Let's revisit that moment today when it looked like it was curtains for tech. Let's treat it as if it were a fire drill and critique what could and could not be done.
First, understand that there was confusion everywhere because declines happen with a level of swiftness that advances can only dream about. As soon as word spread that
may not have had such a hot quarter -- and I say "may" not just because I am long it, but because this stock had been trashed by negative publicity before and I am not succumbing to it this time -- people figured, hey,
, Lucent ... in other words, let's stay away.
Join the discussion on
The difficulty is that by the time that decision is made, we are strictly in group-think mode. In other words, when the consensus was reached that maybe we were due for a round of profit-taking, you can bet that your screen was already wrong.
Let's talk about my worst trade of the day, when I sold some
down about a half-dozen points. When I went in to sell it, the stock was unchanged, after having declined a couple from the opening. Goofus right then says, "Hey, get the last price on that sale." Gallant knows better; he knows that the stock will be so low by the time you finish selling your 5,000 shares that it's better not to do the trade.
Goofus (that's me) forces the trade and knocks Veritas down big. Gallant anticipates that forced buy and is ready to pounce the moment he sees it down 5. In other words, it was the time to buy, not sell.
But in the heat of battle, people make mistakes. The stock is up big from where I bought it. How do I know where it will stop? What's the problem with taking a profit? It was a good trade to begin with. The whole litany of rationalizations.
Ultimately, great traders know where the market is heading even when not-so-great traders are reacting to what they are seeing. In a "fast market," one that is moving so rapidly that the machines can't really update in time, you have to think ahead about where a dumb seller might knock down a stock you like. You have to be ready to pounce because you have to understand that, at the bottom, others want to buy with you. But most important, you have to like what you are going to buy because it may not be the lowest price of the day, or of the days.
In this great tape, however, it is. If you bought my Veritas, you made about 15 points in 10 minutes.
Now that's good trading.
During this incredible time of plenty in the stock market, we all have to remember that not everyone has it easy. I know this is a journal dedicated to helping you make money, and I don't want to turn it into my soapbox. But I am also not going to pass up the opportunity to remind you to dig in and help out the other guy. If you've got a big profit in something, take something off or give some of it away. Charity is an intensely private matter with me, and it is none of my business what you support or what you do with your money that you have worked so hard (or been lucky enough) to earn.
But if there were ever a year a reader of my column should be able to do the right thing, it is this one. So let's all do it together.
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James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Lucent. 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