This harried day presented a decent snapshot of what it can be like once the summer is over and business picks up at my firm. I thought it also could be used to show how we make decisions here. As always, we are not making the decisions so I can write good columns. We are making the decisions to make money. They may not work. We are a working lab, not a theoretical one.
Sometimes we have days of confusion at
. They are usually days when we are out in the field meeting companies, trying to learn new ideas, getting our feet wet in new areas because we think the old are stale.
(We, too, are tired of endlessly buying and selling
(MSFT) - Get Report. We want new names. In the fall, the big investment houses throw giant conferences where companies go and tell their stories. I have always wanted TSC to cover these conferences, at least with streaming video if not with reporting, but I don't make assignments. My reasoning is selfish. We are not a big firm. We can't have people at four different conferences. Consequently we miss different, interesting stories. But we do our best to catch as many as we can.)
(Some of it we do to be sure we stay current on our positions. Others we do to learn new positions. I have talked extensively about how hard it is to learn a new position well enough to invest in it. When we short-circuit things, we get the kind of travesty we put ourselves in with
(ICGX) , a crummy company that we thought had good buzz. Oh, it was crummy because it screwed up after we bought it and we lost millions on it. Before you take umbrage, the Eagles are crummy and they haven't cost me a dime. Get used to this type of terminology with me and companies. It's called the truth and it is rarely applied to the business of stocks.)
Yesterday was one of those days. We had everybody deployed.
was up at the Back-to-School Conference in Boston, monitoring the placid names we like to be involved with during a soft landing of the economy. (And why not, with
quietly hitting a 52-week high even as just about everything else faltered?)
(Melissa came to us out of Penn, and worked as a summer associate for us the previous summer. Here are her raw comments to me: "Reuben Mark president of Colgate's schtick was as convincing as ever. I , along with everyone else in the room, left with the feeling that Colgate is a must-own.)
("Colgate is a company with strict financial discipline. Mark ran through plans for gross margin improvement, which occurs quarter after quarter because everything is preplanned. Colgate's goal is to improve gross margins by 50 to 100 bps a year with a goal of 55% by 2002 and 60% by 2008 ... Colgate delivers on its promises and returns far better than its peer group and the S&P over time. Although nothing new was revealed, Mark's presentation and Colgate lagging over the past few months sent investors running to the phone to pick up some more Colgate.")
(How did I use this? A day later Colgate got downgraded on a price basis -- meaning it was too high for the analyst -- and it got knocked for three points. I bought it then. So, I took no action off Melissa's visit at the time, but I was ready the next day. Without this input, I would have been fearful that the analyst downgrade might have been because of the fundamentals. With it, I have a pretty decent trade going. I went home Friday long Colgate.)
Matt "Red Hot" Jacobs
was hitting the New York conference trail, indulging in one-on-ones with his namesakes while dropping in on a few semiconductor meetings.
(Matt is the keeper of the Red Hot index, which, by the way, dropped three-quarters of a percent on Friday because of
big decline. It was basically flat for the week. To refresh why these stocks are in the index, I asked Matt to give us a paragraph on the methodology.)
("The Red Hots were devised systematically in order to highlight innovative companies in explosive growth industries. These stocks have defied all valuation laws and rules as investors try to find the next Microsoft,
(YHOO) . The Internet is the one common thread that unites all of these companies, as it will determine the long-term viability of these corporations.)
("There are four categories of Red Hots: telecom (includes optical, Web hosting and wireless), next generation networks (including fiber channel), semiconductors (focused on communications) and e-commerce/software (focused on business to business opportunities.)")
(Many of the Red Hots were in town last week. Matt saw
(JDSU) , which he said was very positive on the explosive growth in the optical components markets as well as reiterating its message of becoming a one-stop shop for active and passive components. So we bought some more.
(EXDS) was very bullish about its business and defended itself vs. recent negative publicity. Matt convinced us to buy Exodus off this meeting. He saw Broadcom, which caused us to buy some into the selloff on Friday, because its outlook was very positive. And he saw
(RBAK) , Matt's particular favorite of the Red Hots, which said that it was in the sweet spot as it pertains to future growth of any broadband technology. We were already long Redback, but we bought a little more. We also bought some
(CNXT) - Get Report and pared our Juniper because we don't like owning too many Red Hots. These are all marginal positions for us, with the largest being 20,000 Qualcom, which we bought on Friday after Matt decided the cautious comments from Everen probably will be history in a few more days. I hope he is right. So does he.)
Jeff Berkowitz, who is at his best during conference season, was playing monster-back, trying to be at whatever session or meeting was necessary while checking in with me to see where he should go next.
