Wrong! Rear Echelon Revelations: The Bottom Fishing Begins
By James J. Cramer
One thing is certain, we won't get an end to this selling with these
crazy higher openings. The pattern where we open higher and then fail
is simply deadly. It has never produced a tradable bottom that I know
of.
We need to have the market open flat and then go right down, or, even
better, start way down and then rally. The latter is the textbook
bounce that I am waiting for. Everything else just seems to prolong the
inevitable.
We did some selling near the end of the day as well as some shorting,
hoping that we would get that kind of cathartic selloff soon, but maybe
that's almost too-wishful thinking.
A slamdown opening, with everyone puking up every single last Net
stock, would normally be how a turn could occur. That's why I focused
on the true problem here: The newer trader's innate inability to take a
loss and move on. Many of the people who have bought stocks in the last
year are used to buying dips. That works only if the selling reaches a
climax and everyone who wants to sell has sold.
But with these Net stocks, people don't want to sell until they have
to. That's why you get disorderly runs on stocks. I keep harping on
margin selling because when I see stocks go down in the last half hour
of trading, it reminds me so much of what I used to have to do to
clients who didn't get the collateral in when I was a broker. I would
have to sell with all my might because all I was trying to do was raise
cash, any cash, to meet the repo man. I only had a couple of clients
who borrowed money, but they all got crushed at one time or another,
which led to the type of forced selling I saw in the last half hour
today. After the close today one thing had changed. People who are not
in the sector -- fund managers, e-mailers, fellow travelers -- have
begun to talk about which Net stocks may be doing well that have fallen
so much that they are actually cheap.
Unfortunately, the ones I am looking at to buy are small cap. I will
not use this forum to talk about them. Suffice it to say that stocks
that are down 50% to 70% from their highs, that are through the
offering prices, and that are not burning cash at a furious pace and
have good money in the bank are all being considered by my fund to be
excellent possibilities.
But we have bought nothing yet. We have to do work. We have to call
analysts. We have to see if we can get meetings with managements. We
have to look at the products, get the word about whether the brands
have reach and the companies are having a good quarter.
Bottom fishing, true bottom fishing, requires the patience of the fluke
fisherman when they aren't biting. It takes time. You have to get it
right because the kinds of stocks we are talking about have no
liquidity and can't be gotten out of if we make a mistake, without
wrecking the prices with our own exit.
Nevertheless, to not do this is plain stupid. When there is forced
sloppy selling by margin clerks and brokers, that is opportunity to
sink your teeth into the next great Yahoo! (YHOO:Nasdaq) or Amazon
(AMZN:Nasdaq).
Oops, make that Intel (INTC:Nasdaq).
*****
James J. Cramer is manager of a hedge fund and co-founder of
TheStreet.com. At time of publication, his fund had no positions in any
stocks mentioned. His fund often buys and sells securities that are the
subject of his columns, both before and after the columns are
published, and the positions that his fund takes may change at any
time. Under no circumstances does the information in this column
represent a recommendation to buy or sell stocks. Cramer's writings
provide insights into the dynamics of money management and are not a
solicitation for transactions. While he cannot provide investment
advice or recommendations, he invites you to comment on his column at
jjcletters@thestreet.com. |
