Ignore the Rumors, Find the Bargains

Meanwhile, I have known a few true stock market geniuses -- people who have made fortunes for themselves and their clients over the years. And none of them ever trades on rumors, speculation, or buzz.

They look at fundamentals -- things like cash flow, dividend yields and macroeconomic trends. They make their money by doing their homework, holding their nerve, going against the crowd, and catching the big moves.

Last week I quoted a fund manager who argues that homebuilding stocks are going to collapse back to 2000 levels. Maybe he's right. But there's more than a whiff of capitulation about the sector. Investors are quick to panic and no one wants to touch the shares with a 10-foot pole.

The same seems to hold true about investment banks. Since June 19, Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks) has lost one-third of its market value, Goldman Sachs(GS Quote - Cramer on GS - Stock Picks)one-fifth and Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) one-quarter.

One thing is certain. The market got it wrong six weeks ago, or it's getting it wrong now. Only time will tell.

You can count on wild volatility in the weeks and months ahead, and lots of rumormongering.

Please pass the salt.

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