I wrote this piece out of sheer guilt for not having written all day Wednesday, but it was by far the most popular piece I did this week, so I am grateful for a chance to go deeper into it. I imagine that many of you are part-time traders and identified with my plight. I will use this piece as an opportunity to tell some of our newer members some of my personal history, so you can understand what I do better. As always, I will not care about length and I apologize for going on so long. Maybe the editors will break it up into two parts if it is too overwhelming. As they tell me nothing, we will just have to wake up and see.
Ten years ago when I had to be on the road, I found myself wishing for a tranquilizer to control the out-of-control feelings I had with no PC, no
and no way of accessing quotes.
(Ten years ago I would have picked up the phone and called my wife to see how things were going if I were on the road visiting a company, or we would just close our office if we both were on vacation because we WERE the company. I currently keep track of my stocks in my office with four ILX machines, a Bridge machine, a Bloomberg machine and my personal computer with a T-1 line and TheStreet.com as my homepage.)
Now, though, with cell phones and a partner like
, even a day like today, when we were moving from our old Bucks County, Pa., house, I didn't feel out of touch.
(Make no mistake about it, I hate going on the road for any reason. I am a trader and I lose my "feel" when I am on the road. By keeping up with the market, all I really want to do is be a credible sounding board for Jeff if he has questions. There was a time when Jeff was just starting out that I would trade extensively from the road, using my feel. I remember taking down 1,000
five years ago on a family vacation in Reheboth. And I sold 200,000 shares of
(DGN) at $9 at a
near Smyrna, Del. But these trades required total concentration and I was winging it. Having learned to trade while on the fly at law school, and then refining it when I was a salesman at
Of course, there was nothing momentous about today. Nothing that made me put the whole move on hold and bolt to the office, which I have done many times, or nothing that smacked of a crisis that would have my wife loading a dumpster instead of just handing things off to me.
(The worst for me in this vein was the summer of 1990 when the night I arrived for a month off in Martha's Vineyard I got a 4:30 a.m. call from Seth Tobias, then my broker at
New York Securities,
telling me that Iraq had invaded Kuwait. I spent the next two days trying to fly back and I never saw the house again. I had a great month, though, shorting the retailers and the banks.)
Still, you have to know how to do it, what to ask, what to relate to, in order to make it a productive day. Many of you are now part-time traders, so I thought it would help to tell you what I look for and ask about on those very rare days when I am not in the office.
(Walter Haydock, my superb former partner at Goldman Sachs, taught me everything about how to call in. I have refined it, but one thing I can tell you, nothing is like a calm voice on the other end. Jeff has replaced Walter both in partnership and in demeanor, but I thank Walter for training me how to make the most of a phone call without distracting the recipient from doing his job. For those of you who are seeking a job in the business, the Goldman Sachs training program still ranks as the greatest way of learning about most of this stuff that I know of.)
My first call, around 6:30 a.m., was to ask about Europe, particularly London and Finland.
(A word on my schedule. I get up at 3:30 a.m. every morning. I have always woken up at that time, and after seeing a series of sleep professionals over many years to try to treat an inability to sleep past 3:30, even if I go to bed after 11:00 p.m, I met a doctor who told me to get up and go to work and I have been doing so for years now. I guess you can say I make the sleep problem work for me. I have never needed a lot of sleep, but it is only since I started going to the office in the middle of the night that it has been a godsend. It runs in the family; neither my father nor sister can sleep and I don't ever recall seeing my Dad asleep at night, as he was up when I went to bed and up when I got up. Weird but true. Two days a week I work out, the other days I answer email and work at the office and talk to folks in Europe. I have traded there every day for years, keeping my hand in, in part because it makes me a better trader and in part because, at this stage of my life, I just like it.)
was off one-half, and as I was aware of a big contract headed Nokia's way, courtesy of an adept friend in London, I managed to snare off about a point while I checked in.