(Jeff was everywhere and by the end of the week we were dog-tired, having been to dozens of companies.)
And I was trying to make a few bucks on the trading floor, waiting for good calls from all three to see if we could deploy some capital, while looking for opportunity away from tech and soft goods.
(Companies come in to see me and sometimes I go to see companies, but mostly I man the trading desk. One of us, either Jeff or I, has to be here. Them's the rules. We don't break them.)
Meanwhile, the rubber-necking delays of
and that hatchet man
guy who doesn't like rising markets kept intruding with meaningless diversions that led to sporadic, moronic futures buying and selling. These guys truly create traffic jams; what a terrible lot in life.
(I used this rubber-necking as a way to slow down the traffic of the market and I think it works. Another way to look at these Fed speakers, like Meyer, is to say they are speed traps along the highway. You slam on the brakes when you see them and resume the legal speed. That's how these guys are used. They are speed bumps, speed traps, rubber necks and when it gets out of hand, they are detour and road closers!)
We were hoping for a quiet, opportunistic day. Instead we met up with a wall of innuendo and rumor that threw our game off. It sure didn't look that way at the outset. We shook off that British rate move nicely
(what the heck are they doing over there anyway?)
, and we seemed to be digesting Friday's gains nicely.
(This rate hike is what happens when you don't prep the market as Greenspan did. I came out of this hike with renewed skepticism of other central bankers, few of whom are in Greenspan's league.)
But by midday we could tell that somebody didn't want somebody to make a profit on the long side in the semiconductor industry. And when you take away that leadership, you seem to imperil the whole shooting match.
(Everybody knows these stocks are just way too hot. I mean they are simply on fire and periodically they attract short-sellers who want to knock them down. Hey, I respect that. I just hate the stupid rumors. Especially when TV knuckleheads run with them.)
We tried to do some trades. We skirmished with
after a positive presentation, but ran into a wall of sellers and retreated hastily to our defense lines.
(This company always intrigues me because it has a smoking division, the
division, and a not-smoking division,
. I think Martis is getting less and less important, but that hasn't stopped it from hurting TLAB's stock. We took a 5/8ths loss.)
We attacked a bit of
but were thrown back almost immediately on news that the company was not on allocation.
(Nastola fakeout that cost mucho dinero in about 45 minutes.)
We switched from
after a couple of bullish sessions with the latter and less bullish sessions with the former, but we didn't pick up much valuable real estate.
(Urgent -- this was no slight on XLNX. This is a two-horse race and we would like to bet the field, but we can't possibly have as many semiconductor stocks on our sheets as we would like to without risking a big messy loss one day. We don't like that kind of beta, or stock volatility. Anyway, we sold the Altera on Friday in a big semi ramp.)
It was an unsuccessful day on the battlefield.
By the end of the day I was agreeing with
The Wall Street Journal
article that had you switching from
, but there wasn't a game worth watching!
(Here's a fact. I really got bullish on the Net the day the article appeared about how people are bored with the Bull. SmartMoney did one of those bored-with-the-bull things about 5000 points ago. I took it as contrary. The Net has been a downer. It is probably over as a downer as the stocks have had giant declines and are now due for a huge short covering rally or more. Only the media would write off the bull after a few quiet months. People aren't in stocks for the juice, they are in them because the 401(k) laws forced them to be.)
These days happen. Where did we come from leading up to today? We have had one of the most exciting semi-romps in the history of semi-romps. We had the seemingly unstoppable Red Hots run into a little gravity
(except for Red Hat, which may be the least substantive, but most loved Red Hot right now)
. We had breakouts left and right in the Nasdaq.
(Excuse me for having something critical to say about Red Hat. Go hate somebody else, you greedy emailers who trashed me for this. Excuse me, but I don't see this one doubling from here.)
So the market is taking a break.
Today I am telling my people, "Go back to those meetings. Keep learning the new stories. Get ready for the next romp in some group that seems stuck in the mud right now. And stop trying to make big money today." It may not be in the cards to do so. Too many people seem to want this market down right now. Let them press their case and be ready with the best names for the next leg up. Sometimes that's better than chasing down every "
" rumor. And a heck of a lot more lucrative.
(Homework is going to meetings, double-checking to see if the story is intact, pressing the flesh and making sure your questions are answered. That's what this week was devoted to.)
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long JDS Uniphase, Exodus, Verisign, Redback, Micron, Intel, Yahoo!, AOL, Microsoft, Cisco, Colgate, Sun Microsystems, Qualcomm and Juniper. 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