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Cramer: Not Long Into Today? You Missed a Big One

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NEW YORK (RealMoney) -- Let's use this up opening off the Europe deal as a microcosm, an incident that explains much of what happens in the stock market today.

First, a proposition. Let's say I was a bear going into the EU drama session last night, a bear meaning that my book was net short, classically meaning that I make money if the market goes down and expect to lose if it goes higher.

If I wanted to be honest with myself -- and believe it or not, that's not always easy for a hedge fund manager -- I needed to see a total collapse of the talks. That was the home run. That's where I would have distinguished myself among my peers. That's what I would have told my staff I was betting on.

The "collapse" did not come about. So, intellectually, I was WRONG.

Unfortunately, saying you are wrong out loud is considered a colossal sin. I know this. Believe me, if I NEVER admitted I was wrong I would be chastised and pilloried much less than I am. But if someone admits he is wrong, the critics say, "Even he admits he is wrong," and then they blanket everything with that self-assessment.

In reality, though, of course, it was a wrong bet. Consider it in sports: You bet run, they passed, they got a touchdown.

So, what do you do if you can't say you are wrong -- and what do you tell your staff? Two different things. Publicly, you do what I saw some manager on Bloomberg do this morning: He spewed the negative litany:

  • Not enough money. We were looking for 2 trillion euro; we got 1 trillion.
  • The devil is in the details, and we don't have the details.
  • Fifty percent haircut means 120% of GDP for Greek bonds, which is still wildly unrealistic.
  • It is just a plan for a plan, and that means nothing.
  • Here's the rough part of that analysis. It could conceivably be right. It might actually be the case. But today at the opening at least, you are going to have a gigantic loss while the long-only funds are going to have a gigantic gain, so it is truly intellectual sour grapes.

    However, you have to stick to your story or look like a total buffoon.

    Nevertheless, let's just distinguish for the moment between good investing and bad investing. A good investor should have placed a bet that some deal would go through, and he's in a place now to reach the conclusions that it isn't enough, and he can start selling into today's rally.

    In fact, a great investor would be someone who didn't believe for a minute that a deal could be reached of any real gravity, but bet that the market would love any deal with a trillion-euro fund, and that was well within the probabilities. That fund manager would be 200% long going into the close. He would then take off half that long at the opening and then, throughout the day, work his way toward a more market-neutral position if the market keeps climbing.

    Ideally, it would be terrific to be about 50% long at the end of the day if the market ends up 2%-3% higher.

    That's how it would be if you got it right.

    Frankly -- and let's be really brutal about it -- if you weren't hugely long going into today, you missed a big one ... and I would rather hear from someone else.

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