Knowing the Top When You See It

FREE: Cramer predicts how investors will know when the party is about to end.
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Most of you who come to the site are casual players of the mania stocks. I call them that so I don't lose you. On Personal Finance Friday, I like to keep things simple, not simplistic, and talk about the longer trends that affect you both as a stock holder and a mutual fund holder in the wilder things occurring in the market.

This week I want to discuss not when it will end -- which is the hopeless mantra of everybody who is out and wants you out -- but what it will look like before it ends. Isn't that what we all want to know anyway? Isn't that what the issue is?

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Message Boards.

So, let's do it in checklist style:

The underwritings fail. These are the greatest tells of what is going on in the market. They are the barometric readings for the market. When you see a whole slew of B2B underwritings that don't work, then you should get very worried.

Wacky non-B2B stocks go up on announcing B2B initiatives. Take a look at the chart of

Sovereign Bank

(SVRN)

. When it announced its dot-com, the stock tripled. It then came right back down. A host of financial service dot-coms had just started out at that same moment. They had all been skyrocketing. They all crumpled. Be on the lookout for fake B2Bs. That will be a very important top signal.

A series of secondaries get priced and fail to hold pricing and yet insiders keep selling anyway. This is a fantastic top tell. When insiders want out and they are not sensitive to price, that means they see the writing on the wall. (By the way, if they are sensitive to price, then there is much more to run.)

Fidelity

and other traditional mutual fund families own all that they can of the hot names. Monitor this carefully. You want to see if the old-fashioned guys are already in. Once they are in it is late in the game.

Even the executives at the companies think the whole thing has gotten goofy. When

Syquest

tripled because people thought they had the next

Iomega

(IOM)

, some new executive gave an interview to a wire service saying that its stock shouldn't have been going up as it was. That's a balloon popper.

Similarly, the exec who runs Sovereign pooh-poohed his stock's run. That's called "a top."

The earnings fall short on some of the bigger companies. Ultimately this is the most important warning sign. When you see new companies miss revenue forecasts -- and it must be more than a handful -- than you are already dead. That's why monitoring earnings is so important. Right now business is so strong for so many companies that we are spoiled. But a lot of these new companies have new chief financial officers and new heads of sales and new top personnel that haven't played the game. They don't know the rules. When they screw up it will be ugly.

The good news on this checklist is that not one single warning sign is going off. We are greenlighted on everything. That's one of the reasons why we at

Cramer Berkowitz

are spending so much time on these newer companies. That's why we walk around hoping for some bad economic macro numbers to allow us in. We see that things are still strong and we want to participate.

That said, remember that things can change on a dime. You can't be the guy who buys Sovereign at the top, or Iomega at the top or Syquest at the top (remember that).

That's what kills you.

Random musings:

This column was directly related to an email I received from a reader, as are all my Friday personal finance columns. I won't answer individual personal finance questions but I am happy to speak generally on the site as a rule ...

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Chat board home run: Because of an extremely intelligent discussion in the

BEA Systems

(BEAS)

chat board on our site, I was able to snare 10 points in the stock. I think it goes higher.

Be sure to check out the latest standings in Cramer's business-to-business rotisserie contest against his colleague Matt Jacobs.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long BEA Systems, Ariba, Internet Capital, VeriSign and VerticalNet. 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

jjcletters@thestreet.com.