Hard Decisions on 'Soft

Cramer's temporarily parting ways with Microsoft, saying he wants the stock at a price he likes, not one others set.
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What happened to the tracking stock? Where did that disappear to? Did that just turn out to be idle gossip from the Sun Valley Country and Media Club? Say it ain't so,

Bill

.

Trying to value

Microsoft

(MSFT) - Get Report

is never easy. It is a high-multiple stock where the boilerplate is thick and the worries are long. We went into the conference call all set to pick up more stock if it dipped. We went out of the conference call as sellers, offering our stock at 98 3/4, as we got the word that all tracking-stock discussions are premature. We were taken.

I was at home, recuperating after a late night at

'N Sync

with my daughter. But

Berko

, who manned the call, felt that given the ramp that Microsoft had Friday because of the tracking-stock disclosure, Mister Softee would have to retreat back to where it was before the announcement was made.

Initially, I was stunned at his decision. But he was there. I was at home, so it was his call. He was so confident that I could buy the stock back lower if I wanted to that he took 'Soft off the sheets. I guess I could live without it for a couple of hours.

My wife saw I was perturbed. When you consider, however, how 'Soft got to 100, it makes sense that the stock could see 95 again. Many options traders had expected that Microsoft would be pinned at the 85 strike.

There were 25,000 contracts of open interest going into Friday's session, meaning that a lot of people were short Microsoft 95 calls.

They may have been forced to cover when they heard the "good news" about the tracking stock. (Here I am acceding to the market's wisdom that a dot-com tracking stock would be a good thing if Microsoft did it, because unlike virtually everybody else, the company has a viable Net business buried inside it.) Without the "bid" in the market, this stock would never have reached par so quickly.

Now people disappointed that no tracking stock is forthcoming will bang the stock out, and a better re-entry level could occur.

To

Karen

, a pure trader, the logic was impeccable and the decision sound. She said no way to my second-guessing of Berko. To those of you who aren't traders, however, the sale will seem a little ridiculous because we are simply taking advantage of a piece of news that shouldn't have come out, in retrospect, to get a better price. If you are holding Microsoft for the long term, this whole column is a bunch of gibberish. If you take action because we took action, you are accepting trader instinct for long-term rationality. But if you live and die by the gain, as we often do at

Cramer Berkowitz

, it makes a ton of sense.

So we start the day without 'Soft, but I know we will end the day with it. We always do. Can't be without 'Soft. It's just too good. We simply want it at our price, not the price set at the Sun Valley Country and Media Club that none of us shareholders were invited to.

Random musings:

Yeah, as I said here

last night, people wished that

IBM

(IBM) - Get Report

had booked a greater EPS number to go along with that revenue. So some disappointment on that front.

As we have so many new readers, I think it is important to point out that I am giving you a trader's diary. This kind of article is much different from a brokerage recommendation urging you to buy or sell, say, Microsoft. I can only be true to the facts of what occurred. I can't say to you, "We didn't sell our Microsoft," because then I would be lying. I can only be an honest reporter of what we did, especially when I didn't do it.

Why bother to tell you at all? Because, as the italicized text at the end of this column says, I am trying to show you the dynamics of the ways of hedge funds and the markets. If nobody ever sold a stock, you wouldn't need this kind of explanation. Until they stop selling, this column is just another piece of the puzzle of what occurs every day in the market.

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

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