Planning for Disaster

Cramer stresses the importance of having a list of stocks you want to own in times of market weakness.
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The news breaks. You know it is bad. Your screen hasn't reflected the bad news yet.

Don't be fooled. Your screen's wrong. The specialist system, in particular, works to your true disadvantage.

Take

America Online

(AOL)

. It is one of my favorite stocks. (Like you need me to tell you that.) When the news broke about

Rubin's

resignation, AOL was flirting with the 136-137 level.

That meant nothing, however. You could never sell it there. But if you believed, that was your moment.

I went in to buy 10,000 shares at that very moment. I got a 133 report -- my best trade of the day -- when the screen said 135.

That's what chaos is like. You can make it work for you, if you believe.

(Contrast that with my decision to sell some

Telmex

(TMX)

right in the middle of the chaos, because I figured the market would get hurt without Rubin's stability. I got a miserable 84 1/2 report, the low, on my market order, even though the screen indicated that I would be getting 85 and change!)

I always have a disaster game plan, a list of stocks I want to own in case of anything short of nuclear war. I put it into place during the moments when everything looks worse. It invariably succeeds.

I also have human emotions. They go into place automatically, like in Telmex. They invariably fail.

Makes sense.

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

letters@thestreet.com.