(So someone reads me the European papers where a contract had been won. It amounted to a head start, because others didn't learn about the contract until much later, when you traded Nokia in America. A bunch of you fingered me for
on this one and I had to waste my time speaking to my lawyer because TheStreet.com wanted to know if I had insider traded, a violation of the 1934 Act. Indeed, this was quite upsetting because I would like to think that you know I know better than not to trade on inside information, let along write about it! Give me a break. I do homework. You too can get up at 3:30, come in, have the Finnish and German and London papers read to you and try to profit off of it. I say be my guest. I have brokers in Europe who trade for me. You can have them too. Mine are institutional, but I am sure there are some hustlers who will work for you as well as some online systems that are developing. As usual, I am giving away my edge here, but I am a reciprocal altruist just like E.O. Wilson taught me, and I know if I help you, we will build a community of helpers. Community is my theme because we are crummy at it, having waited until we could find a way to make it more than cheerleading. I am told we are almost there, but I will believe it when I see it.)
At 8:20 a.m. I checked to see how the bonds were trading, and because oil was so high, I inquired about that. (If gold were running, or aluminum, I would have liked to have known that, too.)
(I love to watch the bonds. Bonds are the fundament of what we do. I am watching the futures on the bonds as well as the cash market, particularly what is known at the on-the-run 30-year Treasury, which is the benchmark by which all other bonds are priced off of. If you don't know how the bond is doing, you are flying blind. It is my windshield. I care about commodities because they influence the bond and because I care about the macro, the larger picture of the economy. If oil is running, I want to be worried about a bunch of stocks that I might be interested in otherwise, including every big user of oil. I never forgot 1990 and I don't want to do it again.)
Then I waited about 20 minutes and got an early rundown of the research. Today
pushed the semis, including a couple I was long, so I asked Jeff to see if he could buy more of any of those roughly in line or up one-half on
. Nothing doing. They had already ramped before the market opened.
(Each morning brokers from individual firms call my firm. There are research salespeople who give me the call and trading salespeople who give my traders the call. They are proficient in purveying their firm's most important to least important calls with the idea that I might trade from these suggestions and pay them commissions, which is how they earn a living. Upgrades and downgrades are like good and bad reviews for a movie. If you get a lot of upgrades you may have a smash hit that will go up. Same with a ton of downgrades. I don't care how the market does, I have longs and shorts and I can make money either way. This morning
the influential Morgan Stanley chip analyst, spoke about the semis, which have been hot as a pistol. I don't like to wait until the opening if I think someone has a good call, and I will trade with anyone who wants to sell me some stuff that is roughly in-line to up a point after a big push. I can judge better than most how much a big push will move something. I thought, for instance, that an Edelstone push of
I often use the term "ramped" instead of went up, because that's what traders call a really good run, as in "that XLNX is really ramping." Or as my wife would have said, "You had to buy these yesterday." We are friends with Edelstone but he never leaks what he is going to do, and he is a great money maker which is why he has such impact.)
At 9:15 a.m. I checked again for upgrades and downgrades, and there was nothing major. I then asked again about the bonds. As they were soggy, I immediately eliminated banks and drugs as possible stocks we could buy in my absence.
(When the bonds act well, a lot of stocks are fair game for day-trading to the long side. When the bonds act poorly, I stay away from stocks that trade with the bonds, most notably drugs and bank stocks. Both do poorly in a higher interest-rate environment. Sometimes I can use that weakness for me. Let's say I have independently judged that a new drug might be approved by the
two days from when this occurred. I would use bond weakness to buy the stock cheaper. But today I am just trying to figure out how to make money right now and these stocks are handicapped by bond weakness. Please check Best of Cramer for more information about this linkage as I have written about it extensively.)
Jeff informed me about some sort of
nastiness, and -- as I am so used to ERICY trading with Nokia and
-- I braced myself for weakness in both. I urged Jeff to scalp a dollar in Nokia while checking to see if we should buy more MOT down a couple -- we ended up doing so.
(This was a good call. Ericsson, which seems like a company perennially in trouble, has pulled down these other two stocks more times than I can remember. We are always long the cell phone stocks because I think it is still an incredible growth industry. At all times there is a leader and a comer. It has been like this for years. Right now the leader is Nokia and the comer is Motorola. The latter has staged an incredible comeback. I have been trading Motorola since 1982, and about half the time that's been from the long side and about half the time it has been from the short side. What a great trader!! We sold the Nokia up and then bought it back again down three from where we sold it. Before you pass judgment on that, remember: One, a gain is a gain, and two, I only write about half my portfolio. You don't hear about my long-term stuff because if I mention it here I might have an impact on it. I write about big liquid stocks, not little illiquid ones.)
