From thestreet.com:
Nuts to the Know-It-Alls
By James J. Cramer
6/27/99 5:37 PM ET
Mind-numbing losses haven't been part of the game plan for many of you these last
few years. The variety of ways to make money -- S&P names, dot-coms, drug stocks,
anything tech -- would have convinced just about anyone that there's not much to this
game.
Now the positive interest-rate backdrop, the mother's milk of this whole go-go era, has
run its course and dot-com companies have gone from being the envy of on-air
commentators to the butts of their jokes. The drug stocks work for a couple of days
and then give it back. The tech stocks end the week where they started with a lot of
heartache in between. We are told that the Fed is the problem, but the Fed hasn't
really even done anything yet. We now believe that whatever happens at this week's
FOMC meeting won't matter, because there will be another meeting with still one
more rate hike, and then another and another.
To which I say, steel yourself. Nobody really knows what is going to happen and, for
you to be bearish ahead of this period because it is a foregone conclusion that the
Fed is and will remain the enemy, smacks of what I call anti-opportunism.
I listen every day to this parade of commentators pretending to know what the Fed will
do or what bonds will do and it makes me laugh. Last October, when the market was
falling apart, I fell prey to their sirens.
I closed my eyes to the possibilities that something good could happen. Not a single
commentator in the world predicted three swift moves by the Fed to shore up the
capital markets. Not one. All of these people who come on TV and tell you that there
will be one hike and then another and then another, they were all wrong last year. I
know. I listen to what every one of these people says. If someone had gotten it
consistently right they wouldn't still be pushing their wares in the papers or on CNBC.
You missed a giant move if you didn't act by the end of October.
(Don't think I am right about this? During the 1980s, when I worked at Goldman, I
was surrounded by people who had gotten it right. Within a few years after they had,
they quit, or they stayed in the game just for the fun of it. There were amazing people
at Goldman, including Bob Rubin -- for whom I worked -- and I was blown away by
the ability of some people, particularly the late head of the research department with
whom I had the privilege of talking quite regularly.)
So I am skeptical that many of the same people who were predicting gloom and doom
and no Fed action last fall are now predicting doom and gloom and massive Fed
action. These are people who would keep you from being long Cisco (CSCO:NYSE)
for this amazing run, or kept you out of LSI Logic (LSI:NYSE) or made you sell your
Rambus (RMBS:Nasdaq) or your EMC (EMC:NYSE) or your Applied Materials
(AMAT:Nasdaq). They exist to shake you out.
I don't. I exist to try to figure out where opportunity is and to expose those who would
deny it exists or say it is too risky, either the naysayers who have been bearish since
Dow 800 or the Abelsons, who insist on giving airtime to the same old tired bears he
has paraded past us for two decades.
So don't let the "rigorous" practitioners of doom cloud your vision. And remember this:
I have made most of my money this year, as in years past, buying so-called
overvalued stocks that flunked the P/E, book value and price-to-sales tests. I wish
that weren't the case. I wish I made all my money buying the down-and-dirty
Bethlehem (BS:NYSE) and Armco Steels (AS:NYSE) and Phelps Dodge
(PD:NYSE) and Weyerhaeuser (WY:NYSE).
But I didn't. Somehow, I don't think I ever will.
Random musings: This weekend I had a plethora of email. My eldest said, "Daddy
you have 200 close friends writing to you today," when she saw how much email I got
on a Saturday. Most who wrote were glad that I pushed for a Truth Serum column
(there are great odds such a feature will happen because of YOUR letters), and others
were just so plain worried about the Fed that they are opening their Sealy or
Simmons accounts.
(I know some of you can't believe I respond to your email and even engage in
dialogue, but, as long as you don't ask me about specific stocks and
recommendations, I always will, because this is a community, not some
hand-delivered newspaper with a masthead of people who hope you never interact with
them. I make the time because it matters to me.)
But one guy wrote and said for me to knock off the vigilance -- everybody knows that
owning stocks is "caveat emptor." To which I say: We are not talking about
guarantees here. Guarantees come with vacuums or washing machines. We are
talking about the right to have a level playing field, not one where fraudsters give tips
on TV and then blow the stocks out to you, or a playing field where prognosticators
are always wrong and nobody cares, or one where people leak bogus takeover tips to
complicit "journalists" who run with them because it's good for business and
generates a ton of pageviews and quick profits for the tipster.
Some people expressed skepticism that TheStreet.com or any organization,
governmental or otherwise, can put a stop to rampant chicanery.
Wrong! In the 1980s, people routinely knew about every takeover ahead of time. The
markets stunk to high heaven. Everything was leaked to the buddies of a few and
people made millions ripping off investors.
And then the Feds decided to put an end to it, and they did. People who did this stuff
went to jail. They lost their jobs and their power and the respect of the community.
I am not saying we are anywhere near that level of out-and-out crookedness, but I
think a simple scoreboard of how wrong these tipsters are, accompanied with how
many calls were bought before the rumor appeared (this can be easily done) will go
far toward smashing the myth that you can make money this way. A batting average
will reveal these hucksters for what they are. More important, we can very quickly
develop a reputation as the place that companies can go to tell the truth when the
stuff is pure poppycock.
You think companies don't want to tell the truth? Wrong! Good companies with good
managers don't want the marketplace ruined by rumor and innuendo. Remember
when the late Roberto Goizueta, the much-missed head of Coke (KO:NYSE), issued
a statement after a commentator predicted (for the jillionth time) that Oats
(OAT:NYSE) was going to get a bid from Coke (after massive call buys had been
observed) saying that the commentator didn't have a clue? If one of the greatest
chieftains of this century could do it, what's the big deal?
I predict that Truth Serum will be where other execs will go to show their courage and
their unwillingness to have the market corrupted. It will be the one place on the Net
where the lies of the message boards can be dispelled promptly. I also predict that
the marketplace will begin to clean itself when -- after day five or six or seven, no
Kmart (KM:NYSE) bid surfaces -- those who traffic in such garbage will be revealed
as totally unreliable.
I am getting excited just talking about it. It's the real-time community protection
organization that the Net was made for. |
