By James Cramer
In my Internet roamings, darting in and out of chat rooms and examining site after site of purported investment advice, I am continually amazed at the mistakes traders make.
Routinely, for example, I see people rooting for stocks, as if somehow they can inspire others to cheer along -- and buy -- with them. I'm trying to lead a movement that says let's cover business with the same accountability as the sports pages, but cheering isn't a part of the equation. Save it for the stadium, where it can make a difference to the home team.
I see people believing that some companies can do no wrong; other managements get branded as congenital liars who couldn't tell the truth even if it is in their own interests. It's rarely that black and white.
blew up Tuesday not because they are liars. It was because business got soft. But the worst sin that I see, a cardinal sin that absolutely will lose you money nine-times-out-of-ten, is a belief that a single product matters to a company. Nowhere is this more evident then when discussing technology.
Take Tuesday. The boards were alive with chatter about
very hot Digital product, that, I am sure, is vastly superior to anything else in its class. In fact, let's stipulate that it is.
I have even received a half-dozen emails from people wondering what I think of the product, and whether it would get me to change my neutral stance on Iomega.
Although the stock did act well Tuesday, in a bad day for storage in general, it was not this product that was lifting it.
The notion that this product -- or any one new product -- could be important to the future of a company's stock is actually a quaint, innocent way to examine an equity. I am not an innocent. I am a skeptic.
I wasn't always like this. At one time in my career I used to get very excited about every new
p.c./t.v. converter, or new
Creative Sound Blaster
I used to hang out at software stores to see what was blowing out the doors. I had my contacts at
in lower Manhattan who would tell me what was hot. I used to scan all of the p.c. mags to see who had the best new products and most functional devices.
Sometimes it would lead me to a good hit. But more often than not it lead me to duds:
Corp. (great scanning stuff);
(super-gizmo p.c. t.v., through its Tecmar division);
(video player on airplanes),
(Multimate, my first word processing program ). Oh Lord, I could go on forever. Endless. (And funny in retrospect). And I thought of just these in the time it took me to go half way through the Holland Tunnel!!
Occasionally, a retail fervor, a wave, so to speak, will get behind a stock, and a phenomenon will occur:
spring to mind. The latter certainly got a big boost from the enthusiasts at
And I was always amazed at how knowledgeable all of these MF's were about the ins and outs of the product. I just wish it mattered more. Then the truly technophile homework wonks would win.
But it doesn't.
Mind you, I am not being cynical. I just know what drives stocks: earnings. You either have them or you don't. Products can matter in the long run. Particularly if you have the distribution system to make them work, like the
and in the
of the world.
But I have lost more money betting on products than I have on any other single prism for investing. That's why my trash bucket is filled with faxes announcing new products, but my briefcase is filled with faxes detailing earnings reports.
One moves stocks; the other doesn't.
It is that simple.
Random musings: I guess everybody just accepts the fact that the program that marred Tuesday's close is just fine and dandy. I still find it to be an outrage. Take
, which I am long. The stock was cruising along in the 93 region for most of the second half of Tuesday's session and then the program boys (and girls) came in and knocked it down a dollar with one minute left on the clock. Foul. I say reset the score back to 93. So should the management at Eli Lilly. Someone has to stand up to the outrage of the silent programs that are routinely allowed to manipulate stock prices to fit the whims of the programmers¿
James Cramer is manager of a hedge fund and co-chairman of The Street. His fund holds a long position in Eli Lilly. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to