James J. Cramer and Todd Harrison chatted on TSC Chats Tuesday, Dec. 19 at 5 p.m. EST.
Consumer confidence is declining, lower interest rates; oil prices are still relatively high, therefore trade balance worsens, dollar weakens, foreign investment withdraws, market declines, consumer confidence declines? Isn't foreign investment and weak dollar the hidden worry?
That's a strategist macro question, it is not a worry at all, the dollar has actually been too high vs. the euro, we anxiously await massive Fed interest rate cuts, which would lower the dollar and make us more competitive with our trading partners.
How does MO do if the
When the Fed eases, you have to move out of defensive stocks, like Philip Morris, and move into more aggressive stocks, so I would think that Morris would peak with a Fed cut.
Hey Jim could you explain your prediction of a fiber meltdown?
I don't think that you have to go much further than the excellent work that Ravi Suria, the fixed income analyst at Lehman Brothers, does to find out why these stocks will keep going down. He writes eloquently about how the telco companies don't have enough money to buy all the fiber they need. And that's the Achilles heel of all of these stocks, they are going lower, not higher.
Jim, did you think we would get to
5000 with a rate cut?
I would be happy over time for a run back to NAS 3500 with a rate cut, and for something gradual to continue as the rate cuts unfolded, but NASdog 5000 seems too difficult seeing the fundamental decline on just one rate cut.
I would view the rate cut as a tonic to stem the bleeding, but I think in order for the NAS to get a sugar rush, we need to see some signs of pickup on the fundamental horizon.
What does the phrase "cash is waiting on the sidelines" mean (if anything)? If one billion that has been "waiting" is being spent, then it is still waiting - just in other hands...
Please don't misunderstand this, there are people who keep cash reserves that will go into the stock market if rates go lower, and if stocks go lower. That is always an important indicator of forward progress for the market and to ignore the cash on the sidelines is to ignore the future.
Todd, what do you see as support for SUNW?
What a battleground! As with many of these charts, the price action is dangling in the abyss right here. But as we are oversold (SUN has traded down precipitously from 48) I would look to add SUN as it approaches 20 for a trade. However that might prove too pessimistic of a downside price target.
What do you think the chances of capitulation occurring tomorrow as everyone throws in the towel b/c of no rate cut & the institutions/mutual funds swipe up bargain basement prices?
I think any time you try to "game" a bottom, it's dicey. Having said that, the flow that I saw today was, in my opinion, anticipating the potential for a cut by the Fed. When that cut didn't occur, I think that selling exacerbated the decline. I've maintained for some time that 2300 is longer-term support, and I would be surprised if we could get through there on this leg of the selloff. We are oversold, psychology is abysmal, and we have retraced 50 percent of the rally. I've become incrementally more bullish as we approach our level ... for a trade. I have no opinion on when the cycle bottoms.
Is it safe to bottom-fish the auto parts stocks?
No, it is not until the Fed eases, because these stocks need two eases before you will feel it in their earnings. They are too deeply cyclical to benefit from one ease.
Hi Jim and Todd. What are some of the stocks you might look at if we have a whoosh tomorrow?
When I think "whoosh," I think a rubber band has extended. In that vein, I would look for the high-quality names that have been taken apart. Look to the semiconductors, and select networking stocks. And, best of breed among the other sector bases.
On a "whoosh" down, I continue to want to buy large-cap S&P safety names, because the Fed did not ease, and those will keep going higher. I am particularly partial to food, drugs, beverages, and health care. I also think that you can buy tech that recently announced good earnings, but there aren't many of those. Maybe something like a BEAS, or an Oracle. But I really don't want to emphasize tech, because there is too much churn in tech. And I want to go where it is cleaner.
It is important to emphasize that we are talking trading moods here. The fundamentals, according to the sage and savvy Berko, are showing no signs of improvement. We are looking for the next trade.
Remember, my job is to find where the fundamentals are good, which keeps drawing me to these areas that nobody gives a darn about, but go up in good and bad days. That's what I like, things like CVS, or Mellon Bank, or Campbell's Soup, or Heinz, these stocks go up on good days, and do nothing on bad days. That's what I like.
