Saturday, March 14, 2009

The Mad Man Of Wall Street

American Scofflaw
With money he earned working as a researcher for law professor Alan M. Dershowitz, and as a miserable summer intern at the Manhattan law firm Fried, Frank, Harris, Shriver & Jacobson LLP, Cramer started dabbling in obscure stocks such as Standard Press Steel, American Agronomics, and Bobbie Brooks. "Nothing but oil was working," says Cramer. Still, he felt the market was on the cusp of a big rally, and he maxed out his academic loans to raise money to invest.

As his brokerage account swelled, so did Cramer's obsession with the market. He started leaving stock tips on his answering machine every Sunday night. He recalls, "I was like, 'Hi, this is Jim Cramer. I'm not here right now. Take a look at PEOPLExpress, which has a good business model..."' Dershowitz urged him to register as an investment adviser. Cramer agreed, but says back then he never considered himself more than an amateur with a knack for making money.

ENTER MARTIN PERETZ, editor of The New Republic and Harvard professor, who approached Cramer out of the blue with a $500,000 check. Peretz, who would later co-found with Cramer and invest in his hedge fund, had been profiting from tips on the answering machine for months (after initially calling to ask him to write a book review), and wanted Cramer to run his money. "He seemed to know very deeply so many stocks," says Peretz, who would prove loyal. "At one point, I was down $80,000 and he didn't give up on me," says Cramer.

Cramer made Peretz $150,000 in two years. He parlayed his record into a three-year stint as a broker to the ultra-rich at Goldman. Then he spent nearly 14 years at his hedge fund, opened in 1987, where he routinely took home $10 million a year and more.

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