thestreet.com: long or short ? (Part VI)
On 21st onsl spiked up 26 points
Susan came out that evening, with her now infamous article on ONSL
and whats this,, next day,, Cramer hinting ONSL is a buy ??????
was she trying to bring the price down because Cramer forgot to go long
after covering his short position ??? No, I'm getting overboard with my imaginations.
archive.thestreet.com
Wrong! Rear Echelon Revelations: The
Gold Rush
By James J. Cramer
12/22/98 12:15 AM ET
Can't stand to hear about the Net anymore? Valuations
driving you crazy? Well, what do you expect me to write
about, how oil service companies are having trouble making
their numbers? How Hercules (HPC:NYSE) blew up after
the close?
Net stocks are the only things people are thinking about
these days. Any attempt to talk about savings and loans or
chemicals or auto parts seems hopelessly irrelevant.
Nobody cares, not one bit.
That said, there is a year-end phenomenon at work, one that
has a huge impact on groups like this. People want to show
they own winners. If this group had faltered somehow in
November and not come back, the vigor with which people
are piling in to them would subside rather dramatically.
But if you don't show that you own any Net stocks and you
run money professionally, the discussion goes like this:
Investor Jeff: "So, what do you think of the Net stocks?"
Manager Jim: "They are stupid, the valuations are so out of
control. I like the stock of National Gift Wrap and Box
Company. It sells at $24 but has book of $12 and one day it
will get a takeover as management is committed to bringing
out value. In the meantime it pays 2.5% and I can sleep at
night."
Investor Jeff: "Do you think all of these stocks are just
bubbles? Can't you get comfortable with any of them?"
Manager Jim: "No way, they are all ridiculous."
Investor Jeff: "While that is very prudent, my other managers
have made a fortune in these, so I have to go with them."
The only way to combat that rather obvious conversation is
to say, "Hey, I own some America Online (AOL:NYSE). It
has a good business model and it is making money." Or,
"The Web portal business could be huge so I am long some
Yahoo! (YHOO:Nasdaq)." Or, "A lot of them make no sense
to me, but I have become comfortable with the plan Lycos
(LCOS:Nasdaq) has put in place."
Then at least you have a fighting chance to keep the money
and get more in. But to be able to say that, you have to get
long. You have to buy. And when you are running $1 billion
or more, as many people do these days, you can't just own
a couple of thousand Onsale (ONSL:Nasdaq). You have to
have a full position in the name, meaning a couple of a
percent at a minimum. A couple of a percent of $1 billion is a
ton of money and you have to compete with dozens of other
managers playing the same game. Consequently, you get
stocks up 25 or 30 points.
That said, one point I must stress: These particular price
moves are like no others I have seen in my life. The sheer
velocity, coupled with the lack of any profit-taking, is nothing
short of incredible to me and to everybody who trades
professionally. The simultaneous ascension of Internet
traders, of Internet commerce and the paucity, still, of
Internet shares relative to the demand, is a level of
serendipity that nobody banked on.
It is not difficult to be both shocked and numbed. The runs
these stocks are having are just staggering. The market's
lack of rigor in valuation, the sheer craziness of it all, defies
anything I have ever believed could happen. And I'm a
believer in the Net. I can't recall a time when the market was
less skeptical, more gullible, more willing to overlook fanciful
claims and buy into the rap of virtually anything Net.
And yet it goes on.
One day maybe we will look back and say, How come
nobody said, "Hey, this is crazy. These things can't all be
winners"? Not every company is going to make hay on the
Net. Some of these companies have nothing. But by then
maybe things will have doubled or tripled again. Once
something gets overvalued, it gets that much easier to get
twice or three times as overvalued.
Until then, the gold rush of 1998 continues unabated. And
who am I to tell you there's no gold in them there hills when
we have seen billions in gold created already?
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