They are coming out of the closet, confessing to me. They can't take the deceit and the obfuscation. They want to let someone know that they can't stand the hype they have to give to their investors who are suffering through their miserable returns. Yep, I am talking value managers and the chicanery that some of them preach to their punching-bag clients.

One manager confessed to me that he got sick of how many times a day he told his investors how "well-positioned" they were with their banking losers. Or that he would have to say to his firm's hapless investors that their holdings were so undervalued that that they would just have to outperform the


by 50 basis points, or some other authentic Wall Street gibberish.

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"We rode these value stocks all the way down," he said. "It got to the point that every time one of our current buys kept dropping, my colleagues and I would joke about how we were even better positioned for the year ahead." The source, begging for anonymity, continued: "I really wanted to tell these clients to invest elsewhere."

I know how this guys feels. This "sticking-with-your-guns" stuff is so persuasive that people worship at its plastic altar. It is the ultimate rationalization for sustained underperformance and only in this game would it be tolerated, if not praised. It makes me sick. It is a sign of lack of guts, not of intelligence and honor.

Last year, I was faced with this stick-with-your-guns mentality and its seductive logic. I was long a ton of savings and loans, in a portfolio that had made me a fortune year after year after year. But these small financials had stopped working. The M&A game had collapsed, the yield curve had turned criminal and the remaining players were refusing to sell out to bring out value.

My largest position was

Bay View Capital


, the biggest savings and loan in the San Francisco Bay area. I figured the great environment out there, coupled with the fantastic real estate market and the great growth of Silicon Valley, made this stock a prime takeover target. But management didn't see it my way. It wanted to expand, to buy other companies that made higher risk loans. Great.

At the end of the year, I was stuck between accepting 19 and change for something I had a much higher basis for, or holding on until they brought out the value. I changed my stripes. I could not make that valuation case to myself let alone my investors. I hit the 19 bid.

Today, Bay View blew up. It preannounced a very disappointing number. I could just see that icing sitting on a putrid cake's worth of performance if I had stuck with that old value portfolio. How fitting that these "bankers" chose to release the bad news on Dec. 28, just in case some owner of the stock may have been trying to eke out a good year. The old kibosh from the Bay gang that couldn't shoot straight. The stock now resides at 13. Now, there's a return for you. Go explain that one to your clients. I don't have to.

So, when you get the sitdown from the underperforming manager and he mouths about how value has to come back, remember the back-alley confessions I am getting, and remember my decision to take the loss on Bay View. Best trade I ever made.

James J. Cramer is manager of a hedge fund and co-founder of At time of the original publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at