At 10:00 a.m. I again asked about the bonds, as well as whether any research calls were impacting the stock market. I wanted to know whether pushes were working or not or whether there was an overriding theme.
(Each day has its themes and its rhythms. If I don't know these it drives me crazy. Mark Haines makes fun of me for being from the church of what's happening now, but there is more than a grain of truth about it. First, I always want to figure out if the research calls are working. If five stocks get pushed in the research call and all five are up nicely by 10 a.m, then I reason we are in for a good solid rational day. If five stocks are pushed hard and they are all down, I know it does not matter how good a stock is, be defensive, the market is headed lower. In the same way that I love to keep my eye out for pushed merchandise on down days. When the pushed or sponsored stocks start bouncing back, I know I have an all-clear to be aggressive. Second, I want to know the mood. If two autos are up and one is down, maybe that's an opportunity. If three semis are up and a fourth is down, that could be an opportunity. If five telcotechs are up and the sixth is down, that is definitely a sign that some money can be made, unless it is blowing up.)
Jeff said that it looked like there was a program that brought the market down artificially on Tuesday. If that's the case, I said,
and a couple of other big-caps should do well. (If the bonds were solid I would have been itching to buy some
ahead of the quarter.)
(I later discovered that someone sold some SPIDERS, which are these derivative products that don't work very well in that if you sell them they immediately knock down the underlying market, in this case the S&P 500. That means one account can cast a whole lot of gloom on top of the market when he is selling. That's what happened in the last hour of Tuesday's market. I like to look at MSFT and GE as "tells" for programs because they are the biggest stocks in the indices and most affected by any selloff. Please check Best of to find how these sell programs can overwhelm the market at times.) (At all times I have my list of stocks that I know are doing well and I apply the list in a proper tape. If the bonds had been robust, I would have reached for Chase or Citi because I have confidence, based on Wall Street research analysis, that they are going to do just fine.)
Sure enough, Mister Softee was already up a buck and a half and Jeff had sold some of the stock we had bought the day before at the bell, betting that a sell program had wreaked the havoc. Good call on Mister Softee, but we missed GE, and the stock ramped.
(During what I thought was an S&P program selloff, which was right, I stood there and bought a ton of Microsoft as the programs knocked it down. Now Jeff let some of that trading stock go, but kept our core position to trade around. That's kind of what we do. We missed the GE and were sick about it all week. Yes, we do stew about these things. No it is not professional. Yes we are competitive as all get out. Missing GE is like missing the open man in the end zone and handing it off to for a loss of three.)
I then asked how the
was. (I did not ask how the
Dow Jones Internet
index was because no one trades that, and I was more interested in how the true Net plays are working.) We like to buy Net stocks when they are down big, but nothing was flashing red that intrigued me except some
, so we grabbed a little of those.
(In priceline.com we made a little money, but Yahoo!, well check the numerous archives for the rest of the week and you will see what I mean. It was awful. I love the DOT. I love its volatility, its sheer energy, peripatetic little devil. I continue to be drawn to the Net in the same way our contestants in that great challenge seem to be drawn to the Net. Did you see that guy from
, I mean he was smokin'! I am watching that like a hawk so when the winner comes in we can have some fun and share war stories before we both pit our wits against the market to make money that day. Believe me, you want to win it. You want to sit between me and Jeannie, watching the screens, listening to the sounds, taking the research, getting the mojo.)
Then I wanted to know what was DOWN the most because that's where opportunity beckons. When I heard about the holocaust that was
New Era of Networks
, both Jeff and I wondered whether the momentum funds that had played havoc in 1996 were up to their old tricks, buying things up to ridiculous levels and then trashing them. I also congratulated Jeff on not having bought NEON and he congratulated me on not pushing him on Waste. (Brokers had wanted us in both names right up until today's slaughter.)
(I look for things that are down because they may be on sale for a variety of reasons, sloppy seller, a "price" downgrade as opposed to one based on fundamentals, a Maria knockdown, as opposed to a Maria hype up, when
takes a brokerage research call, gives it some breathless spin and makes the stock whammajamma to her own music. These two stocks had quite a few adherents. When they trash stocks like this it is a reminder that we are at very lofty levels. NEON reminded me of
(JDEC) , and, yes, historians of the arcane, that miserable
. WMI reminded me, well, of WMX!!)
