Why do people always want to ask about the same stocks? For the life of me, I can never figure out why chat after chat we get the same questions. When can we buy the drillers? When can we buy the semiconductor equipment stocks? What do I think of
a buy? When will Asia stop hurting these companies?
I have two theories. One is that an awful lot of people got stuck buying these two groups when they were substantially higher and now they don't want to take a loss. And the second is that people connote a bargain with a stock that is down.
If these are the two reasons why you might have held on to losers or are drawn to them, they are pathetic, bogus reasons. The opportunity cost of sticking with a loser is incalculable. The notion of bottom-fishing because stocks are well off their highs is simply stupid.
Let's think of some analogues here. You are given a hand in cards. It's a crummy hand. For virtually no transaction costs, you can trade in some cards to improve your hand. Is there any sort of fundamental or emotional attachment to those first cards? Absolutely not. Yet, when it comes to stocks, many would be willing to stick with a losing hand rather than go for a better set of stocks. It's even more foolish in stocks than cards; you get to deduct the bad cards against the good cards!
Now how about this bottom-fishing approach to buying? Let's take the semiconductor equipment stocks. Just because they are down doesn't make them cheap. A change in prospects for the better while the stocks are still low makes them cheap.
But I don't see any change in prospects except negative ones. In the time when you wait for East Asia to turn around, another group of stocks that may have been less tarnished by Asia than these ne'er-do-wells might be higher in price but still off the high. That group is a better buy. Fundamentals, not price, drive stocks higher.
Yet time after time in these chats people want me to recommend buying these groups simply because the stocks look to be "basing" or because they have declined so much. That's just hope. I don't hope for stocks. I hope for sports teams. I hope that people get better when they are sick. I hope that luck is with me.
But I don't buy stocks based on hope. That's why, each time I get these questions in the chats, I try to be emphatic near the point of insolence. I simply don't want to be the crutch, the amulet that keeps you in stuff you should not be long.
Are you sticking with that 3 of clubs, 5 of hearts, 7 of spades and a pair of 9s?
Get a life.
* * * * *
I have two words of advice for the
about what employers should do when they find mutual fund managers trading for their own accounts instead of the accounts of their fiduciaries: "Fire them." I have an ironclad crystal-clear rule on personal trading. Quit my company and you can do it all you want. Every good idea belongs to the partners first. I have always subscribed to that. I have no personal account, closed it the day I left
. My wife has no personal account, although she does maintain her mother's IRA. Same with everyone at
. Easy. No questions about whether someone should have done something for the firm or for themselves.
would have avoided a nasty one with this rule. Does it create any hardship? Not at all. If you are any good at picking stocks, you can go run money off on your own or craft a deal with management that lets you participate in your own mutual fund performance upside. That we are still debating this point is beyond me...
Mega-merger eyes-glaze-over time. I never thought I would say this, but I wish the M&A boys would take a vacation for a little while. What non-arb has the time to study all of these deals and still do his job well? ... Read the
thread and took action, lightening up a bit. Felt the con arguments were very compelling...Haven't been on TV this week, and I have to tell you, it is a terrific break! Hate that makeup they paint on you. After you have scrubbed with
, expended more Baby Wipes than I would go through in a week's time with my kids, and gone back over with
and a wash rag, it still feels like it is on you. It often is! And, it causes my eyes to look like they have perennial pink-eye. How come no one ever tells you this stuff going into it?
James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com.
At time of publication his fund is long General Motors, although positions can 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 by sending a letter to TheStreet.com at