This five-month period will go down as the period when health-care stocks crushed mutual funds. Hospital stocks, managed-care stocks, drug stocks, medical-software stocks, stent stocks -- you name it, they killed you.
When that many stocks go wrong, you have to understand that a massive secular trend might be at work. Health care became the enemy -- as it did in the early 1980s and again when
took office -- and it has itself to blame. Think about this litany:
- Everybody got costs under control except these guys, in part because they could get away with it.
Mergers were done recklessly in this business many times at the behest of Wall Street to please ever-demanding momentum managers.
The worldwide economy was so weak that the health-care business could be counted on to be consistent in its growth, by continually raising prices and flaunting its pricing power.
Now, all at once, these trends are ending. The worldwide economy is getting stronger -- that's the cyclical thing again. (Real upside surprises, not manufactured upside surprises, really get mutual fund managers going.) The government's not going to stand for much more price-gouging when it comes to prescription drugs, and the Web could play a role in competition for the lowest cost for the consumer.
shows the hazards of shotgun marriages for growth's sake. The deal-making analyst-M&A nexus has been exposed as questionable. The HMOs angered so many people that they even drew the wrath of the national magazines.
Finally -- and this is what we won't find out because mutual funds love to hide behind bogus disclosure rules -- these stocks are under massive liquidation by the giant funds of the U.S. The big fund families are fleeing this sector in a way that has peoples' heads spinning.
Just last night, as I attempted to get medical help to restore my voice, ears, nose and whatever else is involved in this nuclear attack on my sinuses, even my doctor wanted to know what was wrong with
. The first 10 points were a crummy quarter. The next 20 were strictly a sea change. I can't underestimate this sea change. Peter Canelo of
Morgan Stanley Dean Witter
, the unsung strategist hero of this era, was dead right when he said this week that until the government finishes its investigation of the prescription drug issue/
regulation, these stocks are toast. Burnt toast.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in the stocks mentioned, although holdings 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