Have you ever wondered if the stock market is just like one big casino where the house is rigged against you? This article by Henry Blodget — and the interview from Jim Cramer quoted within — helped affirm my sense of the stock market as basically a pillaging ground for crooks and liars. While the markets and the business of finance in general is populated with many ethical professionals, and while the work of researching and investing in good businesses is worthy, the bottom line is that the investors with lots of cash and a shifty sense of how to manipulate things, tend to walk away from the table with more than the little guy. And why is that? Is it because their research and judgment is better? Perhaps sometimes. But more often, the reason they make more money is because they know how to manipulate the market and they have enough capital to do it.

I had a brief love affair with trading stocks. It lasted about a year in its heyday, then faded to owning a small batch of stocks, then turned into selling everything and going into a combination of guaranteed savings and high-yield money market accounts. A small portion of our retirement money is also diversified into a number of mutual funds. Short of stuffing your money in a mattress, this seems to be the safest way to keep it, and even make a decent return. You can now get over 5% return in high-yield money markets. But high-yield money markets are not guaranteed.

I sometimes ask myself if I want to try researching and buying some stocks again, but I can’t seem to muster the courage, and for the small amounts I’m willing to risk, it’s not really worth my time. Sometimes I think about buying into foreign currencies, betting on the dollar going down, but I’m vaguely uneasy about doing so — it seems kind of un-American, or just strange, like buying life insurance policies on your friends, secretly betting they’ll die. I’ve considered the argument that you should buy gold — that when all else fails, gold will skyrocket in value, but this just doesn’t make intrinsic sense to me. I’ve read a number of arguments for owning gold and I’m still not convinced.

But I don’t think I’ll be going back to stocks anytime soon. It’s articles like this one that remind me of why:

[Blodget writing]…Cramer draws a line in the sand—briefly making it look as though he is not suggesting that hedge funds break the law. Then, he appears to recommend that they do.

[CRAMER:] Now, you can’t “foment.” That’s a violation. You can’t create yourself an impression that a stock’s down. But you do it anyway, because the SEC doesn’t understand it. [my emphasis]. That’s the only sense that I would say this is illegal. But a hedge fund that’s not up a lot [this late in the year] really has to do a lot now to save itself.

This is different from what I was talking about at the beginning where I was talking about buying the QQQs and stuff. This is actually blatantly illegal. But when you have six days and your company may be in doubt because you’re down, I think it’s really important to foment—if I were one of these guys—foment an impression that Research in Motion isn’t any good. Because Research in Motion is the key today.

[Blodget] Until this point, Cramer has just played the role of coach. Next, however, in an example that could come back to haunt him—and in seemingly direct contrast to what he says in his just-released explanation—Cramer switches from adviser to practitioner:

[CRAMER: ] What I used to do … if I wanted [a stock] to go higher, I would take and bid, take and bid, take and bid [repeatedly buy stock and then make an offer for more], and if I wanted it to go lower, I’d hit and offer, hit and offer, hit and offer [repeatedly sell stock and then put more up for sale]. And I could get a stock like Research in Motion—that might cost me $15 to $20 million to knock RIM down—but it would be fabulous, because it would beleaguer all the moron longs [investors betting the stock would go up] who are also keying on Research in Motion.

[Blodget] I’m not a lawyer, but it sure sounds to me as if Cramer is admitting here to a practice that is questionable at best. He then switches back to adviser mode and describes the next part of the game, which is to get reporters involved in helping your cause.

[CRAMER:] Again, when your company is in survival mode, it’s really important to defeat Research in Motion, and get the Pisanis of the world and the people talking about it as if there’s something wrong with Research in Motion [Bob Pisani is a reporter at CNBC]. Then you would call the [Wall Street] Journal and you would get the bozo reporter on Research in Motion, and you would feed that Palm’s got a killer [competitive product] that it’s going to give away. These are all the things you must do … and if you’re not doing it, maybe you shouldn’t be in the game.

[Blodget]Cramer does not say here explicitly that hedge funds should lie to the “bozo reporter” at the world’s top business publication, but a few minutes later, after describing how he would knock Apple’s stock down, he clarifies:

[CRAMER:]What’s important when you’re in that hedge-fund mode is to not do anything that’s remotely truthful. Because the truth is so against your view that it’s important to create a new truth to develop a fiction. [full text]