The Trader Goes Truth-Seeking
By James J. Cramer
4/16/00 4:45 PM ET
Click here for the latest from James J. Cramer.
Editor's note: In light of the recent severe market conditions, this mock interview is running in place of James J. Cramer's usual Sunday column, State of the Web.
When I was a frizzy-haired pauper of a journalist just out of college I took a job covering murder and mayhem at the Los Angeles Herald Examiner, a scrappy Hearst paper that doesn't exist any more. I took the job because I wanted to change the world. I took the job because I wanted to tell the truth.
Fortunately, I had an editor who knew better -- Don Forst, who became a boss and a friend immediately. Don felt terrible for me, coming out of Harvard as president of The Crimson, full of ideals and desires to make things right. He felt terrible because he knew what was coming my way: massive disappointment and disillusion. Don, who later went on to manage the Village Voice, filled me in on the two principles I never forgot: Journalism is commerce; truth is saved for novels. Journalists write because it is a business. We can't always get at the truth because the law protects the truth from coming out through journalism because reporters have no subpoena power, so people don't have to tell the truth to journalists. Sources can lie and never be exposed. Subjects can posture and get away with it. It's wrong, but journalism is what it is, a severely limited form of truth-seeking. So if you want truth, he said, go read some great British novelists.
This blast of personal history is relavant because I am about to give you the truth by using its natural medium: fiction. I have now read every single (thanks to the Web) interview with every money manager that has transpired since last week's obliteration and I know that Don Forst's wisdom is more true than ever. The interviews all have the same cast: Everything is fine, there are plenty of bargains, we are staying cool, picking among the rubble, we haven't lost any money and it is business as usual.
Wrong! What a stinking pile of fresh cow manure! (We own a couple of longhorns, so trust me on that repugnant analogy.)
So, without further ado, here is a fictional interview with a portfolio manager at a fund that just went from plus 47% to minus 14% in the four weeks since March 10. This fund manager has been in the business for four years and was up 100% last year and has consistently pushed the market's pedal to the metal. He had his worst week ever. He is single, lives in Manhattan and hadn't a care in the world until this week. His name is Ben Gould but everybody calls him Buzz cause, well, Buzz does!
I am going to interview him. And I have subpoena power and knowledge of his business, much to his own chagrin, so he can't bag me, but he doesn't know that at the beginning. So, watch the ambush and enjoy the truth for a change. (This fictional interview is a worthwhile companion piece to Brett Fromson's unbelievably honest and fantastic TSC Streetside Chat with Robert Wilson, a legendary investor who continues to know more about investing than just about everybody. You must read this interview.)
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Cramer: So how was the week overall?
Buzz: This was a week of massive opportunity. Stocks came down from lofty levels and we had plenty of cash and we put it to work in our favorite names which we expect to rebound immediately. In fact, this may have been the best single buying opportunity I have seen since I got in this great business.
People were coming in here with idea after idea and I couldn't wait to put it to work with all of the cash I had and the cash that was coming in over the transom. I couldn't be more pleased. We bought Vignette (VIGN:Nasdaq - news - boards) and Sycamore (SCMR:Nasdaq - news - boards) and MicroStrategy (MSTR:Nasdaq - news - boards) and Microsoft (MSFT:Nasdaq - news - boards) and Motorola (MOT:NYSE - news - boards) and a bunch of others at fabulous prices. A great week, just a great week.
Cramer: Gee Buzz, that doesn't jive with what I know from the inside of your firm. My understanding is that you were invested to the hilt coming into this week and that you had to sell some things to buy others.
Buzz: Well, you know, that is true. We run 100% invested around here, so you are right, any buying we had to do we had to sell first.
Cramer: So how can you regard it to be a good week if your fund lost 25% of its value, even more than the Nasdaq?
Buzz: When I described it as a good week maybe I was being a little glib. But the company is very much intact and we are not concerned about the losses.
Cramer: If somebody came into your fund at the top in March, he's seen his assets more than cut in half, right?
Buzz: We are a long-term fund and it will always come back. Dollar-cost averaging is a great method of investing.
Cramer: But haven't a lot of those people just been completely creamed and, in retrospect, shouldn't you have been selling when you were buying?
