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.
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