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We call it broken field running. That's when stocks seem to vault up and down in bizarro fashion. Someone reaches to buy

Minnesota Mining

(MMM) - Get 3M Company Report

, up two today -- don't worry, I sold it to him. Another guy buries some



three feet under. It looks like there is no one between the running back and the touchdown except a couple of hapless diving cornerbacks.

What gives?

It's that liquidity thing again. It is a nightmare out there. So, let's go back to my National Gift Wrap and Box Company example, so the hedge funds out there shooting against me will have to waste a lot of their time looking for the symbol of my dad's company.

National Gift Wrap trades 2,000,000 shares a day. The screen market on National Gift is 65 1/4 by 65 1/2. It trades pretty easily in 25,000-share lots with those parameters. First, let's do the trade in a normal tape, before all of the

Long Term Capital


Rock Creature LLC goes into Cheat 'Em and Kill 'Em, his favorite broker, and asks, "Where can I buy 200,000 shares of National Gift?" The trader looks up the holders, knows the stock and says, "I will short you 100,000 at 65 3/4, a quarter-point above, and work the rest in." Rock Creature agrees to this. Then the trade gets done, and Cheat 'Em quietly brings in the rest, including his own short, at about the same price that he sold it to Rock Creature. He makes the commission.

Now, the new bizarro broken field running time: Rock Creature LLC hears that National Gift is going to go on the

E.F. Hutton

buy list tomorrow morning. He's got to get this one. He has no restraint, even though he knows you aren't supposed to trade on this stuff. He's losing too much money to care. So he goes into Cheat 'Em and Kill 'Em, his favorite broker, and he asks, "Where can I buy 200,000 shares of National Gift?"

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The Cheat 'Em trader says, "You want me to &^$*&$*&$*&$(&^$ short you this? Haven't you heard? We don't do that stuff any more. Boss says he doesn't want us committing any capital or getting short since Long Term Capital gutted our bottom line. Take a &^%$*$*%&^ hike."

So Rock Creature LLC then goes into Bag 'Em and Gun 'Em and asks, "Hey, where can I buy 200,000 shares of National Gift?" Bag 'Em's trader says, "Hey, I'll short you 50,000 shares at 66 to get started, and I will try to work the rest in. Is there anything I should know about this?"

Rock Creature says, "Nah, just like the stock. Put me up."

The trade gets done.

The Cheat 'Em trader, the first guy, sees the trade, and he knows that Bag 'Em had no National Gift in inventory. Heck, nobody has any inventory right now, again, because there is


money on these trading desks. The mortgage-backed desks are lugging so much inventory that nobody has any room for plain old equities. The rest of the equity is earmarked for Greenwich.

The Cheat 'Em trader then calls some hedge fund buddies, who are also getting killed in this market and looking for any edge, and says, "Go take some National Gift. I think Bag 'Em is short them." His scummy buddies make their calls, and they find out that Hutton is going to put National Gift on the buy list too!

Next thing you know, National Gift is up three, and the scummers have a real good trade going against Bag 'Em, who is still short the stock. As Bag 'Em can't go home short because you are supposed to be flat at the end of days like this, he scrambles to cover National Gift at 69.

Everybody sells it to him, and it's hedge funds 1, brokers 0. Real bad day for the Bag 'Em trader. That's how money has been made.

Now, this stuff goes on for a days at a time, until everyone has had the ^#&^%#^% kicked out of them. So now here is what happens: Evil Devil Hedge Fund comes in and asks Bag 'Em to short him 200,000 National Gift shares. Screen market's 65 to a half. Bag 'Em says, "Not after all of the money I lost the other day. But I will work your order." He then goes and tries to find a real seller of National Gift. He will not short a share himself. The real seller he locates is willing to sell at 67. So, the Bag 'Em guy takes what stock he can, walks the stock up to 67 on light volume -- there are no big sellers -- and the trade goes on at 67.

Natural seller to natural buyer. No shorting.

So, in normal times, National Gift goes up a quarter-point on this order. In these times, National Gift goes up two. Without the ability of brokers to provide liquidity and short stocks, we have a tape that seems hapless and stupid and downright irrational.

Because it is.

James J. Cramer is manager of a hedge fund and co-chairman of

At the time of publication, his fund was short Minnesota Mining, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to at