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Twenty-five Rules of Investing:  1  |  2  |  3  |  4  |  5  |  6  |  7  |  8  |  9  |  10  |  11  |  12  |  13  |  14  |  15  |  16  |  17  |  18  |  19  |  20  |  21  |  22  |  23  |  24  |  25 

 

 

When the Chiefs Retreat, So Should You

 

 

Rule 19

Lots of guys had lots of reasons to sell Enron. I only needed one of them: The CEO quit for personal reasons.

CEOs don't quit for personal reasons. CFOs don't quit for personal reasons. These are fabulous jobs. You get them after giving up much of what people enjoy about life, such as family, friends and nights out. Competition is so fierce for these positions that when you finally land one, you don't up and leave. You leave because something's wrong at the company. Hence, my rule:

 

When high-level people quit a company, something is wrong.

 

"Aha!" you say, "I know a CEO who quit because he had an epiphany about climbing K2." Or, "I know a CFO who left because she wanted to spend more time with her family."

Fine. There are exceptions.

This is a game about the rule, not the exception. There will always be some situation in which it is a mistake to sell when a high-level person leaves. I don't care.

As you can tell, if you have read the rules to date, I am giving you the stuff that has kept me in the game all these years, that literally has kept me from losing more money than I have made.

In the midst of its scandal, AIG (AIG - news) felt like Enron to me. We have no idea what kind of reserves AIG really has at all, and the high-level departures are unnerving. This one seems like Fannie Mae (FNM - news) at best, Enron at worst.

This is why on some sleepy August night with Enron at $47 a share, I told everyone and anyone that I would sell it nine ways to Sunday because Jeffrey Skilling, the man who would have given his eye teeth to get his CEO job, suddenly quit. Of course, there were those who said, "Cramer, if you had done more homework, you could have gotten out at $90." Yeah, maybe. I didn't.

I didn't keep you in till zero, though, either.

 

 

 

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