Worrisome trend when the mo-mos go nuts as they did on these stocks. (This type of garbage happened back in 1996 and some of the mutual funds never recovered from the gaffing. For some of these you can't even play the bounce. In fact, WMI kept going down.)I then gave Jeff a break for a couple of hours but came back to ask about specific groups that were weak. When Jeff mentioned oil-service sloppiness, I said we had to buy some
, because with oil at $20 a barrel the analyst community is all over these stocks any time they are down and you can make some quick money. He did.
(Good trade. I sold the SLOB at $64 on Friday when inventories were down and the price of oil was higher. These stocks are fantastic trading vehicles, always have been and always will be. I would not have found this bargain had I not asked what stocks were weak, instead of just focusing on our own portfolio. I want opportunity not conformity. I will get right back in this stock at $60. A bunch of technicians all fired off letters to me saying what a mistake this buy was. Sorry guys, it was a good one, but thanks for caring.)
At this point I asked Jeff about our core portfolio. These are the names I never talk about because they are thin and because I am afraid that if I mention them even in a remotely positive light someone will accuse me of trying to manipulate them. (That is why I always use
, my Dad's company.) I was not so interested in finding out how the stocks were doing as I was about whether we had checked in with any of the companies to see how the fundamentals were. One of our smaller-caps was up nicely and I wanted to know if there was any news. He said he checked in and there was nothing going on. (His check-in consists of calling the company and asking the investor relations person or whoever the point person is for shareholders with questions.)
(Ah, my core portfolio. Talk about a place I don't want you. I don't want you piggybacking off me to begin with. If I wanted you to buy certain stocks I would quit my job and go be a broker and earn a commission from my recommendations. I write to give you the flavor not to entice you into buying anything. Nothing is worse than pushing small cap. I was asked to do it once for SmartMoney and ever since I did, there are people to this day who think that I am about pumping up small cap and selling them -- even though I never did it then and I don't do it now. )
(Jeff wants to know tone of business. You can't ask them whether they are going to do X. And in the last month of a quarter you basically can't ask them anything about how earnings are as they are in quiet -- well-described in Andersen's Turn of the Century novel. Sometimes though you want to know if some brokerage house you don't know about rolled out coverage or whether some management member spoke at a conference. These days public companies speak in so many different places it is tough to keep track and only the investor relations department might know.)
I also chatted with the movers at lunch, both of whom wanted to know why I haven't been on
lately. I explained that I will be on next Wednesday. Seems like I get that a lot lately. I explained that I wish I were on more, 'cause I love that show, but that's the way it is.
(These kinds of scheduling decisions involve corporations and corporate machinations that don't make you any money and I don't want to bore you with them. Suffice it to say that I regard Squawk as something that I find incredibly fun and stimulating and arguably is the single greatest non-family pleasure I have. I would be on in much more often if I were allowed to be. But that is not up to me. I cannot stress that enough.)
At 2 p.m. I asked about the bonds and buy and sell program activity. I also asked what was going wrong and right. Today was it MOT and GE on the wrong side -- we pulled too much of a trigger in MOT and no trigger at all in GE, and Mister Softee on the right side, as it is our largest position.
(The MOT sprung back to life, so that was some great buying of a weakness generated specifically by profit-taking from what I can tell. Microsoft bounced back nicely, too. Right now there is a tendency to want to buy on every dip. You know why that is? Because it has made you the most money, for years! Hey, there is a pattern that works.)
We also discussed how the
were. These are three Morgan Stanley indices for cyclicals, consumers and high-tech stocks. They gave me some flavor to see if I needed to sell some
or buy some
on the earnings weakness (no, no and no). I skipped the
because the bonds were not our friends today (bank and drug indices).
(Again, I am always looking at groups. I use these indices as a proxy, or shorthand, so I don't have to ask about every steel, copper, aluminum, paper and chemical company when it comes to cyclicals, and every cosmetic, soap food and soft drink company with the CMR. I trade too much tech to just ask for the MSH, but it helps get me a picture of things. ) (I am long the papers, betting that a price increase is going to stick and that these stocks seem relatively cheap versus the rest of the market.) (These indices, particulary the MOSH, as it is called, are often employed by hedge funds as a way to bet for or against certain industries, I might buy calls on the cyclicals if I think a cylical rally is coming because I don't want to be in the "wrong" cyclical during a big rally. Or I might buy puts on the CMR if I thought inflation was igniting, as these stocks trade quite poorly in times of high inflation.)
