Bullish, No Matter What

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In politics, we know where people come from. The conservatives and the liberals have lines, they have sets of beliefs that yield conclusions to almost every debatable issue.

Lately, politics has been creeping into investments. Not Democrat vs. Republican party politics. But dogma, polemics -- stands I think have no place in the investment firmament.

How does "politics" manifest itself? Let's take the writings and television appearances of Gruntal's Joe Battipaglia and Goldman's Abby Joseph Cohen. As I search through them looking for "rigor," which in my book means that they have a stated set of criteria and they stick by that criteria, I find none.

Both of these icons of the bull market past believed in earnings derived models. Earnings are at the heart of this downturn in the stock market. Earnings estimates are being slashed pretty much daily. Have been for months on end. Yet those estimate cuts have meant next to nothing to either of these gurus. Which leads me to question whether they haven't just become polemicists for the bull camp, finding a way to stay bullish no matter what the empirical data say. They are political bulls, espousing the notion of higher prices as if by rote, no different from people who say, "I am a Republican, no matter what, and therefore I am sticking with my viewpoint that stocks are headed higher." That's fine if you're talking about tax policy or defense spending. But it makes no sense when it comes to the stock market. If your work, which is based on earnings per share, shows earnings per share coming down dramatically, you must yield a different conclusion about where the market may be heading.

For me, this unreal dogma in the face of declining indicators is no different from the twisted intellectualizing many bears used during the 1980s and 1990s to stay negative, despite improving fundamentals. For example, some of the most vocal bears in the 1980s ranted endlessly about how stocks could not and should not go up as long as the U.S. government's budget deficit was skyrocketing out of control. This stance, for example, weighed heavily in the thinking of Henry Kaufman, who was called Dr. Death or Dr. Doom or whatever during this period. A better name for the once-powerful Kaufman would be Dr. No, as in if the government were ever to fix the deficit problem, as former Treasury Secretary Bob Rubin did under Clinton, he would still say no to equities.

It's hard to believe how powerful Kaufman used to be. My buddies at Salomon used to load the boat up with puts on Treasuries before he spoke because he could rattle the markets so badly. These days he's ignored, because it turned out that his was more of an outrageously negative polemic than a well-reasoned stance against equities until the underlying finance problems were solved.

Heaven knows I have hounded Jim Grant for this kind of thinking. Again, it's because I view the world empirically. Grant's been a bear on equities during the entire bull market. Now he looks right. Maybe just a tad early.

But he, too, had multiple opportunities to acknowledge that, periodically, things were improving, or that the declines we experienced were profound opportunities. I am reminded of a time in 1997 when the Dow Jones averages were sinking from 7500 to 6900 right before our eyes because of problems in Asia, notably Thailand.

I was sharing the steps of Federal Hall, across the Street from the New York Stock Exchange, with Grant and Charlie Gibson from Good Morning America. It was one of those moments when I thought the whole equity market had gone completely nuts. The U.S. was much stronger than Asia and the U.S. tech companies, while gaining market share in Asia, weren't going to be knocked for more than a few pennies per share -- if at all -- from this contagion.

Gibson turned to Jim Grant, who put on his best bear face -- you know the one by now, with the intense frown and the downbeat eyebrows -- and explained to people how, once again, this was the end of the world and that our markets would be crushed by the coming Asian plague. Amazingly, he recommended that people move some of their assets to Korea, a stock market he called cheap, with real bargains vs. our own.

In what I thought was out of earshot, I punched my home phone number in, got my wife on the horn, and said, "Look, I want you to call this morning and make our kids' Uniform Gift to Minors contributions now, rather than wait until year-end." I had no personal account then, didn't believe I should as it was in conflict with Cramer Berkowitz, but that money could be invested whenever I wanted and I wanted it done now, to take advantage of the gloom. Then, on my other phone, I speed-dialed the office and bought 100,000 Intel(INTC Quote - Cramer on INTC - Stock Picks), 100,000 Cisco(CSCO Quote - Cramer on CSCO - Stock Picks) and 100,000 Dell(DELL Quote - Cramer on DELL - Stock Picks), as well as all of the other usual suspects. The sellers were willing; we got great prices.

Gibson, who is a terrific guy as well as an excellent on-air personality, overhead my bullishness and my rantings and he managed to get the camera on me to show my desperate buying. He then asked me why I was in such a frantic state. I said because this might be the last great buying opportunity we'd see for ages and that Grant would be completely wrong.

Well, we all know what happened: Cramer Berkowitz made its year in about 48 hours; the Cramer girls caught the bottom of the market.

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