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Jamie McCarthy, WireImage / Getty Images The stock guru's top pupil, baseball star Lenny Dykstra, was secretly paid to plug stocks on TheStreet.com and give access to Cramer, reveals Randall Lane in his new book, The Zeroes.
In an era of epically wrong financial predictions, boisterous Jim Cramer's declaration that "Bear Stearns is not in trouble!" a week before its March 2008 collapse, rated among the most moronic, or at least the most infamous.
But it turns out that Cramer made one call far worse: He decided to make a stock-picking star out of a mumbling former Major League Baseball All-Star named Lenny Dykstra, giving him a high-profile column and ultimately an expensive "premium" newsletter on Cramer's site TheStreet.com. How did Dykstra return the favor? As I reveal in my book, The Zeroes: My Misadventures in the Decade Wall Street Went Insane, Dykstra took money—$250,000 worth of secretly issued stock—in exchange for recommending that stock to TheStreet.com subscribers. He also promised access to Cramer in exchange for the stock, which he apparently hid under his brother-in-law's name.
It was Cramer's repeated endorsements—echoed by de facto validation from everyone from CNBC to me—that enabled Dykstra to pull off the scheme.
Jim Cramer single-handedly created the concept of Dykstra-as-financial genius. Known mostly for his willingness to crash his body into walls or his cars into trees (nickname: "Nails"), the former New York Met and Philadelphia Phillie became an investment columnist for TheStreet.com in 2005, after sending Cramer an unsolicited email. For the next four years, Dykstra made stock picks, focusing on "deep-in-the-money calls"—a way to buy leveraged options—for tens of thousands of followers on Cramer's website.
Dykstra confuses HBO's Bernard Goldberg, but impresses Jim Cramer
"Not only is he sophisticated, he is one of the great ones in this business," Cramer told HBO's Real Sports in 2008. "He is the one of the great ones... a guy who applied the same skills to money that he applied to sports, it's brilliant." Cramer added that there are only "four or five" people in the world he would take stock picks from—and Dykstra was one of them.
Cramer, I am sure, had no knowledge of Dykstra's "pay to plug" scheme—an arrangement that could well lead to a Securities & Exchange Commission investigation. He was just a dupe. But his relentless endorsements and promotion of the ballplayer's stock-picking over the years must now surely rank as his most ill-conceived.
Cramer's effusive blessing, and the fact that his highly legitimate TheStreet.com tallied Dykstra's impressive track record (as late as last year, Dykstra bragged on the site that he had picked 96 winners against only one loss) impressed everyone from CNBC to The New Yorker. It also, for a time, impressed me.
I was running a company I had co-founded: Doubledown Media, which produced glossy magazines like Trader Monthly, Dealmaker, Private Air, and other titles for the rich and profligate.
Lenny Dykstra called me in 2007 as randomly as he had called Cramer, and within 24 hours he hired me to produce The Players Club, a financial advice magazine for professional athletes. Dykstra introduced me to his athlete buddies, everyone from John McEnroe to Tim Brown to Keith Hernandez. But he was especially proud of his friendship with Cramer, a relationship he waved around like a magic cloak of legitimacy. He'd play me Cramer's voicemail messages, or forward me their emails back-and-forth.
Given that hundreds of people were already slavishly emulating Dykstra's picks—and given how good his track record was, at least according to TheStreet.com—I suggested that he start a paid financial newsletter, an opportunity he jumped at. For six months, we developed the name, hired staff, and tested the price ($995 per year). Some $87,000 in subscription money rolled in before Dykstra even wrote his first newsletter.
And then, in April 2008, he abruptly took the newsletter from us and put it under TheStreet.com's umbrella. Helped by the marketing muscle of TheStreet.com, Dykstra quickly sold roughly $1 million in newsletter subscriptions.
Dykstra also left us with hundreds of thousands in unpaid bills for the magazine we were publishing for him. In the course of our ensuing legal fight—and then doing reporting for my book The Zeroes—I stumbled across his Cramer-for-sale scheme.
In the late winter of 2008, an entrepreneur named Richard O'Connor, who had become Dykstra's favored adviser, introduced him to Shannon Illingworth, the founder of a publicly traded company called Automated Vending Technologies, or AVT, and the two quickly cut a deal. O'Connor told me that on March 25, 2008, Illingworth gave Dykstra roughly $250,000 worth of AVT stock in exchange for plugging the company on Cramer's website, TheStreet.com, and promising to provide a personal introduction to Cramer.
12 June 28, 2010 | 12:44am Twitter Emails
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Why do people listen to these as*hol*s? Oh, yeah; greed.
I didn't completely get what the article was going on about, but it's hard to imagine Lenny Dykstra as a stock market guru, and the fact that he was in league with Cramer is the stuff of good comedies.
It's about the same thing, some people are new on these news, corruption at the Wall Street just ask to Warren Buffett. How you think these folk's make their money investing and trade with the market ?, you need a connection inside of Wall Street.
Randall Lane seems to have a real hate for others. I think he should take a laxative and ease up a bit. If ANY of this happened, let obamy take care of it. After all obamy is king, messiah, and "the one". We don't need a randall lane to mess up our lives. When men like randall lane make themselves out to be all and be all and do all in anything, LOOK OUT, and get out of the way, let him go by and give him nothing for the passage.
You're an illiterate idiot. What the hell does Obama have to do with any of this? When idiots like you pretend to "be all and be all and do all in anything", you just come off as stupid. And a racist. The writer did none of the things you say, and no one ever said the president was any of those things, he's just a man who won an election. And you're just a retard with an internet connection.
reader3... please dont feed trolls like Jackson. You said it yourself. He's an idiot.
