It's No Longer Too Early to Buy

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Most of the time, taking pain for the gain should be discouraged. If you can time things properly and build positions gradually, you don't have to take a beating every time the market drops.

But in 1991, you had to take some pain. I limited it, courtesy of my wife Karen, to a couple of days because she made us go to the Islands -- St. John's; candidly, just OK -- until a couple of days before the bombing started. On the days we were back, we legged into some monster call positions, several thousand Home Depot in-the-monies, tons of Wal-Mart out-of-the-monies, lots of Dayton Hudson calls (now Target) and monster positions in C.R. Bard, Baxter (she liked the charts), Maytag and Whirlpool, fantastic consumer confidence plays. I loaded the boat with Merrill Lynch, Citigroup and NationsBank calls, with a nice dollop of Salomon Brothers, IBM, Intel and Microsoft calls. We were loaded for bear by the outbreak of the war, fully margined, gun to our heads.

Within a week we were up 20% and off margin. In two weeks, we were in a hefty cash position, probably a little too soon for my taste. By the summer, she was out of there, on vacation; "Up too much to mess it up trading," she told everyone. We stayed in cash for the rest of the year and took care of our new infant, true hedge fund prevent defense. Smart.

The positions that worked the best were retail and the brokers/banks. The positions that worked the worst were tech, but that was before the real love affair had commenced.

You know what, if I were still at it, I would be doing the exact same thing. I'd be grabbing boatloads of Wal-Mart February 50 calls, and Maytag Feb 25s and Target Feb 30s. I'd be a size buyer of Merrill and now probably Lehman Brothers and Bear Stearns, with their good quarters all. I would add Wells Fargo and J.P. Morgan calls.

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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 and Target. 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."