Every morning Joe M. delivers a foot-high stack of research reports to my desk. Every morning I dutifully sift through it for about 15 minutes, triaging the pile. Great pieces go on the left. Good pieces go on the right. Okay pieces get sent to Jeff Berkowitz, my partner. And bad pieces get recycled.
But not in these times. In these treacherous times, I am so afraid of finding something I might like and want to buy that I toss the whole pile over to Jeff.
These are dangerous times.
But not for the reasons you'd think. Not for fundamentals. In fact, it has been a fairly benign first quarter for earnings. Here we are in week three of March and very few companies have told us they can't make the numbers.
The problem is inventory: most desks are lugging. We call it "wearing it," as in some mutual fund put a big block of
to a major block house and he's "wearing it." That means he has no place to go with it. Buyers don't want any more Ascend -- heck now they wish they'd never heard of it. The brokerage desks aren't in the business of taking home inventory -- no more than a retailer likes to be stuck with merchandise at the end of the day that was meant to be sold.
So what do they do? Like a retailer, they put it up for sale. Initially, the sale seems like any other discount. But when the stuff doesn't move, a simple daily special turns into fire sale. Desks chuck stuff at any price. Just so they don't have to lug it and pay the inventory costs while it goes down on them. Just so they can make room for the new distressed merchandise coming at them tomorrow.
That's what's happening right now, that's what's behind the spiral down in the
. All over the country mutual and hedge funds are trimming ballast, dumping things over the side. The problem is that the "side" is a broker. And brokers can't even afford to ask what the merchandise is. So the brokers call all of their accounts and just try to stuff the stock anywhere they can. Invariably, it is placed in weak hands and quickly reappears lower at another trading desk.
How does this cycle end? Typically it goes to an extreme. Stocks get sent through book price, become ridiculously cheap on earnings multiples, make tempting takeover targets for other companies.
Unfortunately, we are starting this process from a pretty high level. But I suspect we will get to where we have to go awfully fast. Buying opportunities will abound. Merchandise will get sold at levels where you, the client, can reprice it upwards in a matter of days or weeks.
Until then, as they used to say on Hill Street Blues: "Be careful out there."
Personal note: All hell broke loose for me yesterday. I had so many crises going on that I could barely keep track of them. It is always difficult for me when I am out of the office. But yesterday I had to be at the office, at
, for Squawk Box, at the Spy Bar to film a commercial for
, monitor my stocks -- all of which were going down -- and get this piece out.
At 2 p.m. I was juggling two cell phones and my personal computer, while a woman put makeup on my face and a guy tied a tie around my neck. Suddenly, Jeff, my partner, says "call your wife at home, there's a problem."
I call, and sure enough our daughter is sick and has to be rushed to the hospital. Dehydration.
I say to my wife that I'd love to help out but I've got 30 people waiting on me at the commercial site, and two companies begging for me to do several things at once.
She says, okay. Do what you have to do. And I hang up.
And then it hits me. On Monday Bill Griffeth, the excellent anchor on
, said he couldn't get the story about the
's chairman killing himself out of his head. Griffeth is usually so jocular and funny that we all stop and listen at my shop for his 1:55 p.m. droll lesson of the day. But that day he talked about how important it was to remember that even if business is going poorly, it's just business. It will come back. It will sort itself out. And if it doesn't there will be another opportunity. But family, life -- now that's real.
I picked up the phone and called my wife back. I said I am stopping the shoot right now no matter how much it costs, jumping into my car and I will be there immediately.
Twenty minutes later I walked into the hospital and I could hear my daughter crying for her daddy all the way down the hall. I rushed in and she said, "Daddy, these people put this thing in my arm and it hurts, why didn't you stop them?" I explained to her that it was an IV, and she needed the energy from it.
But, Daddy, she asked, "Why didn't you get here sooner?"
I took a deep breath and said, "I got here as soon as I could." And for a moment, in all the turmoil, I felt good. I hadn't lied. I had gotten there as fast as I could.
Now it's 5:34 a.m. My daughter slept well and is doing better already. I'm looking at my screens. I'll make it back. Things will be fine.
I did the right thing. Thanks Bill.
James Cramer is manager of a hedge fund and co-chairman of
While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to