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Giving Palm the Back of the Hand

A lot of pent-up anger is directed toward the 3Com spinoff.
Author:

When the chronicle of the selloff we just got through gets written, I think it will start with this

Palm

(PALM)

fiasco. Palm, in many ways, defined everything that is screwed up in this era. A much-despised-by-Wall Street company,

3Com

(COMS)

, issues a stub of a stock in a subsidiary that makes a wildly popular product.

It controls the float tightly, artificially boosting its own valuation by making the stub open wildly high. It gaps up hideously because "retail" loves the product and puts in market orders through e-brokers, many of which are batched together in a silly and self-defeating way.

Television gets into the act and hypes the thing mercilessly. And then the sickening slide from the opening begins. (

TSC

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readers certainly will be familiar with that saga.)

This process is such a travesty that it is amazing no one does anything about it. The result is that people feel abused and ripped off. They think the system is rigged against them. (It isn't; it just doesn't work well.) And they become contemptuous of Palm, the stock and probably the product as well.

That sordid history has to be the only reason why my mailbox and the mailbox of my colleague

Matt "Falling Knife" Jacobs

were immediately jammed with hateful notes about how Palm will never go up. (Which, of course, inspired Matt to buy more because he can be even more ornery than I am at times.). That has to be the reason why thousands flocked to vote against the notion that Palm can go up. This merchandise is one tainted puppy. I wish I had known the depths with which this one stock seems to have brought people.

Whenever you have a speculative blow-off to the downside like this, whether it be in the sorrowful Linux plays, the dot-coms or wireless devices, it really puts the old kibosh on the market. That's what kick-started last week's decline. I didn't know it then. But I sure know it now.

Random musings

: Some jargon catch-up to do. A secondary is an offering of stock by a broker. It is an underwriting. A preannouncement is synonymous with the notion that a company will announce that its earnings are not going to meet expectations.

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

jjcletters@thestreet.com.