I understand that the Fed can cut rates between FOMC meetings if necessary. How is this done and communicated?
It's been done in many ways. Including with a quick press release from the Fed, announcing that they are cutting rates, it can happen at any moment.
You can also look on the FOMC homepage! LOL!
The HAND lockup has expired. What do you think about it as a short now that the dust is settling?
I still think there are many sellers in hand, and I would be nervous about it, until they are done.
Is Nokia still a good buy here around $45 even though it is a tech stock? Thanks for all you taught me, both of you.
I like Nokia very much, and think it is in a good core position.
I would label Noks a best of breed and a place to go. Anybody seen da cruuuuuuuuuuuuuuuuusha?
I think T sucks.
At what point are the telecoms safe? Is T that bad?
I think that these stocks are beyond bad.
You guys frequently mention how someone is buying or selling a lot of options. How do I determine this? I only have information on volume and open interest.
One of the benefits of sitting here is having access to the flow of the Street. This enbables us to monitor the option market quite closely. We have Mike and Gekmo furiously hitting wires all day long. Does T= Todd, Jimbo?
Do you think we have seen the end of the IPO floods?
I think the days of printing money are over, but there will always be demand for the high-quality H2O.
The IPO market will crank up again, but not until the Fed eases.
Hey Todd when are you going to use some Janet Jackson lyrics in your diary? I am sure Gekmo would like that groove.
That's the way love goes ... COOKIE!
What role did the Bush tax-cut proposal (have on) Greenspan's thinking?
I went on record saying it is not what the Fed chairman wanted and I got hit by a gazillion angry emails; heck, he doesn't want the consumer to spend, he wants the rates to come lower and he will do it; don't take that away from him by shoving down a tax cut. And before anybody criticizes this again, I would be a principal beneficiary of a tax cut!!
AMCC ADDED TO S&P, SPORTS FANS
disclosure, downgrade-- work in reverse on the upside?
I think it makes analysts more reactive. It's important to note that the lion's share of ratings have been reduced recently in tech, and the next round, if and when, will be upgrades, if and when.
I just want to say that I am a big supporter of FD and some people have emailed me saying that I have said things that are not supportive of it. That's nonsense. It will make it harder to be a hedge fund manager though!
Jim , congrats on your new role next year, I'll be looking for longer-term advice; my nerves are shot for the short-term trading. Your thoughts for 12 months out?
For 12 months out I really think the best buy might be a portfolio of higher-yielding corporate bonds from telco companies that have good cash flow. You get a double hit, from good interest-rate coupons and good capital gains when the Fed eases.
Not to be self promoting, but
Leaving Las Vegas addresses this very issue: trading vs. investing, may make good reading.
Biotechs held pretty well today. Any comments?
I urge you to take a look at page B1 of the
Investors Biz Daily
today. It has a list of funds that are doing well. They are all biotech and life sciences, that is where the money is coming in, that is what works in a slowdown, they make sense here.
Who is Berko and why doesn't he write for TSC and who is Gekmo?
, who is my partner (Cramer, Berkowitz) who will be running the firm. He has a lot to do and he doesn't feel like it would be best to spend time writing for TSC. He has his hands full. It is highly unusual to have any pros writing, and we have two from our firm, so let's not get greedy. How many diaries do the managers at Fidelity file, or at Janus? I think sometimes we forget how rare this is.
I have received hundreds, if not thousands, of questions re: the Gekmeister. No, he's not Berko, Greenspan, the Trading Goddess, Matt.com, your inner voice, the sun and moon or my cat, Zoebird. Remember, whoever buys the most gift certificates gets Sushi Friday with him. As of today, Robb Knie is in the lead with a $5,000 pledge to underprivileged children. Nice.
Todd, when you say 20 might be a good price for SUNW, what valuation metrics are you using for that assessment?
Oh Lashy, aren't we feeling frisky tonight? As I have my trader's hat on, big boy, and not my models in front of me, I can't answer that right here. I am looking for disconnects for a trade, FOR A TRADE, dude, less coffee! Bitter critter.
Todd, aren't you the least bit worried that your incessant touting of the Raiders has jinxed them? Just ask
what happened to his Vikings two years ago...
