The Bottom Will Find You - 500 Beiträge pro Seite

[investor_007]

The Bottom Will Find You
By James J. Cramer

10/12/00 7:32 AM ET



In 1990 we would come to work each day armed for battle. We would sit and listen to very positive research on the banks and the retailers -- to name two groups that went down every day -- and then we would watch the put buyers and the short-sellers lay all over the stocks.

Day after day, week after week and month after month, those who bet against Citicorp (C:NYSE - news - boards) made money. At each level -- the 40s, the 30s, the 20s, the teens -- analysts made impassioned defenses. And the stocks dropped. I recall a secondary that Manufacturers Hanover did, a miserable, horrible secondary where the stock never traded at the deal price. It just went down and down and down. Over and over again.

Short-sellers would operate on the group every day. They would buy puts and spread terrible rumors about loan losses and the stocks would wilt and crumble and the companies would say nothing and the rumors would turn out to be true.

It was no different in retailers. The short gangs used to load up with puts in a Dayton Hudson or a Federated and then spread the word about shortfalls. The stocks would tumble like dominoes. The shorts made money hand-over-fist, day after day.

After three or four months of this pattern, no one wanted to own any of these and brokers would call you and urge you to short them. And you still made money. I remember the bottom very clearly. Bank One (ONE:NYSE - news - boards) and Wachovia (WB:NYSE - news - boards), which at that time were pristine, rolled over too. And neither had any problems to speak of. (My, that was a long time ago.) They had gotten to pretty much everything.

It was only after five months of this slogging that we began to get situations where the financial and retail shorts were too crowded and the stocks wouldn`t go down much anymore. Then the shorts turned and operated on health care and building supplies and housing stocks and aerospace and airlines and travel companies and the autos. Same deal. More puts and more shorts. And they made money again.

I recall all of this because all through the period I heard people call the bottom. Calling the bottom was perhaps the favorite pastime then. Reporters would call the bottom. The papers would call the bottom. Analysts called the bottom. Gurus called the bottom. Every time we had a reversal, it was the bottom. Every time we finished strong, we had gotten a bottom. Every Friday we saw a bottom. Every expiration we saw the bottom. Every key earnings report meant the bottom. When Citi broke 20, that had to be the bottom -- until it broke 15 and flirted with 10. Every announcement from any official of importance was the bottom. Every buyback was the bottom. Every bond auction was the bottom. Every really ugly close was the bottom and every really beautiful opening meant the bottom.

Not one was the bottom.

It got to the point where my wife would say, "Stop it with the bottoms already." I would tell her I was just reporting what I heard around me. She didn`t want to hear it anymore. She said we would know the bottom: It would be when you could no longer rumor stocks down. When the puts and shorts stopped working. When the market was sold out and people hated stocks. The bottom would be when nobody thought there could be a bottom. The bottom would occur when every bottom-caller had been taken out and shot. The bottom would be called when everybody thought the market would crash and there were no call buyers whatsoever and nothing but put buyers. The bottom would come when there were no bulls, only bears.

We are in 1990 mode now, plain as day. Every day I hear some clown call a bottom. Every reversal and earnings report becomes a bottom clarion call. I don`t know anybody who talks about the market crashing or even thinks it will. I don`t know anybody taking down massive amounts of puts yet. They`re still buying calls! I don`t know anybody who thinks the carnage is just beginning. I know dozens of people who think it`s just ending. Coincidentally, not one traded in 1990.

So I wait to hear and smell a real bottom, when there really aren`t any more sellers and everything is so heavily shorted that it goes up on in-line numbers. Yes, that`s what happens at the bottom. At the bottom, Motorola (MOT:NYSE - news - boards) reports a crummy quarter like it did today and the stock doesn`t flinch because everybody expected it. At the bottom, IBM (IBM:NYSE - news - boards) reports a so-so number and it explodes because everyone is positioned for a lousy one.

At the bottom, nobody owns calls and everybody owns puts. At the bottom, you want to shoot your broker and you can`t bring yourself to open the business pages. At the bottom you want to shoot the guest host of "Squawk" for being bullish.

Look, I know the propensity to want to call a bottom. You have to go back 10 years to find a time, frankly, where we wouldn`t have bottomed by now. Which is why I`m focused on 1990 and why I don`t want to get too invested in thinking we`re there yet. It will come in time. No sense in killing your financial self in the interim.

Random musings: You want a tape of my Tops seminar in San Francisco? Click here. Going to drop by our online trading seminar in New York? Click here. The RealMoney.com video tape should be great fun and has the added advantage of being right. The seminar? Heck, the others were terrific and packed houses with electricity ripping through them. You have to join us.



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James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. 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 send comments on his column to James J. Cramer.

[investor_007]

Baby, Please
10/12/00 11:36 AM ET


"Without a warning you broke my heart,
Takin` it baby, torn it apart
And you left me standin` in the dark cryin`,
Said your love for me was dyin`
So, come on baby, baby please,
I`m beggin` you baby, and I`m on my knees
Turn on your light, let it shine on me,
Turn on your love light, let it shine on me,
Yeah, let shine, let it shine, let it ..."

Where`s the love, people? This is just abysmal action. Every rally is bringing out sellers, and the panic of missing the snapback is everywhere. From the catbird seat, I continue to field questions from people more nervous about missing the ramp higher than from people who have fear. That`s not good.

These are times to exercise caution, not chase rallies. Yes, obviously one of them is bound to stick ... but we`ve been saying that for a month. No edge in picking a bottom.

If you don`t have to trade this environment, get the heck away from your turret and go listen to the music.

No positions.