I let things go until 3:55 p.m., mostly because my wife wanted to kill me by that time for how many times I had called the office.
(She is actually quite forgiving if there is an emergency. She is quite unforgiving if I am just chatting stocks with Jeff, because she knows I would much rather talk stocks than just about anything in the world. She knows that, as she never tires of saying, because on our first date, before we had walked thirty steps from the 34th and Third where I picked her up, I wanted to know if she liked
(CPQ) . Wouldn't you know it, she was long it!! Synergy.)
Then I called again and urged Jeff to buy a little more of a couple of faves that are off, and I suggested that he hold on to
despite the ramp because it sounds like it might be a good quarter.
(Here we were trying to make a decision to trade around a great stock that had been acting badly. While we are confident of Allied's future, the stock had gone from $67 to $62 almost overnight. We bought stock all the way down, 10,000 shares every half point. So the question was when this stock got back to $63, should we sell the $62 stock for a small capital gain, just in case the stock now falls to $60 and we will end up with too much Allied vs. what we think it is worth. We said no together.)
At 4:08 p.m. he tallied the day, gave me a recap and issued a report card. We talked about our mistakes and our triumphs. We went over what is on tap for tomorrow. Had I been in the office this discussion would have been held at 3:30 p.m.
(We do these sessions repeatedly. They are hard. It is hard to rate yourself every minute. I always figure it is like those brutal remonstration sessions that Mao put people in the '60s and '70s, you know some sort of cultural revolution nightmare. But it keeps us honest and alerts us to what earnings and macro numbers might hit us over the head the next day. Jeff tallies our performance every day after the market closes. I go over our realized gains and losses. He is more fanatical about this than I am. It used to be the other way around. I don't know which one is healthier.)
We made money; heck, that is what it is about, last I looked
. (Yeah, we are not in a charity business. I live for my writing, in part because there has to be more than the tally. But the tally feels darn good after a fine day and we smack fists on great ones.)
So while I feel tired from the move I feel great about the profit and loss. I told him I would be in tomorrow at 4:30 a.m., work out and then listen to a Yahoo! replay of the conference call if one is available.
(I have beaten myself enough about Yahoo!. There is getting to be an awful lot of negative sentiment about Yahoo! I don't share it. Enough with the bad
deal already. The integration just got started and the Yahoo! people are smart people and will figure it out.)
Since I feel like I let people down today in this unplanned outage -- the move was supposed to take three hours but it took nine -- I wanted to send this off.
(Sorry for the length.)
: Emotional day. When I worked with my wife we would routinely take off Thursdays and Fridays and trade out of our house in Bucks County. It was so fabulous. We could play with our young daughter, see my dad (who lives nearby) and have a great time while we made some money. But the fund got too big, the job too hard and then, after our second child, my wife stopped trading. For years she held out that I would slow down and we would go back to some sort of day off at Bucks County where I could benignly check in, but I just couldn't do it. Two years ago she remade my office into a bedroom.
(Somehow, when you are running other peoples' money, they don't like you kicking back on Thursdays and Fridays and I don't blame them.)
No matter, the township we were in changed the zoning laws and poof! our farm, surrounded by other farms, became fortress farm in the midst of a massive suburb.
(Ten-acre to two-acre will do it every time!)
In the end it was barely a retreat and it was time to go. The memories, however, will always be there.
(As always, it is the stuff with your kids that reduces you to tears. The tree house that I built with the help of my kids, a bunch of old doors and some plywood, I just can't get it out of my head. Settlement was Friday. Still hard to think about it.)
Back to my usual sked tomorrow.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time the original version of this column was published, his fund was long Yahoo!, AlliedSignal, International Paper, Georgia-Pacific, Microsoft, Motorola, Nokia and priceline.com. At the time this rewrite was published, his fund was long Yahoo!, AlliedSignal, International Paper, Georgia-Pacific, Microsoft, Motorola, Nokia and Goldman Sachs. 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