Boy, you've read my mind. Humility takes many forms, and I swore if we dropped the Jet game, I would be mum. It's been a long time coming though, so I allow myself a little latitude. Gotta love Gruden.
Cramer, about defensive stocks, lots of insider buys in TUP(perware) last months. Your take?
That is the type of stock I would be looking at. Their raw costs will go down when energy goes down, good brand name, etc.
How strong will tech be after this contraction?
I don't think we'll ever get back to tulip status. That was once in a lifetime. But there will certainly be a 'next' cycle, and the goal is to be in the game when it occurs.
I can't tell you how much I agree with Todd. We have seen so many people been blown out of the water this year. It is such a shame. Stay in the game!
JJC, you can retire in peace, TODD is the best! Question: Why does EGRP trade as an Internet stock and not as a broker/financial as SCH does? Is there a bottom in that name above 0?
EGroup has terrific ads but Schwab offers a more proprietary product. That's why it has a higher multiple. I still expect Christos to pull something out for shareholders but Berko gave up on me thinking that EGRP was any good and put it on our restricted list. He was right and saved us a lot of money. When it was at $17 I said it would go to single digits and...
I did a lot of damage to my relationships with those guys, but I was right, and where I come from that is all that matters. Suckin' up ain't worth a warm bucket of spit!
Thanks for the snaps cookie, btw.
If MSFT continues to fade into the sunset, which company if any do you see as a potential replacement market super-icon?
I think that kind of buy-and-hold tech stock may be out the window for a while and I don't see any replacement. MSFT was a monopoly and usually those are illegal. Oops, this one turned out to be, too!
Todd, you often recommend "tight stops." Got any recommended reading on STOPS-101?? I often get stopped out too soon for not allowing enough wiggle room, only to see a stock go up right after I sell.
Good question. This style is totally dependent on your risk profile. We use 'wider' stops on the more illiquid jazzy stuff, and tighter ones on the less volume names. What I would like to stress, is keeping the stops "upstairs" or "mental" such that the specialist or market makers don't lean against your order. When your stop is hit, place your order then, just my opinion.
Why are Janus mutual funds down?????
I will take the Janus question. We are all quick to hang Janus. I think this fund family has made my family a fortune and I will not cut and run on them after nine months of poor performance. I think everyone can have an off year. If they are doing poorly this time next year, I will make changes. But I was cashiered by a lot of people in 1998 and I came roaring back, and I know that those who stayed with me made a ton of money. I think Janus could do the same. I really don't like those who blast someone who has year after year developed a good record that has one rough spot. Now, back-to-back rough spots and I take action.
What about Yahoo!? Is it cooked or is it the one blue-chip Internet stock that will make it?
I said some time ago, during the nuttiness, that before it was all said and done, there would have to be some discernible metrics to value these names. I think there will be survivors, but they'll be measured as media concerns in a historical fashion.
JJC, you sure called the banks today. How big a move should take place based on the Fed easing?
I think banks go to premium multiples if the Fed eases a couple of times. This has been
group for the second half of the year, and I am not giving up on them.
Toddo, any advice on how to sit on one's hands? This I find is the hardest discipline!
Two of the hardest things to do as a trader, book a gain, and sit it out. Remember, it's about trying to trade with an edge, and sometimes the most disciplined approach is to do nothing. There are opportunities in the marketplace, distinct opportunities, if you wait for your trade.
Jim, how are you thinking about the AOL/TWX merger?
I was blindsided by the poor performance of Time Warner. I was so worried about AOL I forgot that TWX could screw up too. It sure does make the combo worse. But I will still back it next year.
Holy cow, flying keyboard alert!
Toddo - does one have to be a Harvard nerd to be a hotshot hedgie?
Au contraire, mi amore, the best traders I know are Queens College types and street-smart types. I bartended, and it's funny (not like a clown), I've noticed a lot of my trading cronies have a similar background. Multi-tasking, baby.
Thanks Jim and Todd! Great chat -- any final thoughts?
Thanks all for showing up. Todd and I agree on more than I thought!! He is the best and you have no idea how lucky we are to have his insights!
Thanks Jim, will miss ya; for the readers, please remember that to maintain composure and remove emotion. It's about consistency. Good night, all.