Nothing like a bit of predictability. The mutual funds are defending their turf already, coming in and bidding up the futures to tell sellers: "Get out of the way, this is our day to walk the market higher." What an opportunity for you to reposition yourself out of the low-flying tech stocks and out of the mutual fund managers who are stuck in the wrong stocks.
Earlier this morning I got an email from a reader that said, simply, "Why would you tell people to sell their mutual funds?" Doesn't that say everything about what I am
saying? I don't want you to sell your mutual funds. I want you to swap out of underperformers and into performers. I want you to make and accept the judgment that not all mutual funds are created equal, that some managers got it very wrong in 2000 and are once again getting it wrong in 2001 and their time has come. I have presented three different reasons you should do that:
- Opportunity cost. You can take the loss in the loser funds and go into some winner funds, or a
S&P index fund. I know that if your mutual fund money is part of retirement monies, there is no tax loss that you can take. So what? Is that an excuse for sticking with someone who isn't doing a good job for you?
Recognition that the stocks these managers are in went from great to bad, and these people did
nothing about it. They made tons of rationalizations but in the end, they had faulty judgment. Why is it so shocking to say that? Haven't you had lawyers or doctors who have exercised poor judgment? Haven't you had to question other professionals? Welcome to the real world. Lots of people got into this business when it was easy and are now overwhelmed. Don't let them take you down with them.
The vicious cycle of losses is going to force these managers to sell the good stocks in order to fund the bad ones so they can meet the redemptions that others will make at the end of the second half. Why not beat that rush and get out when they are busy marking themselves up to look good?
As I said on television last night, please, take some money out of these loser funds today. And then take some out tomorrow and save a little for next week to take out, because these funds are so wary of the feds that lots of times they keep buying their stocks up on the first day of the month in order to justify their previous purchases. Remember, I am from this ilk. I am breaking ranks with the ilk because I know what they do. I have handled their mark-up orders as a broker. I have heard about them from other brokers. I know what is going on and I am breaking ranks to help you, the reader, make some money here.
Don't listen to the marketing sirens and don't buy the method acting of the managers you see on television who have lost you a lot of money. You deserve better.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to