TheStreet.com
Cramer's brave new world and the companies in it
By James J. Cramer 11/29/99
Welcome back. I wish I could say "it's good to be back," but I think it would be like Jack Torrance saying "it's good to be back, Lloyd," as he sips scotch in the California room of the old Overlook Hotel.
Yep, I feel as dazed and confused as Jack Nicholson looked when he broke through that door with the ax, saying, "Here's Johnny!"
I haven't had a sleepless Sunday night like that since my school days. I was nervous, shaking, thinking, how can I keep up, how can I be ready, how can I stay on top of things. I even had the dream last night, the dream that I hadn't taken the class but now I had to take the final. (Don't laugh, I had cured myself of that dream until the registrar's office called me and told me that I was late for an Advanced Civil Procedure exam at Harvard Law, after I thought I had dropped the class. It's been recurring ever since until a couple of years ago, and now it is back with a vengeance.)
What's causing the angst? Quite simply, it is all of the new companies. Someone shouts out just now "Be Free (BFRE) initiated with a buy," and I am thinking, like, "World Be Free," the guy who played for the Sixers a generation ago? Best Buy (BBY) says it is using Calico (CLIC). I reach for the Calico yet everybody already knows it anyway, and the trade still works!!!
Goldman rolls out Portal (PRSF) with a buy, even though it was already up about 50 points in the last 10 days!
Who would have thunk it??
Let's get one thing straight: This is the boldest and bravest new world anybody has ever seen. Every single benchmark and compass I have used in my career are worthless. There is a remarkable suspension of anything that matters -- except knowing which symbols represent which stocks.
And yet, the institution of Wall Street has no idea it is occurring. I am going through my research pile as always and there are pieces on McDonald's (MCD), Royal & Sun Alliance, Whirlpool (WHR), J.C. Penney (JCP) and Sysco (SYY) (bad enough that Cisco (CSCO) seems hopelessly old-fashioned!). The research call is still dominated by insignificant bits of knowledge about IRI food data and the price of uncoated free sheet. The brokers are still making calls on Clorox (CLX) vs. Procter (PG).
And none of it matters.
Individuals dominate this market now. If you don't believe me, look at the trading volume on Friday and what moved. It was individuals doing the moving. Individuals don't care about price. They don't care if a stock is already up 600%. To them, that's opportunity on the way to 1,000%. They don't care that market cap is $30 billion for some company that came public in August. So what? Redback (RBAK) pays $4 billion for some company that seems like it is just a corporate white board; terrific!
They don't care if they "can't get" stock up 12. They don't deal with Joey D at Goldman. They are taking it blind. They aren't hamstrung by relationships and worries that the dealer can't "replace" the stock.
Most of all, they don't care about P/E ratios. The P/E is a huge joke, a benchmark meant to keep institutions out of the hottest stocks! If you ask me what are the most important issues in judging stocks -- lockup expirations, splits or P/Es -- I would simply say, "Give me a break. What do you think, bozo?"
No wonder I feel like a helpless, crazed caretaker and a vestigial Colorado inn.
I am.
And yet, as confused as I am, I at least recognize the revolution going on. I can adjust to the new matrices: speed and velocity of stock movement, catchy names and good venture capital firms, membership in the 500% club (stocks that have gone up more than 500% so they can get to 1,000%), splits and good press. I can play.
I just can't believe.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Cisco and Redback. 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.
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