Cramer Says Hedgies Are Shorting the Stocks in Big Tech Funds

"Shooting against." It's a time-honored way to make money in the hedge fund world. You hear that some fund is hurting, that there are massive redemptions and you call up the holdings and you bet against these stocks. You buy puts on them. You short them.

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I've done it, and I have had it done against me. I have at times gone after funds that I know are bleeding, trying to figure out which stocks they'll sell in order to meet the redemptions. Invariably I made money, but only if I'd been nimble enough to cover before the rallies began.

Except in 1990. Then I was leaning against all the mutual funds with big holdings in financials. But when the Fed switched and poured on gas, I had to cover or get killed. The ones I didn't cover I was annihilated by. The market moved so swiftly that I couldn't cover in time.

Three years ago there were rumors -- proven true -- that I was having redemptions for the first time in my career. My holdings, particularly my 13(d) holdings (own more than 5%, you have to file with the Securities and Exchange Commission) were on display. Hedge funds would be out there every day offering my stocks short, trying to pressure me into capitulating. I talked with enough brokers to know that they were going for my throat. There was blood in the water.

But I got the last word. The Fed eased aggressively and I trapped the shorts in our names. Trapped them like rats. They covered and took me out of some of my biggest names when they did.

If you're shorting some of the names, say of Janus, or Amerindo, or Putnam OTC or Firsthand, betting that they're going to capitulate and sell, you better get it right. If the market snaps back you could be killed, as those who bet against me were.

In the meantime, it is going to happen. It's a fact of life. It's why funds go to such lengths not to tell you what they are long. They are just too vulnerable to this process.