Hanna: Stewart Misses the Point
March 16th, 2009 at 10:16 am - by Ana Danijela
Tim Ferriss, author of the popular “Four Hour Work Week,” interviewed Mark Hanna, Trust Officer at the Clayton Bank and Trust in Knoxville, Tennessee — Hanna has been involved with the trust fund since a transaction with Berkshire Hathaway.
After Clayton Homes was sold to Berkshire Hathaway in 2003, owner Jim Clayton hired Hanna to manage the trust fund. Hanna’s success in the market, according to Ferriss, is significant — though the data was kept anonymous.
Jon Stewart’s viral attack on Jim Cramer has become the scourge of the financial industry — with questions of legitimacy and truthfulness fresh on the minds of Stewart’s audience. Stewart represents the “lay view” on the current situation, said Hanna, ‘falsely implies that investing in stocks is as safe as “betting it all on red”.’
Hanna conceded that Cramer made ethically questionable decisions, notably, his “stirring the emotions of those who hold stocks as a long-term investment, turning them into short-term speculators.”
A paraphrasing of famous investor and so-called “Oracle of Omaha,” Warren Buffett, “if you are a long-term investor in stocks, you want prices to decrease over your buying period so that you are able to buy more at better prices,” led Hanna to say that Stewart was entirely wrong in his claims about “financing the adventure” of hedge funds with long-term investors’ funds.
Hanna conceded that problems with corporate governance and regulation led to “managers reward[ing] themselves for short-term performance at the expense of shareholders,” a claim that Stewart would support wholeheartedly.
“The bottom line [is]: gambling is never investing, and investing is never gambling. The trick for the savvy investor is to recognize the difference,” concluded Mike Hanna.
March 16, 2009 at 11:18 AM
“Stewart represents the “lay view” on the current situation, said Hanna, ‘falsely implies that investing in stocks is as safe as “betting it all on red”.” Are you serious? The bigger question here is why a comedian and his show are becoming the “go to” source for real news the last few years. Answer - because the real media is a shell of it’s former self, anxious to take the contents of a press release as fact. My concern with the situation is people like you are STILL covering the wrong people, for the wrong reason. Cramer and CNBC are not journalists, not regulated and are doing a poor job. The house has just burned down and maybe . . . . just maybe one of them “thinks” they smell smoke.
And I beg to differ ” investing is gambling” when people like Cramer say one thing to move a market - and then do another. Even a slightly rigged game is a gamble to all those not in on the fix. And with the President we just got rid of in power, there were a lot of people playing that rigged game.
March 16, 2009 at 3:39 PM
“I thought Bear Stearns was honest.” Jim Cramer.
I don’t believe this.
I think that Jim Cramer believed that the guys who ran Bear Stearns would pull the same kind of deceptive shenanigans in order to line their own pockets that Cramer pulled when he ran his own hedge fund. Cramer might have thought that there was some limit to what those guys would pull and that wherever that limit lay, there would still be a piece of the pie left over for the shareholders. That is not at all the same thing as thinking they were honest.
This is where I think Jon Stewart nailed it. I don’t think Jim Cramer knew that Bear Stearns was going to collapse. I do think he knew the kind of things that people on Wall Street do to make money and I think he understood the ways in which the interests of the guys running the firms diverge from the interests of the shareholders. The problem is not that the executives at Bear Stearns were not exposed to declines in the stock. The problem is that the benefits of short-term high-risk strategies were enjoyed to a much greater extent by the executives than by the shareholders while the risks were shared equally. This is what I think Cramer understood without ever trying to make his audience understand.
The bonuses at AIG illustrate the problem perfectly. The compensation of the executives who wrote the credit default swaps was structured in such a way that they are entitled to millions of dollars in bonuses even though there actions brought down the company and cost the taxpayers of the United States billions upon billions of dollars. The scale may be enough to shock Cramer, but the basic methodology shouldn’t be.