We've got our critics: guys like
, who took a shot at us this week. Hey, we haven't delivered on our promise yet, so I can't really blame him on this (his third!) broadside at us. Still, even with guys like Abelson pounding on us, I can't stop believing in what we are doing. All my life all I have known is that when people are counting you out, you work harder and you come back and you show them. I don't know why this venture,
, should be any different from the other challenges. So I am rewriting another piece this weekend (my earlier one ran
Saturday morning) to show that we will work as hard as possible to help you make money. I liked this piece because it addressed the "quarter-point gainers and losers" instead of the 30-point gainers and losers. I want to be short these and long the 30-pointers!
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By mistake, the other day, I ripped out a page from my
chartbook that comes every week. I love my chartbook, something I used to crib from my wife when she worked with me. (It comes by old-fashioned hand delivery, and we used to pore over it together every Saturday morning. Man, were we out of control and, certainly at the time, without children.)
(I still remember when my wife was aghast that I didn't look at charts every week. She said it did not matter whether you were a technician or a fundamentalist; charts give you ideas, show you things and open your mind to areas of the market you might not be thinking about. These days we are blessed with Helene and Gary, and I start my trading day each day reading them. Both of the charts they use, especially Gary's homegrown charts, are simply excellent and must-reads.)
The page scared me to death. It showed me what happens if you stray too far from the
(Here is the point of this piece. There are a ton of stocks that are doing nothing. If we take our cue from them and choose to do nothing because of them, then we should give the money to managers who are trying to find stocks away from these. That's not a sin. Not everyone can do this game. Some don't have time. Others don't have the inclination.)
Each chart page comes jammed with four charts on a side. I happened to have ripped out a page of H's. Every one of these stocks had a terminal chart.
(Remember, a stock that has only a few bumps up on the way down looks terminal to me. It may not look that way to you if you are long it, but it does to me, with no position.)
As this was a random act of tearing out, I shuddered to see one after another chart starting out high on the left and finishing low on the right.
First up was
, the communications company. There has been a fabulous rally in communications stocks, but it has studiously avoided this old warhorse. The chart shows a move from 40 to 20.
(Amazing, I used to trade this stock constantly, during the days when Joe Bellace ruled telecommunications from his perch at Merrill Lynch. Periodically Harris would hit the cover off the ball and you would get a good trade. Now I guess they feel that the whole world is passing them by. There was this giant Harris factory in Jersey on Route 202 that I used to pass on the way to visit my Dad's. A few weeks ago I went by it; the wrecking ball had leveled every last piece of it. You couldn't even find a shard of it. Nice metaphor.)
Next up was
Hartford Financial Services Group
. This stock had been eroding for months, but then had an obvious short squeeze up over the breaking of
. Now it has turned decidedly down again. It has dropped 20 points from its high.
(Man, were the jackals all over this stock as something to buy after the wall fell. But three days later and you were stuck with the same underperforming dog, and this time the analysts didn't say a thing. People would play this stock for takeover, which means, in my world, that the fundamentals are doing nothing or deteriorating, so you have earnings risk vs. takeover reward. I think that is a sucker's play.)
was next. What the heck happened here? I mean, what was all of that consolidation for anyway? Wasn't it to boost earnings? This company has been a one-way ticket down, and it isn't even
(Is there some handbook out there that says if you are a bozo, you should go to work as a toy company executive? It didn't use to be like that. Maybe that's just my heritage talking because my dad sold toy games when I was little, and I thought it was a terrific racket. All these guys have to do is coin money, because all of the production is done overseas. I can't figure this one out at all. Anybody have any ideas?)
When you have an H in a name, you are certain to pump into some health care companies. Talk about wasting assets. These stocks, long a favorite of every growth portfolio manager, have just about gaffed everything they have come in contact with. They are simply awful. In this case, we see
, which might as well be the same down charts. Look out for tax-loss selling between now and year-end. And don't expect a January bounce!
(If you want to see what it is like when a fad move ends, take a look at some of these health care stocks. Oh my word, one after another these have been taken out and shot. No kidding, on the front page of The New York Times every day for about three years was that the Clinton administration was going to get its arms around Medicare spending. When it did it, all of the companies that were living off the government's largesse got clobbered. Nobody saw this coming, either in the industry or on Wall Street. Pretty pathetic, wasn't it? I hope you didn't get hurt by this.)
is next up, and like every mining company, this has become a one-way ticket to the underperformance graveyard. It's been cut in half.
(Remember that run in the mining stocks a few months ago? We all were beginning to think that was something big. Well, not all of us. I was blasting it from day one. I am glad I did. If I had bought this sucker, I would have been a dead man.)
was a shocker. This stock used to represent a proud furniture retailer that I traded constantly when I was at
in the '80s. It labored mostly in the 30s and 40s then. Now it's at 4!! Amazing. With no sign of a turn.
(These guys are a textbook example of what happens when you expand too fast, open too many stores and make bad acquisitions to please the growth hounds of Wall Street. What a disaster.)
Finally, there is
. Talk about great '80s stocks. This one has just become one long run downhill.
(This was at one time my favorite stock in the book. I used to "use" it with all my clients who were scared to death that the Japanese were going to destroy us in the '80s as they took over every one of our industries. My pitch was always the same: "One thing that is never going to happen is that you want ever see a bottle of Mitsubishi ketchup on the table. It will always be good old Heinz." True. But the big money was made in the take back of American leadership in tech.)
What are all of these charts saying? I think they are saying that this is the old noninvestable economy we are looking at, stocks that, if they had decent balance sheets, would probably be taken private because nobody cares about them any more.
(It's amazing how many dozens of smaller companies that have been around forever are now getting takeover bids. They happen everyday, but nobody notices because the big deals are for billions upon billions.)
There is simply too much competition for stocks like these. What is amazing, though, is that there are so many old stocks nobody cares about anymore -- like much of the bottom portion of the S&P.
(So the S&P gets dragged kicking and screaming into the millennium, finally acknowledging that Yahoo! (YHOO) isn't going back to zero anytime soon.)
They should quarantine these guys so nobody buys them by mistake! Very telling.
(Next time someone tells you that the B2B'ers or some other highfliers are too dangerous, think about the dangers of owning these stocks through the greatest bull market ever.)
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Goldman Sachs and Yahoo!. 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