JJC's Margin Mantra

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Before I leave for the Online Investor Expo at Bally's Resort in Las Vegas -- of course, I hope to see you there -- I want to talk once more about margin. You know this anti-margin crusade is important to me, perhaps the most important mission of mine on this site. But I don't think you know why. It is because of my communications with many of you that I maintain this jihad against borrowing money for stocks. At Cramer Berkowitz, we have used margin sparingly over the years and only when we felt the market was so low and so ripe for a move that we could take advantage of the bargains.

The classic example: When I was trading with my wife, Karen, right before the Gulf War began, she looked at me and asked, "How long will it take it us to beat these jokers?" I said, "No time flat." She wanted to wager it all and then some, so we levered.

We have also periodically borrowed money when the Fed was easing aggressively and when we thought the market overreacted to extraneous bad news, such as the collapse in Asia in 1997. Nevertheless, we never make a practice of it, and we are certainly not addicted to it. We don't think it is a business-as-usual instrument and we recognize its dangers and its ability to knock you out of the game. In other words, we think margin can be an investor's worst enemy at times and we are shocked at how loosely it is used, particularly among newbies.

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We felt that way before TheStreet.com began. Now I feel the need to preach about it regularly because of the dreadful and horribly sad correspondence I receive from so many of you. Recently, I asked a few of you why you did not renew your RealMoney.com subscriptions. Many of you were simply blown up by debt. Not by the market. But by margin!!! Some of you didn't even know you were on margin. A poor widow in the South I am working with got blown out of $800,000 -- she wasn't poor when this decline started -- because of margin. She claims she didn't know that she was even on margin! "What's margin??"

I don't know how many of you are still left, hanging on, trying to eke it out while margined, thinking you will make it through this bear phase. You won't. Get off margin. The futures are looking up. I think the market could bounce. Even Todd-o Harrison is peeling off some of his bear suit. Get liquid. STAY IN THE GAME!

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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 comment on his column at [e-mail].