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Short Memory

Eleven years ago this week, the trader shorted the market, only to get his head handed to him when the bargain shoppers returned from vacation.
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Eleven years ago this week I got lulled into shorting this market big because of a very similar selloff to the one we are having now. The advance-decline line was bad, the interest rates were going against me and I thought I could make a fortune when everyone came back from summer vacation and saw what I saw: a terrible tape.

I had visions of the 1987 selloff repeating one year later, as the market had peaked in late August of that year, too. It seemed natural to expect that history would repeat itself and another crash would occur. I know the headlines were full of this wisdom and I intended to profit from it from the short side.

I wasn't about to listen to my wife, who kept saying over and over that the selloff was on light volume and without conviction. I figured what the heck did she know, talking about light volume? Who cares how much volume there is? Volume, shmalume. What matters is price, and the prices looked bad and were going to get worse.

I got my head handed to me. People came back from vacation, took one look at the prices, and said "what a bargain." They bought and bought and bought. I had to throw in the towel on some shorts that I still find painful, including a short



trade that feels like yesterday. It obliterated me. As did the rest of the shorts.

I know how hard it is to dismiss any price movement as nonconsequential. The losses don't carry asterisks with them that says they were created by sellers who sold these stocks down on light volume. But I always think back to that Labor Day week in 1988 where I had it all figured out that people would return from vacation and panic, giving me a great short-side run.

Instead it was I that panicked, and not a moment too soon, because had I not covered I doubt I could have ever recovered. The 1987 bet hasn't paid off since; it won't pay off now.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any stocks mentioned. 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