Get Off the Telecom Toboggan

Editor's Note: Jim Cramer's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published Jan. 30 on RealMoney.

If you own Qwest(Q) or Level 3(LVLT), I think you are nuts if you don't sell these stocks.

Let me put this in terms everyone can understand: Pricing in long distance is simply falling apart -- for data, for voice, for everything. Demand has fallen off a cliff, too. Long distance has gone from being an OK business to being a terrible business. And anyone in it, from Sprint(FON) to Qwest, is just an accident that is still very much happening. There is simply too much competition for these companies to make it -- even with Qwest's old US West business.

Frankly, I was shocked that Qwest wasn't down more after that miserable conference call. That was just an awful call, and I don't have a clue who would still own this stock.

Level 3 went and told you that it could be in violation of covenants if revenue drops off. How can it not be? How can we believe revenue is going to turn up when there is no evidence whatsoever of anything but a further downturn ahead?

Last year started with the bankruptcy filing of Winstar and 360 Networks and got worse from there, yet nobody downgraded anything. This year started with Global Crossing's (GX) bankruptcy ... and it will only get worse from here.

And nobody will downgrade anything.

The risk-reward for both Qwest and Level 3 has gone from bad to out-and-out terrible. If you sell them, you won't ride them to zero. That's the best thing I can say about these two companies.

Random musings: So the Tyco(TYC) guys were selling stock after all, and so were the Enron guys -- using some novel "sale to the company" method that doesn't require proper disclosure. This action will cause another wave in Tyco selling as the company continues to be plagued by serial distribution of bad news. There is a simple solution to all of this, though. Securities and Exchange Commission Chairman Harvey Pitt could announce today that when you are an executive and you do anything with your stock, you have to file a form online about it immediately. It would be simple if it were online. We have the technology to do it. It could be done with the click of a mouse. Pitt knows this. He should do it, immediately. ... When I read that excellent article about Elan(ELN) in The Wall Street Journal that sent the stock down 10 points this morning, I kept thinking, you know, I think I knew this about Elan. Sure enough, I did! Herb had flagged it many times before. I used to have this dream that I could see the Journal the week before it came out. Guess what? It wasn't a dream, it was RealMoney! Gratz, Herb!

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