The public loves meaningless scientific breakthroughs. Take the action in
this week. Over the weekend, IBM announced some new process that will replace aluminum with copper in chips and make them better, cheaper, faster, etc., etc. etc.
The moment I saw this story I realized that my decision to exercise those September 100 calls that otherwise looked worthless would be an inside-the-park-homerun. Stock novices would not be able to resist buying IBM off this alleged great discovery.
Sure enough, IBM doesn't open until 9:46 a.m. and when it does, the price is four points higher. No analyst had raised numbers. No one had added it to the buy list. The public had simply caught the new scientific breakthrough bug again, and there was no stopping this virulent virus.
I love IBM, but I sold my position into this hype. Call me a skeptic, but I always sell into scientific breakthroughs. Numbers move stocks, not breakthroughs, and this copper stuff may raise numbers in 2005 -- or then again it may not. It may flop. It may never see the light of day. Maybe
is working on something that will allow glass to be used instead of copper!!!!
Don't get me wrong; I'm no Luddite. Hah -- that English history course finally paid off 22 years later. It's just that scientific breakthroughs get announced all of the time, but what the professionals want to see is commercial breakthroughs, stuff that turns around the numbers now.
I learned this lesson the hard way. About 12 years ago cold fusion was all the rage. The papers had latched on to this method of energy and predicted that by last year we would be riding with it, flying with it and certainly replacing all other forms of energy with it.
Cold fusion needed a particular kind of uranium to work. Nobody at that point could rival me in finding the stock or stocks that would benefit from a breakthrough. Fish oil, bone growth, anything. I was off to the library to search about who would make a buck off of science. I was Mister Scientific Breakthrough. I located
in Canada as the only substantial source of this rare type of uranium for cold fusion. I bought and bought and bought.
Sure enough some paper soon identified Dennison as the right kind of uranium player and the stock jumped 20%. I thought I was a genius.
It never traded higher than that day in the sun. In fact, within a year I had pretty much lost my entire investment. So had everybody else I told about it, including my Dad.
Will this copper thing turn out to be another cold fusion? Who knows? Who cares? I know that in four weeks when earnings are announced, the only copper that will matter is the copper penny that IBM either makes or misses its numbers by. That's what I live by. That's the only science I know.
James J. Cramer is manager of a hedge fund and co-chairman of
. At time of publication his fund held an open position in
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Mr. 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 welcomes your feedback, emailed to