These Are the Days - TheStreet

These Are the Days

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The 1990 analogue grabbed me Wednesday like an unexpected left hook to the side of the head. In the midst of the carnage in the financials, led by the once stable BankAmerica (BAC) - Get Report, I saw a rally develop among the good guys. StarBanc, which doesn't know a hedge fund from a hedge row, took off. I saw good buying in Suntrust and Wachovia, two banks that lend only to institutions that don't need money.

That's what happened in 1990. That's what happened during the final downleg. Today, as then, it was obscured. Bank people focused today on the unraveling of BankAmerica, which seemed to be buying a hedge fund rather than letting it go under. BankAmerica was all fear and gloom. Just like

Bank of Boston

or

Manny Hanny

might have been in 1990.

But the good guys started breaking out of the pack. That's one of the reasons I bought

Fannie Mae

(FNM)

Wednesday. Fannie's one of the good guys. They have been buyers of all of this distressed merchandise out there, coining money, doing everything right. But they have been punished as if they were one of the bad guys.

On Wednesday it became evident that Fannie was no longer trading with the BankAmericas. It was trading on its improving fundamentals. I have been waiting for some sort of divergence to develop when Fannie held in while the brokers and ne'er-do-well banks broke down. Wednesday we got that.

Again, like 1990, we are seeing insiders piling into the financial companies that are doing better than their stocks indicate. Again, as in 1990, we are seeing so-called invincible hedge and mutual funds liquidating small financials into the waiting arms of insiders and their corporate buybacks. Again, as in 1990, we have dozens of thrifts trading where it is immediately additive for companies to buy back shares.

In the world where I am, a world which says that this market is so crazy that it defies reality, I search for patterns that have happened before both in my 20-year trading lifetime and in the history books. My kids might call it a desperate search for the missing Lovey Blanket. But I would like to think of it as more than just a totem hunt though, because history does have a way of repeating itself. In 1990, the last bear market, the point of maximum frustration came during these weeks. Right now. Overlay it.

I remember trading out of Pennsylvania with my wife and being blown away about how information I had, good information, meant nothing. I could not get out of any mistaken trade, except at big discount. Upgrades were meaningless. Earnings surprises? They meant nothing, too. Discipline was our only friend and conviction our enemy because conviction caused you to ride things down. She used to tell me that when I had a good idea, I should go rake leaves and forget about it. She even bought me a leaf blower to keep me from buying anything, because the market was so irrational, so random.

Days like a week ago, where

Cisco

(CSCO) - Get Report

was down nine and

Microsoft

(MSFT) - Get Report

was off the charts low, days where capitulation was in the air and all around you, days where you wanted to throw up or be put out of your misery, those were exact replays of the days of October 1990. That's what we experienced last week. I think we will experience another one of those days like last week, but a contingent of people I talk with feel that the despair of last Thursday might mark the low for the time being. Or permanently.

For what it is worth, if 1990 were to play out exactly again, something that would be pretty amazing, in the next 10 days we will have one more swift, horrible swoon, one that carries out some mutual fund or brokerage house, and then we at last bottom.

As Jeff Berkowitz and I beat this bottom thesis into a bloody pulp, we see signs that some things are happening that would not have occurred a month ago.

Pfizer's

(PFE) - Get Report

bad number didn't hurt the stock (it round-tripped from where it was the night before).

Coke

(KO) - Get Report

has bottomed ahead of earnings.

P&G

(PG) - Get Report

has fought its way all the way back to a respectable level.

IBM

(IBM) - Get Report

is back at $130 despite macro worries.

Pepsi

(PEP) - Get Report

didn't blow up despite cautionary comments.

International Paper

(INPAP:OTC BB) hardly reacted to the

Goldman Sachs

downgrade. These things could not have happened a month ago, when nothing worked. These are signs that some things have some resilience, that at least some stock is in the hands of people not anxious to pull the trigger on bad news.

Until we get completely derailed from 1990, I am sticking with a conviction that this market will unfold just like that one.

Unfortunately, that means another bout of pain. Fortunately, that would be the bout that you buy, not sell. Stay tuned.

Random musings:

Brokerages are still frantically deleveraging their balance sheets right now, causing illiquidity in all markets, but most visibly in the fixed-income markets. That's what's behind this new wave of debacles. I think there is still plenty of unwinding ahead of us ... Conference call mania time. Corporate i.r.s, use some sense. If everybody is on

Compaq's

(CPQ)

call, don't schedule a disk drive call.

Seagate's

(SEG)

today was a classic. Should have been after the close like the

Al Shugart days. We just can't monitor too many companies at once.

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

At the time of publication, the fund was long IBM, Seagate, Pfizer, Cisco, Fannie Mae and Microsoft, although 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 at

letters@thestreet.com.