By James Cramer
People should shut up about 1987 already.
Although the press has no memory for it, the '87 debacle wasn't just a point decline, it was a giant change in mindset. Before October of 1987, there was a swagger about every take, an arrogance about every purchase, a deterministic belief in higher prices. All that despite a crummy bond market, despite a weak dollar, despite a growing budget deficit. There was a totally unfounded faith in where equities could go. The hubris, the cockiness of the people who traded before the crash infiltrated every single decision traders made.
Ever since that day the belief in the long side has no longer been self-evident. The press may not know it, but no veteran in this game has ever been certain of anything since then. Everybody still runs scared; even people who didn't live through the crash. Even traders who were in grade school during the crash.
I sure changed. In the spring and summer of ¿87 I used to love to boast to block traders about taking down size, trying to outdo other accounts in the voracious nature of my takes or the aggressiveness of my bids. I remember glomming 150,000
at a clip, or 100,000
in one fell swoop, even though I ran less than one-tenth of the money I now run.
I look back at that time and I think "Man, I must have been crazy What was I thinking?" Ever since the crash I do things on a ginger scale, 5000, 10,000 shares at a moment, no more. I try never to commit too much capital at one level. I take my time. I fear and respect computer-automated sell programs. I always think there will be another opportunity. I never boast about buying anything. Ever since that day the train has never pulled out of the station without me -- because there is no train, even though the Dow has gone up some 6500 points.
I always say to myself: There will always be another opportunity to take stock. I think that way because I remember what it was like to see capital obliterated, vaporized before my eyes by the eagerness and arrogance of people who knew only that they would be able to sell their stock the next day up a dollar to the Japanese.
(The pre-crash era sizzled not just with arrogance, it also had its share of illegality. I know that the two did not necessarily have anything to do with each other, but the surety of the longside was also rooted in corruption, a corruption that the government decided must end. And it ended the crookedness at the same time that the Crash occurred. People used to brag they had pre-knowledge of takeovers. Now they live in fear that someone will accuse them of knowing something, even when they don't. Take yesterday's takeover of
. Before the crash Signet Bank would have been up four the day before the takeover. And you would have to endure endless conversations from colleagues or clients who "had" Signet. They would brag about it for chrissakes!!!
would have given it to them in a whisper. However, in 1997 Signet Bank went down the day before the takeover. Sizably. And not only did nobody "have" it, but
downgraded the darn thing on the Friday before.)
Yesterday my younger partner asked me to describe the feelings that prevailed the weeks leading up to the crash. I can literally remember everything about those two weeks before as if they happened a few weeks ago. Where
Johnson & Johnson's
vicious break below par.
endless dive. But I could not convey the level of arrogance that was in the market at that time. I could not convey what it was like to not run scared. To think it was cool to be long. That sentiment is so foreign to our markets today, despite what the press pundits might say.
It has never again been cool among professionals to be blindly and blatantly long. And nobody brags about taking 150,000
on a hunch anymore. That's what died that day. And it's not coming back just because it happened ten years ago. Even if the journalists wish it so.
Random musings: outrageously boring session yesterday, filled with the usual miscreant sell programs at the opening coupled with massive inflows into the market once the mail opened...Wake me up when the summer's over...What did
think when it bought
? Did the tissue maker really believe that it could beat Al Dunlop at his own game? There was nothing left to cut and now KMB looks like a terrible overpayer...Memo to every subscriber who wants to find out about my hedge fund: it's closed and private and I am not going to tell you how to set one up or run one, despite your entreaties...Memo to those who want me to answer your questions about individual stocks in order to get you to subscribe, I will not give individual stock advice. I am trying to help you understand the process, not buy stocks or advise you which stocks to buy...
James Cramer is manager of a hedge fund and co-chairman of
. His fund holds a long position in
. That is not meant as investment advice. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to