Funny Money.

Aug. 2 was a lackluster day in the trading of high-flying tech stock Syneron Medical (ELOS). The stock barely budged, down 9 cents to $40.85. After-hours action also looked blah--until 5:33 p.m. EST, when "freedompartner" posted this on Yahoo: "Cramer said buy ELOS before earnings: Just finished taping the show. He loves ELOS." The message referred to stock pundit James Cramer and his wildly successful CNBC show, Mad Money.

Syneron began moving higher and trading picked up. That night on Mad Money--which CNBC tapes from 4:30 to 5:30 p.m., then broadcasts from 6:00 to 7:00 p.m. EST--Cramer indeed touted Syneron's laser products' ability to smooth away cellulite. "I am sticking the proverbial neck out" and telling you to buy ELOS now before earnings, he exclaimed. The stock spiked to $45.46 in after-hours trading on volume of 300,000 shares.

What happened? Apparently someone called Mad Money during taping for the Q&A segment, heard the tout while on hold and disseminated it on the Web before the show aired--against CNBC's admonition. As it happens, viewers who bought ELOS got burned two days later. Syneron's earnings disappointed, and the stock fell to its earlier level.

For two decades Cramer, 50, has told America what to buy and sell--in print (SmartMoney, Time, New York), on the Web (TheStreet.com), on a radio show and now on TV. He also ran a hedge fund, Cramer Berkowitz, that claimed a 24% annual return after fees over 15 years. He retired, burnt out, in 2001.

Since its March debut Mad Money has become CNBC's second-highest-rated program, in what was previously its lowest-rated time slot (except for the 5 a.m. show), drawing nearly 200,000 viewers five nights a week. The show amounts to Cramer being Cramer--as raw and uncensored as ever. He feverishly bounces around the studio, rants at the camera and bangs on buttons blaring the sound effects of cash registers, bowling pins and growling bears.

He's also spawned a burgeoning subculture of trading types looking to make a quick buck off his calls. With a flat market and dormant volatility, brokers and traders are desperate for anything that moves stocks, and in Mad Money they've found their Valhalla.

Aside from Yahoo's boards, which are replete with Cramer references, there are at least three independent Web sites devoted to Mad Money. It's not just chat-roomers paying attention. Brokerages such as Cantor Fitzgerald include Cramer's picks in their research notes, which are distributed to mutual fund and hedge fund clients.

"At first we didn't cover Mad Money's picks, but our customers kept talking about the show's impact," says Damon Southward of Briefing.com, a news service used by investors that now includes the show's content in its product. "We need to stay on top of volatility, and if there's one thing Cramer creates it's volatility."

Earlier in his career Cramer (who was away and unavailable for this story) raised eyebrows as one of the first money managers to write about stocks. In 1995 the SEC investigated whether he broke any laws writing columns about his holdings. Cramer was exonerated, but disclosures and disclaimers were added to his stories. They have followed Cramer ever since, but none as long-winded as Mad Money's. In the show's opening minute a 263-word disclaimer scrolls down the screen (in a tiny font). Callers are subjected to an even lengthier two-minute disclosure.

Despite the cautious measures, it appears CNBC is still grappling with the mysterious ways in which Mad Money moves stocks. On Aug. 8, around noon, CNBC announced on its Web site that Charles Goodson, chief executive of PetroQuest Energy, was going to be Cramer's guest that evening. PetroQuest rose 7% on four times its average volume. Chief executive appearances are typically positive, and Cramer is bullish on oil stocks.

As it turned out, Mad Money had booked Goodson for the following Monday. Informed by FORBES of the error, the network removed Goodson's name from the Web site and canceled his appearance. It also decided to discontinue posting Mad Money guests on its Web site prior to the show's broadcast.

"CNBC will continue to take steps to ensure that the integrity of the program remains intact," says a CNBC spokesperson.

PHOTO (COLOR)

~~~~~~~~

By Peter Lattman