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Cramer: This Market's the Smarter Fool Theory

But I don't think it will.

Instead, I think it is going to make a lot of money, so much money that it's actually inexpensive. However, I would never recommend a stock that's cheap on the numbers that could run afoul of the regulators. But what draws me to Herbalife is the list of buyers. The first group, centered on Carl Icahn, is all about busting Bill Ackman. The idea is that his investors will be scared of the losses Ackman's fund will generate if there is a huge short squeeze and they will pull their money out. It is entirely possible that this stock becomes entirely impossible to borrow because so much has been taken out of the vault already. Then the brokers might be forced to "buy-in" Ackman and believe me If that were to happen the buy-in would be completed at a much, much higher level. There could be a combination by which his investors leave and he is stuck having to cover the shares because he doesn't have enough capital to stay short.

Those are all good reasons to own a potentially bad stock. Now, throw in the fact that a very savvy investor, Bill Stiritz, the man who has had such a good history with Ralcorp -- now owned by ConAgra (CAG), has just bought $300 million worth of stock and you have a new complexity. The hedge funds that have been buying Herbalife are really just doing it because they know that at a certain point Ackman will have to cover unless he gets his way to have the company shut down.

But Stiritz? I think he's buying it because it is cheap and something is going to happen to bring out that value. I think he owns Herbalife for the fundamentals.

Now, you always have to do your own homework. You can't rely on Stiritz. Hey, maybe he sold it today.

Who knows?

But if there is any stock that comes under the category of "the church of what's happening now,." it is Herbalife.

Understand it is very easy for me to say "Herbalife, Netflix, Tesla, Ulta, they all stink, you should sell them they are worthless or they are overvalued." But how about if I have studied them and believe they fit a pattern of stocks that work higher because of the mechanics of the market? What if I recognize that this pattern has led to great gains like they have been in Netflix and Tesla which I have said are cult stocks and can go higher.

And what if I tell you to buy them using deep-in-the-money calls so that you are stopped out at a certain level?

What's wrong with that?

Why do I have to be such a purist like everyone else when my work on the mechanics of the market say something goes higher? Would you like me, instead, to say "technically it looks good?" Would that make it/me more legit?

Oh, one more thing. Do you think I like the process by which certain stocks go higher even as I think it's not right? Isn't that what happens every time you sell a stock and it goes higher. You always think you are right when you do something but it might be wrong that you did it.

For Netflix it was wrong to sell it at $50, and $150 and even $250. It wasn't right. It was wrong. Most of the people I deal with would say it was right to sell it. They either don't regard the points as legitimate or they don't think they are worth getting.

To me that's preposterous. That's like saying that a team lost in football because it was an ugly win. No, it's a "W" either way, ugly or beautiful.

Sometimes being a purist is wrong. Sometimes figuring out that Herbalife has to go up because of the behind the scene dynamics is right.

It is not contradictory to dislike Herbalife's business and like the stock. It is not illegitimate to say that Netflix is overvalued but it can go higher.

I no longer ask people if they understand what I am saying. It's not worth it.

But that does not keep me from saying it. And as long as I think I can "game" this process, I am gaming it.

You don't like it?

Guess what: Go against me.

It's a free country.
At the time of publication, the authors had no positions in the stocks mentioned.

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