Why didn't I short the drug stocks? And why don't I short them now?
Think about it. I had the foresight to know they were poison. I understood the bizarre dynamic that would force them from over-representation in the
to a more moderate weighting. I knew as well as anyone that everybody is fed up with the perennial high prices. And I can read
as well as anyone and I knew
was working on an A-No. 1 supercalifragilistic hatchet job on the group.
So why didn't I pull the trigger?
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First of all, I respect these companies way too much. I never want to short a company that a.) could be on the cover of
tomorrow for best company of the century, of which there is a bunch of candidates from this group, and b.) could have a cure for cancer.
Second, I don't like betting on the machinations of the money-management corps. Sure, they want to sell the drugs, but we get some slow housing start number or the
sneezes and they will come right back to them for a couple of days, causing me to get a nasty headslam. The guys who run big funds are addicted to these stocks because of the 100,000-up rule. Oh, you don't know it? They haven't explained it to you on any other site? It goes like this: "If a brokerage firm can make a market that allows you to buy or sell 100,000 shares at the last price, I want in because, more than wanting a great stock,
I want liquidity
Third, It's hard for me, even though my nature is to be the chameleon, to bet against companies that are doing fine and have done fine over a long period of time. I like to bet against companies that I suspect are going to miss their quarters because of macro trends beyond their control. I like to bet on events, not the cosmos. I don't like to bet on psychology or overvaluation. The latter has put more people out of business than any other force I can recall. I am more humbled by the market's method (madness?) in valuation than I am angered or questioning of it.
Fourth, and final: I am a bull here. I like the tape. The market, the larger S&P, is even a bit oversold, amazing how that seems, given the run in the
. A couple of joker funds might decide that they want these stocks to play the favorite game of the long horns: "catch-up to the leaders," and I will be stampeded into oblivion. Seen it happen dozens of times -- it will happen again.
So I do nothing.
After I have just lulled you into my S&P bear den, let me get you out again by telling you we have a ton of things going on in
chat. We have boards to help decide the final 10 additions to the soon to be renamed
Red Hot Index. And
, my associate, and I need your help in trying to draft more teams in our
B2B rotisserie league. The boards helped us immensely in our first draft, so we are counting on them again.
Help choose more Red Hots:
continuing to rage, we're planning to add more stocks to our
Red Hot Index. Visit our
message boards to post your comments on the candidates -- and make your own nominations.
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 any stocks mentioned. Cramer's fund also may be long or short certain stocks in his B2B rotisserie league or Red Hot index. 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