Cramer's 'Mad Money' Recap: Money Managers 101

Click here for an archive of Cramer's "Mad Money" recaps.

---

There is a select group of people known as money managers, and only they know how the market truly works, Jim Cramer said Wednesday on his "Mad Money" television show.

The mechanics of how a stock moves matter more than a company's fundamentals, Cramer said. There is no such thing as "the market." By the mechanics, Cramer means how the mutual funds act. In fact, the mutual funds might as well be the market because of the large amount of capital they control, he said.

"When you know how they act, you know the truth of the market," Cramer said. "Forget the fundamentals for the short term and think of the funds."

Mutual funds make money from fees, and that's how they profit, he explained. And the only incentive they have to beat the market is to attract more clients and thus more fees. The first thing short-term investors must realize is that mutual funds "buy relentlessly over time," Cramer said. As it takes funds a long time to build a position, it is easy for people to make money on a stock like Exxon Mobil(XOM Quote - Cramer on XOM - Stock Picks), even when it already has moved higher.

The second lesson to be learned is "symbolism is incredibly important if you're running a mutual fund," he continued. A diversified mutual fund needs to have some oil exposure, but it doesn't need to own the best one, "just a stock that symbolizes oil."