Don't Believe the Talking Heads

Wednesday's preopen chatter about Philip Morris serves as a cautionary tale.
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Sometimes the talking heads are so wrong that they can throw you off your game. We saw a great example of this principle in Wednesday's trading in

Philip Morris

(MO) - Get Report


All day, the talking heads blathered about how the verdict against MO in California had been reduced and how that would boost big tobacco. I heard this said at least five times. My, what great news!

So, you might be wondering: How come, other than at the opening, MO did nothing but go down all day? Despite a huge blue-chip rally! The answer, as it often does, had nothing to do with that verdict. Nothing at all. That was yesterday's canard. What mattered was that the

Justice Department

had hired the best legal gun out there, a Minnesota law firm with a reputation for going for the jugular, to work on Justice's sweeping case against the tobacco industry.

There were three salient points about that decision that trumped anything positive involving a cutback in the size of the verdict. One is that the last we had heard about this suit, it was all but dead.

There had been press reports earlier in the year saying that enthusiasm for the case had died down. This hire was a clear sign that this suit is alive and well and dangerous. That's a huge switch from the more benign federal backdrop in an otherwise total-siege situation.

Second, we know that by bringing in outside experts, Justice means business. Remember the


(MSFT) - Get Report

team, Murderers Row, that the Department of Antitrust brought in? This hired-gun plaintiff team could rival Boies & Co. for expertise in its field.

Finally, the Minnesota firm signed on for small bucks. I don't know about you, but there is nothing worse than an opponent not motivated by money. You can't game that kind of enemy. It wants revenge.

The lesson here is that the early-morning TV shows often contain statements about how such and such a stock will trade. Many, many times these statements are plain Wrong. Wednesday was one of those many days. If you listened and acted, you lost money.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Microsoft, 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 at