NEW YORK (TheStreet) -- Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- how to cope with reversal after reversal on Wall Street, and
- what the IPOs of the moment mean now and in the long run.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Coping With Wall Street's Fickle Nature
Posted at 2:13 p.m. EST on Tuesday, April 1, 2014
Did someone just flip a switch? Did everything that was bad last month just get better? Could the market really be this stupid and forgetful?
You bet it can. Because the market is made up of money managers who all have their own motivations, and they can be as mercurial as all get-out. Something that seems valueless at the end of the quarter can become valuable overnight, because the buyers don't mind returning to the shunned, now that a discrete grading period is over and a new one has begun.
I always want to keep in front of you the rules of the game, the way money managers think, because if you know why they think that way, you can make more money when they pull their shenanigans. One of the key principles of most managers who show their holdings to investors is that they never want to be out of step with the times. As I have said over and over again, the previous quarter amounted to a rotation out of the hottest leaders of 2013 -- the biotechs and the high-valued technology companies -- and into the old-time pharmas, the soft goods, the industrials and lower, value-added tech.
So we saw a slaughter of many a market leader during this period, despite excellent quarters and lots of good news. At the same time, there was an endless progression higher in industrial stocks, as the group-think about the turn in the economic cycle worldwide allowed the endless buying in companies such as Caterpillar (CAT), Ingersoll-Rand (IR) and Alcoa (AA), among others that simply became loved.
We saw the same with value tech, such as Intel (INTC), Microsoft (MSFT), Oracle (ORCL), Seagate (STX) and Western Digital (WDC), just old-fashioned yesteryear tech that got dusted off because it had become too cheap compared with the newer, hotter stocks that had been leaders, chiefly those that celebrated mobile, social and the cloud. Salesforce.com (CRM) had become a whipping boy, as had Google (GOOG) and Facebook (FB). You could barely look at these, and if you did, you were rubber-necking wrecks on the market highway.
In the meantime, stocks such as Eli Lilly (LLY) and Merck (MRK), companies thought to be left for dead in the pharma space, roared higher, and Celgene (CELG) and Gilead (GILD), thought to be of the highest quality in the land, languished or were slaughtered.
Of course, it didn't help the highly valued techs or biotechs that we got new underwritings in their spaces pretty much every day in the last month, and lots of left-for-dead -- deservedly so -- biotechs came back to life in a speculative frenzy.
You have to understand that in that environment, you simply didn't want to show that you owned anything that had gone out of fashion in the Wall Street fashion show. You can only imagine someone saying, "You mean you held on to Yelp (YELP) and rode it all the way down from $100 to $79? What kind of idiot are you?" Or, "You kept Facebook after that moronically stupid WhatsApp buy and then the dumb-as-all-get-out virtual-reality joke of a waste of $2 billion? Did you go to college to get stupid?"