Allen Wastler Commentary:
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Defending Cramer's trading warts

Some unfiltered comments may have revealed a dark side, but at least the ex-hedge fund manager was honest.

By Allen Wastler, CNNMoney managing editor

NEW YORK (CNNMoney.com) -- Want to get a glimpse of hedge fund psychology and strategy? How to drive a stock down to make your short bet pay off? Then you've got to check out a particular video on TheStreet.com.

Now normally I don't like to send traffic to competitors. But this video, a December interview with Jim Cramer, the host of CNBC's "Mad Money," is amazing. He details a number of shady practices, some he apparently had first hand experience with, to play the market.

Like manipulating futures ...

"A lot of times when I was short at my hedge fund, and I was positioned short meaning I needed it down, I would create a level of activity beforehand that could drive the futures. It doesn't take much money."

Or creating rumors and playing the press to drive a stock down ...

"The way the market really works is to have that nexus hit the brokerage houses with a series of orders that can push it down, then leak it to the press, and then get it on CNBC that's also very important. And then you'll have a kind of vicious cycle down. It's a pretty good game."

He used Apple (Charts) and Research-In-Motion (Charts) as examples for his short-selling, smear campaign seminar.

In the course of the discussion he knocks his colleague Bob Pisani at CNBC, "bozo" reporters at the Wall Street Journal, the SEC, and investment bank UBS.

He also had some advice for two cell phone outfits, Motorola (Charts) and Nokia (Charts), to overcome some of their woes. "Motorola and Nokia have to get in a room and just fix price."

When the video started making the YouTube rounds, Cramer went on the Don Imus radio show to explain that "mistakes were made" and he didn't really verbalize all that well in the video interview. He also put this statement on TheStreet.com, the website that he founded: "No one knows and respects the securities laws more than I do."

To his credit, the video, embarrassing as it is, is still on the web site. (It got stripped from YouTube, though. Hey, who wants to share traffic on a hot video?)

Cramer is one of those love-him or hate-him guys. Some think he's a whacko because of his on-air antics. (I met him once at a Columbia University conference, and he was actually kind of subdued.)

But he's brought passion to a business that is typically stuffy. And the kind of stuff he talked about in this particular interview happens. He just laid it out, warts and all. If he is stained a little ethically, at least he pointed out the dirt in the laundry.

Tip of the hat, Jim.

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Allen Wastler is Managing Editor of CNNMoney.com and appears on CNN's "In the Money." He can be emailed at wastlerswanderings@cnn.com. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.