Buzz: Sure, hindsight is 20/20, but understand that we are a "long-only" fund and we are not expected to have any cash on hand. You can't just say, "Hey, time to raise cash," because if the bull keeps going, you will fall behind the NDX average, the real benchmark, and the marketing people will be in here riding my butt, wondering why I am not keeping up with the Quints and the Algers and the go-go types at Janus. Those competitors would smoke me if I didn't play as hard as I could. They would get on CNBC and the cover of Money, not me. They would get all of the assets, not me. We have a big ad campaign right now that touts the upside of performance. I can't shake that off. It is better to lose a lot of money with the market going down and just blame it on our "no-cash" charter than it is to fall behind the market if it keeps roaring. That's how you lose your job around here. That's the imperative. It is a business, you know.
The Trader Goes Truth-Seeking, Continued
By James J. Cramer
4/16/00 4:41 PM ET
Continued from Part 1.
Cramer: Buzz, don't you feel badly for those who came into your fund at the top?
Buzz: Yeah, they have been pretty annihilated and -- now that we are speaking freely because you know the truth -- I really screwed it up. I clobbered these people with some really crummy judgment and I am really sorry. I told my girlfriend I should issue an apology, but she is in the business too, and she said, everybody would have to issue an apology so forget about it and it would show that we are weak.
Cramer: And those stocks you told us you were buying with your cash?
Buzz: What can I say, I was long all of them coming into the week. They were being vaporized and I am closely identified with them. All week I tried to prop them up so my NAV didn't go down too much, but in the end it was completely Sisyphean. I couldn't keep those boulders from crashing right back down to Earth.
Cramer: Lets talk about some of the stocks you mentioned. Walk us through the reason you bought MicroStrategy.
Buzz: To prop it up. I mean, come on, if this baby goes any lower, can you imagine the redemptions on my hands? People would be hitting that exit button like mad. I should have gotten out as soon at the first sign of chicanery there, but it happened so swiftly, I figured, what the heck, stick with it. I had no idea how bad it was. I should have cut my losses and run but it's too late now, so I will just keep buying. It is not a bad story if the Feds get off their back.
Cramer: How about Motorola?
Buzz: I was completely blindsided by that baby. I was on the conference call and I couldn't believe my ears. I had no idea how poorly they were doing. Man, that one just took me apart. It was so swift. I didn't have time to get out of it so I just bought more. It will come back, it always does. It either comes back or I am out of here and going to another fund. That's the biz.
Cramer: I see you are long Microsoft and bought more. Buzz: Yeah, I wasn't on the Goldman call that talked about the lite revenue. I was out marketing the fund. You know I was kind of hoping for a settlement there. And I never sell Microsoft. Heck, I never sell anything. To sell is to lose, man, at least until this week. Anyway, the public always buys the dips so I will get bailed out here.
Cramer: Gee, I would have thought you had more conviction than that about your buy?
Buzz: Never mattered before.
Cramer: Tell us about this Sycamore buy. Was that because of something near-term? Something people can buy this week? A new, powerful switch perhaps? An important RBOC [regional Bell operating company] contract win?
Buzz: Nah, I just got snookered on the secondary at 150 and I have been averaging down. I bought enough at 50 to give me an average of 100. And then I tried to buy some more after the close Friday to "get it going." I figured if I take it up, Kathleen Tanzy, that nice woman at Instinet who appears on CNBC might mention it and I might be able to get some lift for the stock.
Cramer: Talk about Vignette -- isn't that a Net infrastructure play?
Buzz: These stocks have just been crushed and you know you have to buy them when nobody likes them. I have to do some work this weekend about what they actually do in the Net space, but they are leveraged to the fastest-growing part of the Net business, site design and engineering.
Cramer: Aren't you worried that, with the decline in the IPO market, that the companies that Vignette has done a lot of work for or is about to do work for won't pay them? Aren't you worried that there are plenty of prospective clients of Vignette's who will never get to the markets now that the IPO window is shut?
Buzz: Well you know, I could worry about nuclear war, too, but you know, stuff happens.
Cramer: Really Buzz, I have friends in this business and they are worried that they can't pay these bills unless their companies come public. And that the businesses like Vignette will slow down.
Buzz: That's in the stocks.
Cramer: "I have to press you on this Buzz, because I think you are being too glib about the possible dot-com decline.
Buzz: Give me a break, will you, man? This was a real tough week. I know, I know, if the IPO window stays as nailed shut as it seems, Vignette will eventually get killed. Same with Scient (SCNT:Nasdaq - news - boards) and Viant (VIAN:Nasdaq - news - boards) and all of those other guys. But what the heck am I supposed to do? I had Vignette on my sheets coming into the week. I had an 80 basis. When it was cut in half, I moved to support it. Sue me, why don't you?
Cramer: I am just trying to get at the truth.
