Cut Your Losses in Energy Traders

Power trading didn't exist. That's right. It was a made-up business. It was something that was thought to be a cash cow that amounted more to a conspiracy of dunces. This morning, CMS Energy (CMS - commentary - Cramer's Take) became the latest to realize that it had trashed its company on the altar of power trading. (This is the second trashing of the company, as the first was sacrificed on the altar of nuclear. What will it be next time, solar?)

Yet people remain in these stocks. They remain in Duke (DUK - commentary - Cramer's Take). They are still in this El Paso (EP - commentary - Cramer's Take). They are still in Calpine (CPN - commentary - Cramer's Take) and Williams (WMB - commentary - Cramer's Take).

People have to stop kidding themselves. If you borrowed billions to play in a nonexistent industry, you are going to have to reorganize -- most likely in bankruptcy -- to stay afloat. You can cut your dividend, you can defer preferreds, whatever, but you blew it. And you owe it to your shareholders to admit the truth and let them sell before they lose everything.

I know that some of you are hoping to get some money back after the class action suits go to work against these fictitious industries. Forget it. The only people who will get money from these guys are the class action lawyers themselves. You'll get coupons to buy energy.

Just write it off. These are still going down. I had the same advice for J.P. Morgan (JPM - commentary - Cramer's Take) when I went in to see them: to write off the loans to these guys.

They didn't take it. Yet.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. At the time of publication, Cramer was long J.P. Morgan. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."