Making the Bear Case

Cramer's biggest fear? The market won't be down far enough from here. His discipline? Buy when it is most painful. Talk about it on our message board.
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Beware of the '87ists! This is their time. This is when their case is strongest. Like clockwork every October, they come out. They were initially silenced by the big short-covering rally we had at the beginning of the month, like heavy artillery that landed around their trenches but scored few direct hits. Now they are out of their rubble, with machine guns blazing, looking fierce, looking invincible. Bears with Quad Fours! Bears with twin .88s. Dug in, deeeeeeepppp!!!

October Chill: Join the discussion on

TSC

Message Boards. This expiration week is when they can howl the loudest and scariest. No doubt, you will hear recounted today what happened on that Thursday and Friday before the crash in '87. Maybe I can get

Ron Insana

to retell the story, fireside-like, about those days when the bears stalked Wall Street and the bulls were reduced to playing the role of coho salmon flapping furiously on Water Street. Darn good yarn!! Maybe someone will recall that that it was 58 degrees then and 58 degrees now. Priceless.

Believe me, it was all bad that Thursday and Friday of '87. They crushed

JNJ

(JNJ) - Get Report

. They annihilated

IBM

(IBM) - Get Report

. They laid to waste

Microsoft

(MSFT) - Get Report

. Yet it was still a great time to sell ahead of Monday. You were a visionary if you took sell action this Thursday 12 years ago, despite the decline. You were a genius if you sold Microsoft or

Intel

(INTC) - Get Report

or

Sun

(SUNW) - Get Report

into that charnel house anteroom.

Let me make the twin bear case, in its harshest terms, right here, right now. Let me go there for you. Then like now, bonds were going down -- interest rates were going higher. Then as now, the market had gone up way too much. It had quadrupled in four years and stocks were wildly overvalued. Then as now, inflation was threatening. Then as now, money managers were up a lot. Then as now, it felt really scary, really eerie.

Yep, has to happen. Very similar. History always repeats itself. Didn't all of us except for

Henry Ford

learn that?

Except there is one nagging detail the bears

will never remind you of

: You could make the same case for pretty much every October since 1987. Every time. Every time you should have sold this week and gotten back in at that perfect moment when you could make your fortune. Just like in '87. Every time, I could retell the same horror stories.

But who did? Who could time it that perfectly? Who could do that bob and weave?

Ali

? Maybe.

Holyfield

? Forget it.

In fact, I would argue that last year was far worse than this year. I know I tried to get out ahead of the holocaust that so many are predicting. I tried the bob and weave. At the bottom.

Last year we had questions about whether the system would hold. If the

Fed

hadn't rushed through three eases in order to save us from John "Chernobyl" Meriwether and his gang of crazed nuclear Nobelists, we should have had a repeat of '87. I didn't think they would. I thought they would blow it. Didn't put full faith and credit in Greenie. Big mistake.

I was wrong. Painfully wrong.

So this time, I raised a lot of cash and expected that things would unfold where this week would be terrible and each day I would dip into that cash and put money to work. I suspect today will be another day that I will do that. So will tomorrow. If '87 repeats itself, Monday will be another day when I buy. Nah, I don't trust those futures. I am playing

Springsteen's

"Goin' down, down, down" in honor of the bear case, right now, in my Discman as I type this.

My fear, though? It won't be down big from here. And I will be stuck with a huge amount of cash and have bought very little. That the good stories didn't let me in because I was too worried about the bad ones. That

Raytheon

(RTN.A)

might keep me out of

Allied

(ALD)

. That

Revlon

(REV) - Get Report

might keep me out of

Procter

(PG) - Get Report

. That '87 might keep me out of '99. And the 100% go-go long boys will take me at the November pass because I am too uninvested.

So I have my discipline, which is to buy when it is most painful. Why? Because the times when I have made the most money is when it was most painful.

And it is very painful right now.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Microsoft, Intel, AlliedSignal and Procter & Gamble. 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.