“SIRIUS NOT WORTHY OF COVERAGE.”….”It shouldn’t even be a stock”

The headline above is a combination of comments which Jim Cramer has uttered with regard to SIRIUS XM (SIRI) over recent months. Quite telling comments, especially when you consider that Mr. Cramer has made it common knowledge that he will not cover stocks under a dollar in value. Why the recent chatter about SIRIUS then from the ringmaster of that silly circus sideshow known as Mad Money? It is my intent with this article to help you understand not only why…..but how the game is tilted in the favor of the very part of the market in which Mr. Cramer is an expert. To be more specific, I am speaking of the short interest….the Hedge Funds.

In 1949 Alfred Winslow Jones formed the first Hedge Fund. Jones received his Doctorate in Sociology from Columbia University in 1941. In researching and writing a 1948 Fortune article on the current trends in investing and market forecasting, Jones concluded that he had a better system for managing money. In 1949, he raised $100,000 ($40,000 of which was his own money) and began putting his theories to practice in a general investment partnership. Operating in almost absolute obscurity for seventeen years, Jones’ success was finally brought to the public eye in a 1966 Fortune Magazine article titled “The Jones That Nobody Can Keep Up With”.

In addition to detailing Jones’ unique investment strategy, the article revealed that his partnership had outperformed the best performing mutual fund that year by 44% and the best five-year performing mutual fund at the time by 85%, net of all fees. This attracted the attention of wealthy individuals seeking better returns on their investments and professional investors willing to sacrifice big salaries for profit participation in the portfolios they managed. By 1968, there were approximately 200 hedge funds including funds established by legends like George Soros and Warren Buffett.

Over the ensuing years the hedge fund industry plodded along with its ups and downs until the early 1990’s, when the financial press once again began trumpeting the returns achieved by hedge fund legends like George Soros (Quantum Fund) and Julian Robertson (Tiger Fund and its offshore sister Jaguar Fund). Many hedge funds no longer resembled the classic long/short equities model developed by Jones. For example, Soros made his big killing in the currency markets and Robertson employed modern financial derivatives such as futures and options, which didn’t exist when Jones started his fund. With lots of new hedging tools and a tide of favorable publicity, the hedge fund universe exploded. By the year 2000, estimates of as many as 4,000 hedge funds of all shapes, sizes and investment disciplines existed.

Research reveals that from 1990-99; the top 25% of hedge funds outperformed the top 25% of more traditional fixed fee based investment managers by a significant margin. Interestingly, these top hedge funds outperformed in down markets as well as up markets, indicating the use of leverage in rising markets does not fully explain higher returns. Two factors, trading advantages and incentive based compensation, give well managed hedge funds an edge. Trading advantages include superior information, lower transaction costs, better market access, size advantages, and structural inequities in the markets in which investors operate. The same advantages financial institutions, including mutual fund companies, have always enjoyed.

Most hedge funds have greater investment flexibility than regulated investment advisors. They profit from leverage in up markets and varying forms of short selling in declining markets, whereas most mutual fund companies can’t use leverage and their only defensive option is to raise cash. Also, hedge funds tend to be focused on less efficient market sectors where the “first call” on new information can translate into an even bigger performance advantage. Size matters as well. The largest mutual fund dwarfs the largest hedge fund. In today’s volatile markets, the small and swift often have a distinct edge over the big and unwieldy. Incentive based compensation is a powerful lure for investment talent. Twenty percent of the profits can be a very good deal even relative to a big Wall Street salary.

In order to help SIRIUS and other stock buyers and holders understand the truth behind the manipulation of the stock, it is important to understand the real Jim Cramer, and not the fictional character created at CNBC. The self absorbed arrogance Cramer displays in this video, in which he not only describes illegal activities, but dismisses the SEC as a bunch of incompetent know nothings is incredibly telling about the truth behind the man. I warn people in advance, that once you watch this video, you will never look at Jim Cramer in the same way again.

The truth is in this video, not on Mad Money. Cramer says things in this video he openly admits on the tape, that he would never say on television during his show or at any other time. The attached video was pulled from youtube several months ago. How it was re posted I do not know, but I feel it is my responsibility to make people aware of it. It discloses some sickening truths about the financial markets, and also leads one to question why Jim Cramer would break his own rules with regard to speaking of stocks for SIRIUS. Is there a hidden agenda based on his recent comments, as well as the writing coming from the Motley fool and the Street.com which is part of Cramer’s personal business empire.

As an investor in SIRIUS as well as the market in general, I am genuinely disturbed by what I hear and see in this video, and it definitely makes a lot of the actions we have seen over the last year seem even more incredible. To say there is manipulation in the share price of SIRIUS at this point is like saying tomorrow is another day; it’s a given! I do not know Jim Cramer, and I do not know what his motivation was behind the making of this video. What I do know is that the man should be ashamed for not exposing the truth behind all the lies and deceptive stories we are told on a regular basis with regard to the stock market. I urge as many people as possible to watch the video, and to realize that market forces are in play every day trying to steal money from your hands.

By Steve Garcia

Long SIRI

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