that along with gaining some insights  into the inner workings of the hedge fund world were the main reasons why I read this book.  There were some nuggets of wisdom that can be gleaned from the book as well. If you weren't trading during the late 90's which featured the Asian contagion, the collapse of LTCM and the dot com mania, this book will give you a "in the trenches" prospective of it. The most interesting part of the book is when Cramer talks about his struggles in 1998 whereby his hedge fund was on the brink of collapse.

Now a days, Cramer is despised and ridiculed by pretty much everyone in the retail trading community who has been trading for at least a few years. While I am certainty aware of his faults and have been critical of him myself at times, but I've always respected him because he is successful. Say what you want about him but you don't get to where he is by being a loser. He made millions for himself and his clients both as a broker with GS and at the helm of his hedge fund which averaged about 24% net of fees over a span of 12 years under his tenure. He is a veteran of the street and has a lot of knowledge of the inner workings of it. He is well connected and comes up with useful ideas and insights now and then.

After reading his book, I had more respect for Cramer in some ways but less respect in other ways. On the positive side, if what Cramer says is true (which I believe is the case), there are very few people on this earth who are more tenacious and hard working than him. It was inspiring to me. He battled through many personal and financial adversities which were brutally agonizing. On the negative side, some of things that Cramer and his fund did to make money bordered on insider trading and market manipulation.  Cramer's firm would generate a lot of commissions for various brokers and as a result they would be able to get access to the important people in the sell side like the big analysts. One particular strategy emphasized by his trader wife, was to talk to analysts gaming them if they were about to upgrade or downgrade a stock and then jumping in with a position if they had good reason to suspect one was coming. If they felt the analyst was warming up to stock they would feed them positive information to give them the "push" they needed to pull the trigger on an upgrade.Another benefit of their "pull" with the brokers was that they were able to know things that the typical retail trader would never be able to know such as if there was a big seller who was putting pressure on a stock and was just about done liquidating their position. When it comes to ST trading individual stocks, which a lot of hedge funds like Cramer's former fund focus on, retail trader's are at a significant disadvantage because of what I discussed above. This is one of the many reasons I don't believe in ST trading.

Cramer also talked about how grueling, cruel but yet ridiculously lucrative it was to have worked for him. Would I have worked for him if given the chance? Yes...the money would be too great to resist. Would I have lasted? Probably not. Aside from his rapid ST trading style which isn't my forte and is incredibly stressful, I would probably not be able to put up with the abuse he inflicts on his subordinates which included getting water bottles thrown at you and having a post-it note stuck to your forehead all day with the stock symbol of the bad trade you made.  I would probably be burned out and stressed having little time and energy for sports, friends or any other kind of life. I realize hard work and sacrifice is essential to success in this game but if attaining success in such a way is going to make you miserable then it's really not success. Perhaps it would have been worth it to put up with the abuse for a few years to build up a good chunk of change then quit and work for yourself.

I've being doing this full time for about 3 years now and my returns have been on par with Cramer's when he was at his fund but I achieved them far more passively, with far less stress never on the brink of collapse and without having the advantage of the inside scoop from the big brokerages at Wallstreet. I've also done it in more difficult market conditions. But 3 years means jack. I could have just as well been lucky rather than good which is similar to the line Cramer ends with in his book.