Exchange-traded funds are part of the "corrupt process" that Jim Cramer said he's seen his entire career on Wall Street.
"I remember when I was a young pup at Goldman Sachs and the goal was to create as much product as possible," he told host Aaron Task, on TheStreet.com TV's
Wall St. Confidential video
Having been the leader of product creation in his sales group while at Goldman, Cramer said he recognized that he did far better than everyone else in commissions because he created a lot of product.
However, it's a case in which "it doesn't do the consumer any good at all because the only free lunch is diversification," he said.
ETFs, on the other hand, represent antidiversification even though they are baskets of stocks concentrated in particular sectors, Cramer explained. While he doesn't consider ETFs to be a ripoff of the consumer, he said they are wrongly perceived as being better.
People who probably have never seen Cramer's "Mad Money" TV show have created the perception that he is pro-trading, when actually the show is antitrading, he said. One reason why Cramer is antitrading, he said, is that he can't keep up with the "manipulations" of an
Oil Services HOLDRs
or of natural gas.
"When people hear the word manipulation, they immediately think it can't be manipulated because if it was, the government would step in," he said. "That presumes a level of sophistication" the government is totally incapable of.
Cramer told Task he believes individual investors should avoid ETFs because they don't make any sense. Further, he said, people don't talk about it because "the press is as unsophisticated as the government," and the people who propound the ETF approach get a lot of money.
"Diversification is the only thing that has over time worked," Cramer reiterated. "The idea of being antidiversified is something that has historically cost people a lot of money."
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