From The Street.Com.....interesting perspective that leads one to consider that maybe the time is right for small/mid caps....
The market's ability to make fools of us can never be underestimated. Just
think, if I were to tell you that Yahoo! (YHOO:Nasdaq) could be cut almost
in half or that Amazon (AMZN:Nasdaq) would drop precipitously, wouldn't
you automatically conclude that the whole market would get swept down with
it?
Monday, when I guest-hosted on Ron Insana's show with the always terrific
John Bollinger, John repeatedly pointed out how the deflating of some of
the Internet did not lead to thermonuclear war for the rest of the market.
(The Cramer-Bollinger mutual admiration society, by the way, was formed by
me, not John. I learned about this game from watching FNN when Bollinger
used to come on everyday and talked about how to understand the market.
The reason why we are so in synch is that I regard him as one of my
teachers, even though I have never met him. His work is persuasive, right
and intelligent, and it has had a huge impact on me and the better part of
my trading career.)
Now I am thinking that the same thing is going to happen with The Stocks
Everybody Loves, or TSEL. Yep, we are seeing cracks in TSEL. Dell
(DELL:Nasdaq) gets knocked over by a feather, an analyst number cut. Cisco
(CSCO:Nasdaq) trades awfully. Intel (INTC:Nasdaq) is hostage to whoever
whispers last. And I am long these stocks! Can you imagine what the bears
are saying!
But contrary to what everybody would believe, I think this defrocking of
the leadership might be good news because it could lead to other sectors
and other stocks doing well. We have all played TSEL to the hilt. We have
taken the multiples about as far as they can go without being Japan 1989.
We have embraced the cult of management personality to the point where if
one of the top honchos of TSEL were to leave or fall ill, it would take
the whole company's stock down with him.
So, I think the big surprise of this current move is that when The Stocks
Everybody Loves get hammered, other stocks will not follow this
leadership.
In 1990 we had similar parabolic moves in a handful of companies. It was
mania-like, although not to the degree we have seen in the last few years.
But Bristol (BMY:NYSE) and Abbott (ABT:NYSE) went straight up everyday.
Again, there were just a handful of stocks leading and no one following.
Then the Gulf War broke out and the leadership got hit along with
everything else. But out of the chaos came the great bull market we are in
now.
Unfortunately, this bull market has gotten way too narrow. We need to see
people willing to leave big-cap growth and find other names. That's what
is happening now.
If you are long TSEL, do you have to abandon ship? As always, I can only
tell you what I am doing. I have scaled back my positions in TSEL. I have
cash on the sidelines. And I am awaiting a leadership switch to less
inflated stocks. In the meantime, if TSEL keeps ramping, I will make some
money -- I have out-of-the-money calls on almost all of these stocks. But
if it gives up the ghost, I will still be in the game.
That, after all, is what counts. |
