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Short Capitulation Day


Tommy Hilfiger


, here's one for you! The bulls owe you big-time!

This morning as we huddled around the speaker listening to the conference call of this heavily shorted fashion stock, we were shaking. Were the inventories too high? Was selling, general and administrative expense really a problem? As we thought we heard scary things,


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was droning on in the background that the stock was trading at 46, down 6. Bingo.

Another high-profile growth name blows the quarter, I thought to myself: Those who are short it win. Those who are long it will be liquidating. It would be today's tale, another sign that the growth momentum funds were going to be pummeled beyond recognition

But the negative case was not to be. Hilfiger explained the inventories in a way that made so much sense that we were salivating to take stock. "Find the $46 seller" I shouted at my traders. "I'll pay $48 for this one. Heck, I'll pay $50!"

No way. Others paid mid-50s, and the short-side was history. Tommy Hilfiger reversed a miserable trend among the growth hounds, a trend of doing so-so numbers and then offering a terrible outlook -- that's the


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paradigm in a nutshell.

Can one stock make a difference? I thought so. Shorts tend to congregate around the same names. Tommy is one of the most heavily shorted names in the book. When shorts are emboldened they become reckless -- a little like the longs! -- and press their bets. That meant to me that you could expect the



and the



to get crushed right along with Tommy. But if Tommy hung in, there would finally be a day when the shorts could not short with impunity. And if Tommy were good, the shorts would capitulate.

Today was that short capitulation day.

Oh sure, there was a lot of help. A good semi conference. Decent European action. A premium bid for once, of an industrial company, something everybody had given up on. But in the trenches of capitalism, where the hand-to-hand combat rages, it was Tommy who came up smiling.

James J. Cramer is manager of a hedge fund and co-chairman of

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 at