I love it, "you're just a retard with an internet connection" and I bet you dream about Palin. . .
Jakeson, get your head out of your_____. Randall Lane had to legal action to get paid for services that Dystra contracted. While gathering information to help his case (which he still never got paid) he discovered the underhanded dealings of so called "expert, Lenny Dystra." NOTHING to do with Obama. He exposes a MAJOR flaw in Cramer, his love of athletics supersedes his intellect, by touting Dystra as an expert, he duped lots of people, including myself who have read theStreet.com, but I NEVER took Dystra's advice. People are easily duped just because they hear a famous name or person. Cramer should be ashamed of himself and apologize to his readers and audience.
Yeah... While the scam is up and all, can anyone reading this see the continuous plug of Randell's book? Come on. Expose the creeps, sure. But, you don't plug your own money making crap while doing "reporting".
Really? Did you really post this? The information in the article comes from....wait for it... the book! Jeez.
NotInsane proves he deserves his penname. He reads. and thinks. Good for him.
Nothing of substance on CNBC except for the cleavage of some of the money honeys All shills for their Wall Street advertisers and a day long infomercial/advertisement for the banksters, fraudsters and general snake oil salesmen, Elmer Gantys and Babbitts of the financial industry
I saw a show about Lenny a few years ago that was centered on his stock picking skills and how he went from baseball to a huge stock picker....but watching the interview, I kept sayingto myself that this just didn't fit right. I have spent almost 20 years in financial services and don't have that kind of track record. I thought at the time he was getting inside information or had some kind of information the rest of the world didn't have. NOBODY is right 99% of the time in the market. NOBODY.
I just read Jim Cramer's article in Yahoo, he says Obama is bad news for the stock market. Why does ANYONE listen to this guy? I really just don't get it...Jon Stewart needs to have him on his show again to teach him few things about the market! http://finance.yahoo.com/news/Cramer-Why-Obama-Is-Bad-for-tsmf-236477135 9.html?x=0
Nepotism run amuck!
Many insightful reporters and experience people who have spent years in financial services had that same feeling that something was not right about Dykstra's record, just as they did with Bernie Madoff. Why are there no reporters out there to dig out a story from their gut before these men ruin people's lives. Cramer is not just a lug who didn't know anything.
Somehow, this must be Obama's fault!
Jomamas, quit spreading your racism. Anyone that listens to a fellow spout off about stocks on the national news and follows that advice is just dumb. The key to making money in the stock market is to buy it before everyone else thinks it is great. Cramer was and is just entertainment. Not my cup of tea for entertainment, I would rather watch the Solid Gold Dancers. Anyone that lost money following financial advice from an athlete deserves to lose that money. Leave Obama out of it. He chose another financial wizard to guide him, Tim Geitner, the genius that was either too dumb or too corrupt to correctly file his own taxes, but is now in charge of the Treasury department. So NO MORE RACISM!!
Same old casino and ponzi dame the faces just change From Jesses Cafe "Gold attempted to break out this morning hitting an intraday high around 1262, but was hit by concentrated selling designed to break the short term price trend. This is what is called a bear raid, Each time gold attempts to break out, the shorts, in this case primarily the Wall Street banks and their associates, attempt to break the trend and push it lower. Each low is a little higher than the last, which is what gives the chart formation its shape of a rising triangle. As the energy behind the primary trend builds, the shorts must eventually give way and allow the price to rise, retreating to another line of resistance a bit higher. Why is this happening? Why the preoccupation with gold and silver by the banks? Notice that gold and silver were exempted from proprietary trading restrictions for the big banks in the 'financial reform' legislation. The US government and its central bank view gold and silver as rivals to the US dollar, and 'the canary in the coal mine' that exposes their monetization efforts and threatens the Treasury bonds. It is characteristic of a culture that secretly abhors and dishonors the truth, paying lip service to whistleblowers while discouraging and ignoring them at every turn. "What is truth?" Whatever we permit to be discussed, whatever is published, and in the end, whatever we say it is. There is a prevailing modern economic theory, probably best expressed in Larry Summer's paper on Gibson's Paradox, that by controlling the gold price one can favorably influence the interest rates paid on the long end of the yield curve. So as policy the US permits and even encourages the manipulation of key asset prices. Thus price manipulation of key commodities becomes a major plank in a program of 'extend and pretend.' This to me typifies the policy errors and failures of Bernanke, Summers and Obama. They do not engage in honest discussion of the problems and genuine reform, preferring to attempt to band aid the problems, cut back room deals, and maintain the status quo to the extent that they feel the people will tolerate. They will be remembered in history as the high water mark in an era of corporatism, institutional dishonesty, and greed. The parallels in the current situation with the Great Depression in the US are remarkable. FDR was a strong leader with a vision, and faced tremendous opposition to his reforms from a Republican minority and its appointees on the Supreme Court. He was considered a 'traitor to his class' and a champion of the common people. Obama is also a traitor to 'his class,' all those who voted for change and reform which is what he had promised. But he lacks genuine leadership, vision, and moral courage, confusing leadership with empty words and gestures. The Banks must be restrained, the financial system reformed, and the economy brought back into balance before there can be any sustained recovery. Those well-to-do that promote cutbacks and austerity measures now without substantial reform merely wish to shift the burden to the many while feeding on the public's suffering. "Now that I've gotten mine, screw everyone else, to make mine all the sweeter." But when the shoe is on the other foot, they whine and cry and threaten until they gorge themselves on subsidies. And those who promote stimulus without reform are merely seeking to maintain the status quo while transferring additional wealth to their own supporters and special interests, often in support of theories that they barely understand. Stimulus only serves to mitigate a slump, but cannot repair a systemic collapse."
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