Playing Red Rover with the Net

Cramer explains how this Internet insanity now resembles a childrens' game.
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So now it's

JB Oxford's

(JBOH)

turn to shine. And

National Discount Brokerage

(NDB)

and who knows what other brokerage today. What a colossal joke this Net stuff has all become! These stocks are trading for many times their float at the drop of a hat, as one day trader after another piles in. The excuse yesterday?

E*Trade

(EGRP)

was down, so other firms will see a surge in orders. Heck, that's good enough for these guys. Guess they gotta raise the margin on broker stocks now to cool those down for heaven's sake.

The foolishness of it all is so out of control that we ought to just set up a whole bunch of dummy companies -- just stocks, no corporations behind them -- and let the day traders romp through those. Make it kind of like a giant game of Red Rover or something -- you know, like "Red Rover, Red Rover, all of you pseudo-Net brokerage stocks come over!" -- and which ever trader gets to the other side first gets a prize!

At least that way we wouldn't be kidding ourselves that it's serious, instead of just some bizarro pile-on race to buy and sell before others wise up.

The basic irrelevance of the fundamentals hasn't been so manifested since those lunatic days in Japan in 1987 and '88. Those of you who traded during that period might recall getting calls from your Japanese brokers saying, "Hey, there is some study out that says fish oil prevents heart attacks, so we are taking up the fishery stocks tonight." And you would buy 30,000 Nippon Seafood or something or other, and make 5 points just like that, as the brokers found someone else to hold the bag for you the next day. We all know how that ended.

Of course, no one will put a stop to this U.S. craziness until someone is completely annihilated, and right now, not only has no one been annihilated, but the Red Rover players are making great money. Unlike other schemes, where the pain of the longs was manifest almost immediately, here only the shorts seem to get hurt, and nobody gives a darn about those un-American losers.

"Red Rover, Red Rover, let all the Internet insurance and thrift stocks come over! Catch you when you were ready?"

Chairman

Greenspan

likened this kind of buying to lottery tickets. There's some truth to that analogy. You could be in the lucky winner if you pick right. But somehow I think the game is much less random and more opportunistic than the chairman suggests.

Take yesterday: I am listening to

CNBC

and suddenly I hear

Ron Baron's

name mentioned as an upcoming guest. "Red Rover, Red Rover, let

Sotheby's

(BID) - Get Report

come over," I think to myself, as Baron long ago identified the art merchant as the next big online play. But everybody else has the same idea, and I have to pay up 2 points for Sotheby's the moment that Baron is announced. Amazingly, again, in this "nobody loses, nobody gets hurt" mode, I could still have made 2 points if I had just been undisciplined enough to pay up 2 to play, as the less swift Red Rover contestants and those hobbled by 28k modems actually waited until Baron spoke to put their trades through and bought the darn thing up 4! Red Rover's got its losers, but not enough to can the game.

OK, Cramer, what's your point? Very simple: When I buy

Intel

(INTC) - Get Report

, I don't have to think, Hmm, maybe Red Rover's going to call for all Internet DVD sites, so I better sell my Intel to rush into those. I only have to worry about the fundamentals. That's a safer, more lasting game. But, hey, who am I to try to put an end a good game of Red Rover while it lasts? Anyway, when the kids lose interest in my neighborhood, we switch to Running Bases! Lots more fun, but many more losers.

Random musings:

I thought the

60 Minutes

piece on

Amazon.com's

(AMZN) - Get Report

Bezos

was actually well done last night. I am so used to hack work about stocks from the networks that this bit of "stock" journalism seemed like an oasis. I always cringe when the network boys venture into stocks. It's like, Oh no, here they go, bungling into P/Es and pretending to know what the

Dow Jones Industrial Average

is again. Periodically they stray into sports, and everybody can fake intelligence about field goals, whether in basketball or football. But it is always troubling when they start talking about equities.

Bob Simon

did some homework. What a pleasure.

Speaking of Bezos, I threw a lot of people off with my convertible discussion yesterday. Put simply, when you issue a piece of paper that pays interest and is convertible into equity at some higher level, that is a license to have people short your stock and buy the convertible to lock in a rate of return -- the yield -- while profiting mightily if the stock goes down. Anybody who played the Boston Chicken converts knows this. With those, you got to participate on the downside with the stock if you shorted it, and you got paid by the company while you waited for the common to collapse.

Speaking of collapsing, does anybody know what the heck is happening at

Philip Morris

(MO) - Get Report

, which I am long and maybe wrong in? What happened to supporting your brands?

Anheuser-Busch

(BUD) - Get Report

, where I am long and right in, has taken Morris'

Miller

unit to the cleaners, and Miller still isn't spending to stop the decline. Remember when Miller Lite owned the category. Bud Light has crushed it. Makes me think the two guys in the ad would take the toilet paper over Miller Lite! This Miller dive is one of the great brand declines of the '90s. I can figure out

Pabst

and

Hamm's

and

Schlitz

and

Stroh's

and

Peels

and

Schmidts

and

Ballantine

-- heck, they didn't have any big money behind them. But Miller? Go figure.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication, his fund was long Philip Morris, Anheuser-Busch, Intel and Amazon.com, though positions 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 by sending a letter to TheStreet.com.