Return to Cendant: Faith No More

Before his vacation, the trader took stock of Cendant and left reassured. Then Jeff Berkowitz called...
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Editor's note: This column is part of a three-day series on Cendant, running April 14 through April 16. An overview details



Lose the rage, my wife said. Lose the anger, my partners said. Stop beating yourself up, my friends said. But a year later, and I still think of



pretty much every day. I think about it because I took only one real vacation last year, and it destroyed my vacation, and pretty darn near my year with it.

When the book is written about what went wrong in 1998 with

Cramer Berkowitz

-- and, like every other hedge fund, things went wrong -- it starts with that phone call from Jeff Berkowitz to Room 431 St. James Club, Antigua, telling me that they couldn't get Cendant open because of accounting problems.

We had close to a million shares. It had been acting funky. We had made a half dozen calls to the company in the week I left to be sure there was nothing untoward about the departure of the CFO, a man I had met. While I had not liked him, I thought he was at least doing the job. We had been reassured. Reassured up the wazoo. Nothing was wrong. Henry was in control.

Henry, of course, was

Henry Silverman

, the man who had made us a mint at


. While we weren't into

Walter Forbes

, he too had made us a ton of money over the years at



Before I left for vacation, I wanted to nail this thing down tight. I knew there had been high-level resignations, so I smelled something. But this stock had it all. It was a combination




American Express

(AXP) - Get Report

with synergies that could make it into the next big thing. Heck, it already was a big thing.

"Where's it looking?" I asked Jeff. Jeff didn't want to say. I have worked with this man for seven years. We have braved sandstorms together, we had bonded, we had confided about our deepest problems. But not this deep.

"Where? I mean, how bad?" I said.

"It's looking in the teens," he said.

Considering that the stock was 36 when I left, I did not care whether it was high, mid or low-teens.

Jeff then described to me the situation. I was sweating like a horse in the paddock on a blazing day at Belmont. I was foaming. Positively lathered. And I was getting ready to chopper over to Montserrat to look at the volcano with my eldest daughter. It was the reason for our trip and it was scheduled for that day.

For the next three hours I stewed and paced and felt my heart race as we bought stock in before-market trading, hoping to be able to average down a little, with the expectation of flipping some of it at the opening. I got my wish, making some $300,000 on the before-market trading. There was only one problem. I was losing $16 million on the rest of it.

Look Back in Anger

Cramer chronicled his thoughts last year as Cendant spun out. Read the blow-by-blow here.

Cramer on Cendant's Blowup

Cramer on the Pain of Cendant

Save Equality for the Constitution

Cramer on the Pain of Cendant

Heads Should Roll at Cendant

Why Cendant Begs to Be Investigated

During that great helicopter ride all I wanted to do was jump. Even the fantasy of throwing the whole management team from Cendant into the volcano, something I thought might provide a release, did nothing for me.

The rest of the vacation was a joke. I was a shadow, a worthless shadow. Not even Captain Morgan could help me, or Gosling's for that matter. When I got back, I proceeded to lose my temper on virtually every single business program. As it turns out, amazingly, I was THE ONLY person who owned Cendant for the crash. Or maybe, just maybe, the only one who admitted it.

And we even battled the thing back to where we could sell it between 23 and 26 as one brokerage firm after another got back on the horse they could not leave.

But I can't stand Cendant to this day. It wrecked my time with my family. It wrecked my performance. It wrecked a year of my financial life.

So why do I keep it on my screen? As a reminder that these are just stocks, pieces of paper backed up by the good faith and credit of the people who run these companies.

Sometimes that good faith will be misplaced. This was one of them.

Random musings:

Talking about things that went wrong: Next week, while I'm on vacation,

will publish a series from me on what I did wrong in 1998. As I suggested earlier this week, read it, learn from it and don't do what I did.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long AOL, although positions can 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