Rule No. 17: Check Hope at the Door
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When I hear the word "hope," as in, "I hope General Motors (GM) will come back to $35 so I can sell it," I get furious. Always remember:
Hope is not part of the equation.Don't "hope" for anything. Hope is emotion, pure and simple. And this is not a game of emotion, other than to take the other side of the desperate. Yet, I hear "hope" more than any other word, particularly with the contingent of Sun Microsystems (SUNW), Nortel (NT), Gateway (GTW), Cisco (CSCO) and EMC (EMC). Those stocks are filled with hopeful people betting that something good eventually will happen that will drive the stocks higher. Hoping and praying are excellent things in religion. They are integral to sports. You know that the coaches of some of these come-from-behind NCAA men's basketball teams keep players motivated through hope. But hope is a mistaken emotion in our business. It supplants reason, it supplants rigor -- especially when it comes to low-dollar-amount stocks. No company ever set out to have a low-dollar-amount stock. The companies fight like heck not to have them. When they have them, it is a judgment rendered by the market that is harsh, difficult to accept and ultimately, far more right than wrong. When you suffuse your thinking with hope, you end up holding on for something that most likely will never occur. Cut your losses and move on. Remember, we don't care where a stock has been, we care where it is going, and it is most likely headed down if you are hoping.
|1.||Pigs Get Slaughtered||2.||It's OK to Pay the Taxes|
|3.||Don't Buy All at Once||4.||Buy Damaged Stocks|
|5.||Diversify to Control Risk||6.||Do Your Homework|
|7.||Don't Panic||8.||Buy Best-of-Breed|
|9.||Defend Some Stocks||10.||Don't Bet on Bad Stocks|
|11.||Own Fewer Names||12.||Cash Is for Winners|
|13.||No Regrets||14.||Expect Corrections|
|15.||Know Bonds||16.||Don't Subsidize Losers|
|17.||No Room for Hope|
|Check back for more of Cramer's Rules|
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