Say Goodbye to Certainty in the Stock Market

We all love certainty in the stock market. We like benchmarks. We like relationships. We like the "official" nature of the Standard & Poor's. We love valuing companies on earnings. We think that price-to-earnings measures never lie. We buy and sell stocks on certain matrices that make us comfortable.

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And in the end of the 20th century, we threw it all out the window.

We made a mockery of the discipline that served us so well. We rendered all that we knew about relationships among bonds, stocks, prices and earnings hopelessly irrelevant.

We just don't want to admit it. We would feel naked without our beloved standards. We would be revealed, unbelievably, after all of this rigor that we have built up and blessed, as mountebanks who can't make you a dime.

Oh come on. You know it is true. Nobody can write it. If you write it, you get laughed at by the professionals, your peers, your buddies, your Fellow Travelers. Maybe I am just secure enough -- or just lunatic enough, or just masochistic enough -- to put it down here for all to see.

But our methods of valuation, our standard methods of valuation, don't make us any money any more.

Sure, periodically, they come in to play. We will see S&P futures sell programs come on when rates rise sharply, as money that is run as stock vs. bonds gets juggled about. And there are plenty of managers who won't own the New World stocks; witness the massive underperformance vs. the Nasdaq that most funds are experiencing.

I sure wish it weren't that way. I was able to calculate price-earnings ratios and figure out relationships between stocks and bonds and sectors and groups better than just about anybody. Heck, I was one of those kids in school who just had to get As, and I got an A in "authentic Wall Street gibberish." Just ask anybody who knew me before TheStreet.com, when my reputation was for numbers, not popping off.

But it sure is hard to take the so-called righteous stuff now. It is hard to listen to the brokers discuss the relative merits of VF Corp. (VFC) and Deere (DE) when 10,000 shares of Portal Software (PRSF) on a good day will make what you make in Deere in a lifetime. It is hard to worry about price-to-sales when Cisco (CSCO), the smartest company I have ever seen, buys Cerent, which, in the Graham & Dodd world, doesn't even exist.

It is challenging, to say the least, to think of book value, when a company has an idea that could wipe out much of the current retail infrastructure. Maybe it was all of that Marx they made me take at Harvard to get that diploma in the 70s, but analysts seem to have nothing to lose but their price-to-book chains.

Oh that doesn't mean it's easy, or a dice roll, or some expensive game of chance. Matt Jacobs, the hardest-working guy in my office (and I thought I would die before I ever wrote that) spends hours upon hours trying to figure out whether Scient (SCNT) has a better model than Verisign (VRSN) (it doesn't) or whether the good folks who run Red Back (RBAK) are better business people than the gents behind the wheel at Tellabs (TLAB) (they are).

Trying to spot which company might have "viral" growth ahead of one that has "organic" growth, vs. one that is just plain inert, takes a skill set that they can't inject in you at business school. Just as the market itself has become wide open, the skill sets you need to win have become wide open, too.

One thing is for certain though. All of those talking heads you see and hear today, and all of the analysts and brokers and traditionalists of the antebellum days, they know it, too. Oh maybe they can't articulate their fears other than to their spouses. Oh, they can deny the thoughts of this column till the cows come home.

But they are shaking inside. They are fighting their own irrelevance. They don't want to change, because it is frightening, and otherworldly, and downright too hard at this point in their lives.

The other day a reader tried to make fun of me. He called me Chameleon Cramer. I think he meant to hurt me. Get in line!

I can tell you I felt honored. It made me think that I can still change my stripes to stay alive. Only a chameleon would invest in a Be Free (BFRE).

Only a chameleon could recognize that a coat of S&P 500 worship gets you eaten fast in the New World.

Chameleon Cramer. Maybe I will make business cards with it. Suits me fine.