A nightmare! In a multipart series this week, Jim Cramer is taking a look at the stock selloff and what individual investors can do to protect themselves in a market that's scaring even the most seasoned veteran. Don't miss Part 4.

By the beginning of this year, like 1989 in Japan, you had to be a moron NOT to be in stocks. You had to be a moron not to be leveraged. I didn't see the nightmare coming until March. I didn't see it coming until my friend Steve Galbraith walked me personally through the margin numbers. From his perch at

S.C. Bernstein

, where there are no underwritings, no bullish vested interests, Galbraith opened my eyes with is no-nonsense work about how out of control the borrowing had become. He began to pen a series of emails to me saying that maybe I could play a role in avoiding the train wreck that was coming.

Jeff Berkowitz

saw it too. He would be the man on the phone to the partners playing the role I did with

Marty Peretz

in 1984. Things had gotten too heady. We were taking money off the table. Nah, we weren't going to abandon it. We just weren't going to play with a lot of capital.

At the top, and indeed March 10 was the top, margin debt was highest. Stocks were doubling in two or three days. My email became a cesspool of hundreds of readers per day telling me how much better they were than I was. We dipped and then came back, and I went on TV and said, "Take something off the table." I penned piece after piece saying to

take it off the table.

The heat was unimaginable. Everybody who had heard my worries in October 1998 wrote me to tell me that I was Chicken Little. I was bombarded by people who told me I didn't know what I was talking about, that I was getting out when things were just getting good. I remember showing the hate mail for my bearishness to my wife. She could say only one thing: "What a bunch of suckers. When you, a bull for 18 years, gets negative, it means something."

I had seen the movie. I saw it in 1984. I saw it in

1994. The


had been too easy. The Fed had screwed up. We all have to pay whenever the Fed is too easy. The Fed had let the party go on too long. Now we all had to be punished. Now we all had to bear the pain of their lack of caution and our shunning of any caution.

Now it is clear to all but those who are too stupid or too thick or too vested or too blind that that we are in one of those periods where money cannot be made. Oh sure, there will be someone who claims to have a formula. Someone who can short it just right.

But deep down we know the truth. People have to lose money here. They have to learn that mutual funds aren't safe and stocks aren't safe. They have to realize that cash is safe. And if we don't realize it, the Fed will make cash more profitable the longer we ignore the warnings. In the end, we will finally have an alternative to stocks: cash. Cash will be what we brag about. Cash will be the asset class we will speak of the way we spoke of stocks and new issues. We will love cash the way we loved




Commerce One








. We will love cash the way we loved









Of course, the moment will come when we can like stocks again. But it is a moment in time, not in fundamentals. Enough money has to be lost to remind us of the risks of owning equities. Who knows when that is? When consumer spending drops because people have to sell stocks to buy anything? When rates get so attractive that stocks get so cheap that takeovers begin? When enough companies go bankrupt that supply gets removed, forcibly removed?

But to declare that the moment is here now is just wrong. We just got out of the denial phase. In fact, this was the first week that I saw capitulation, an understanding that sales were going to have to be made to preserve capital. This week past was Week 1 of fear. It would be too glib to think that one week of capitulation defines the period. Not after these years of fat.

Deep down we know what the bottom looks like. The bottom comes when you stop looking at the business pages entirely. The bottom comes when you stop reading about the market. The bottom comes when you curse the icons on TV who came to represent the bull market. The bottom comes when all of the pain is taken and the Fed is done tightening and the margin debt declines for several more months.

It has to happen this way. The alternative is Japan, where it went on for five years instead of five months. Where trillions of dollars of capital were destroyed by a prolonged market crash. We can't have that happen. We can't. And the Fed won't let it happen. Too much at stake. The greatness of the nation, just like the greatness of what was the greatest economy of the latter half of the 20th century, the empire of Japan. That blueprint must not be followed.

Stop asking when will it end. That will make you no money. Just remember, like in '84 and in '94, it does end. And wait. I want you to be in there with me when it ends. I want you to make money with me. Don't knock yourself out of the game. Play small. Stay in touch. Stay in current. Believe me, it will get good again. But only if you have enough money to play.

We are in a cathartic period right now. No new deals. No new issuance. A decline in margin debt. A recognition that it is hard again. That's how it was before the Net revolution. That's how it was before money became too easy.

That's how it will be again. Returns won't be as great as they were. That's OK. They can't remain that strong without the value of the money created being debased by inflation. That's why we should not scorn the Fed for playing the role of the scold, but be thrilled that the Fed has enough gumption to restore things to where the game is more challenging, but the payoffs are still meaningful.

Those who have developed a skill that allows them to game the market will still make some decent money in a singles and doubles game. Occasionally there will be big wins. Just like there are home runs. But home runs aren't commonplace. They weren't meant to be.

Sure this whole litany is sobering. If


were corrupt there would be someone urging me not to write this stuff for fear that it will hurt pageviews or unique visitors. There would be someone saying "Where's the Mr. Bullish that the advertisers want?" Or, "Way to go, killjoy. Thanks for sending everyone to



Motley Fool


CBS MarketWatch.com



To which I say, you readers have come to know me better. I am out for only one thing, to help make you as much money as possible. I can't do that right now. You can't make me. Marty Peretz can't make me. Jeff Berkowitz can't make me. The

Trading Goddess

can't make me. Because I can't. Can't tell you if I can't. Been around too long for that. Not worth faking it.

So we wait. Until the Fed is done. Until the buyers get reliquefied. Until consumer spending cools. Until more companies fail. Until there is more money building in the system. We will scratch out some gains and make some things happen. But only in the context of staying in the game. That is a must. You won't know it has turned if you don't stay in the game.

So much bad stuff has been written about me of late that I can't bear to read the papers. But I know that I have never wavered from my initial mission that Marty and I set out on in 1996, to develop a product that levels the playing field and gives you the same insights I had when I started out, with much better tools and information at your fingertips.

Recognizing when not to act is as important as knowing when to act. Let the offline press continue to abuse me. I don't give a darn. I want you in the game winning with me, even if it means that for now, you lose interest. I am confident that when things get better, the other guys, the detractors who never helped you make a dime anyway will be just as negative as they have always been. And I will have done right by me and by you. That will be our collective reward. That's what I write for. That's what motivates me. That's why we have won and will continue to win together.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Brocade. 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