Cramer's nose got longer
Is It Style or Substance Lifting Stocks?
By James J. Cramer
06/09/2003 02:41 PM EDT
URL: thestreet.com
Last week, when everyone had a good laugh at my expense because I raised some cash, I had a true soul-searching moment. Again, remember, I am no longer running money for a hedge fund. I no longer have to answer to angry partners that want performance today or want their money back.
I am able to sit back and figure out whether the market is going up on substance or on style. Substance means the earnings are getting better, or are about to get better, and can justify the new prices. Style means that there are funds chasing performance, hedge funds forced into covering, mutual funds propping up stocks and the Fed injecting liquidity.
The fundamentals, or substantive case, is a 1991 road map that took the market up thousands of points before it gave way to a 1998 road map that led to ruin. The fact that so many people think I've lost my mind by taking off 10% of my stocks after a 23% gain is mind-boggling, and similar to 1998 in itself.
The unfortunate thing about both road maps is that they do lead to up either way. One is sustainably up and the other is unsustainable. The action today, while not putting us back on the 1991 road map -- in my Action Alerts PLUS account I just sold my Target (TGT:NYSE - news - commentary) , for instance -- keeps us from tracking 1998 too closely.
I have pledged to you, after the great capital destruction of 2000, that I'm not going to sit here and try to beat the market on a daily basis. To do that in 2000, for example, meant that anyone trying to follow my moves could never get out fast enough before a huge amount of damage was done. I had no choice but to switch on a dime in 2000 because of my loyalty to the partners who demanded performance every day. Now I have an allegiance to myself and to you not to get carried away with the bull when the bull is actually B.S.
Why is meandering the answer? Because it might turn out that with a few breaks we are following substance, not form.
But we can't know yet whether this market is Avaya (AV:NYSE - news - commentary) -- up for no substantive reason a la 1998 -- or Citigroup (C:NYSE - news - commentary) in 1991, up because it bottomed for all time and never looked back as the fundamentals improved and improved some more.
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Cramer switched into Bonds in Feb 2000. No post on TSCM that he was doing it. Was pimping crap techs on the site at the time. He can't rewrite history unless he backdated articles and buys SI. :P
Jack |