Buzz: I know and the truth us killing me. I knew I shouldn't have sat for this interview, but the marketing guys gave me a script and I tried to stick with it at first.
Cramer: So what did you sell to finance the buys?
Buzz: Let's see, I sold some Emulex (EMLX:Nasdaq - news - boards).
Cramer: Was that you wrecking the stock? I saw it went down about 50% in one day.
Buzz: Yeah, I panicked a bit. I told the trading desk get 500,000 Emulex off the sheets and get it off now, because I can't keep my lunch down and look at the positions any more. They called all of the trading desks and the desks all said the same thing. Forget about it.
Cramer: How did that dialogue go?
Buzz: I can't share the real details because this is a family publication you work for, but it went something like this. We went in looking for a bid on all 500,000. And everybody laughed. One broker at a major firm said: "You walked this stock up 20 points when you bought it. You got everybody short. You want out? Last sale 90. I will bid you 65 for all 500,000." And we whacked him! Hah, he got killed. Didn't bother me; we had a 30 basis you know. But it was our largest position.
Cramer: What happened that turned you off to the stock?
Buzz: It had a cup-and-handle pattern and went through the 200-day moving average. I didn't like the money flow either.
Cramer: No, I mean, what happened at Emulex?
Buzz: Something about a slowdown in the sale of Emulexers. Something like that. I might have to get back to you on that with more details.
Cramer: What else did you sell?
Buzz: We blew out of bunch highfliers like Webmethods (WEBM:Nasdaq - news - boards). Gee, that stock declined 100 points while we were trying to get out. We were going to sell Webvan (WBVN:Nasdaq - news - boards), but there wasn't much cash left to it. And biotech, oh yeah, we butchered Sequenom (SQNM:Nasdaq - news - boards) on the way out. I had meant to sell Sepracor (SEPR: - news - boards), but in the heat of battle we sold the wrong one. I felt bad because I was more familiar with what Sequenom does than with Sepracor. But c'est la vie. We needed the cash to meet the redemptions that were coming in pretty swiftly. Oops, please, please don't run that. The marketing department told me to deny that we had any redemptions, no matter what. This could get me fired.
Cramer: OK, let's get down to it. Let's talk about the future. How does it really look to you?
Buzz: Frankly, just before this crash, I mean correction, I had bought a really big apartment in the city, 72nd between 2nd and 3rd, and a Range Rover to impress everybody on Egypt Lane, and I committed a really expensive rental in the Hamptons. I am trying to get out of the latter cause it is $100,000 a month, but they are telling me it is too late. I guess you could say I am a little nervous about the payments on the apartment.
The Trader Goes Truth-Seeking, Conclusion
By James J. Cramer
4/16/00 4:40 PM ET
Cramer: I didn't mean you personally, how about the market?
Buzz: Well we are hoping we get some cash in so we can try to stabilize our holdings. We were on the phone all weekend to analysts telling them we are going to cut our commission business if they don't get on the horn and bull our stocks on Monday. But they were pretty shell-shocked. I don't know if we can count on them. I am going to read them the riot act if they don't though. I am going to have their jobs after all the commission biz I do with them and all of those underwritings.
Cramer: How does the market look to you?
Buzz: What do you think? I am quaking here. If it holds 3200 on the NDX, I am OK, but if it breaks, I may be history.
Cramer: But don't the fundamentals of your companies justify higher prices?
Buzz: You know, I am a chartist at heart and all of the charts are broken. It is very worrisome. If we had more cash, well, we could make the charts look better, but we don't have that kind of firepower. You know on Friday afternoon I called a bunch of my friends who do what I do -- we have this club called "Young Turks" and it meets at Privilege every Tuesday night -- and I said, "Hey guys, if we all go in on Cisco (CSCO:Nasdaq - news - boards) and Intel (INTC:Nasdaq - news - boards) and Sun Double U (SUNW:Nasdaq - news - boards), maybe we can get a rally going." But they all laughed. They didn't have any cash either. We will try to do it again after we see the mail on Monday. If there is cash in, maybe we will go into the futures and try to push 'em up a little. Get something started. One of those snapback Vs. But if there isn't, it just might be "Katy bar the door".
Cramer: Anything else you can tell us about that climactic Friday?
Buzz: Not much left to say, I guess. Let's hope it gets better this week. Couldn't be worse, could it? Could it??
Cramer: Thanks Buzz! Sure won't read that kind of interview in Barron's this weekend!! Best of luck in what ever career you chose next. Thanks for the candor.
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