Jim Cramer reveals a hedge fund strategy for manipulating Apple stock

The viral video making the rounds from CNN to Facebook today is Jon Stewart's The Daily Show interview with CNBC's Jim Cramer. In part two of the unedited Thursday interview (see video below) Stewart rolls several 2006 clips of the TV host and former hedge fund manager discussing how some Wall Street insiders ply their trade. One of the clips appears to be a suggestion on how to float Apple-related rumors in advance of Macworld, in order to take advantage of the subsequent share price fluctuations.

At approximately 7:33, Cramer discusses the process of "fomenting," or ripening the financial environment for a short sell by starting rumors about the company's stock. Even though it's not allowed, "you do it anyway because the SEC doesn't understand it." At 7:57, he discusses how easy it is to start rumors about Apple, noting that the company rarely confirms or denies any rumors.

FierceWireless put together a handy timeline of Apple rumors from 1999 up through the beginning of 2007, and the iPhone talk was indeed a hot topic in the run-up to the official announcement. In September 2006, the first rumor that Cingular (now AT&T) would be the sole carrier for the iPhone began appearing. In October, rumors switched to T-Mobile as a carrier after the company's CEO spoke favorably about Apple. In November, Cingular's mobile music service launch seemed to scuttle the rumor that they would be the iPhone carrier, and Bear Sterns analyst Andy Neff suggested that a potential iPhone would cause the iPod market to suffer.

Considering that the clip Stewart played of Cramer was dated December 22, 2006 and the iPhone was subsequently announced at Macworld in January 2007, Cramer's discussion of possible short-selling and Wall Street rumor-mongering in that timeline is discouraging. On the other hand, it's not clear if any hedge fund employee actually manipulated AAPL using the methods that Cramer alluded to.