James J. Cramer

James J. Cramer

A weeklong electronic journal.
Feb. 21 1997 3:30 AM

James J. Cramer

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       From 9:00 to 9:50 a.m. my day is pretty much made or broken. I know whether I will make or lose money--all that really matters at Cramer, Berkowitz & Co.--by the end of this tense 50 minutes. So here is a blow-by-blow description of what happens at my hedge fund during the only time that really matters.
       9:00: Bond and stock futures sharply down. The market dropped some 40 points in the last half hour yesterday, looks like it will continue. Intel indicated down a couple as a result of Cyrix getting some business from Compaq. This is a typical overreaction based on a Wall Street Journal story that everyone knew was coming. Cyrix won't make as many chips in a year as Intel will make in a day--but stupid money's gotta bolt and it will frame the whole opening.
       9:15: Futures still heavy. Brokerage research sets the tone during this period when people are figuring whether to buy or sell, and right now the tone is blah. Oppenheimer goes out negative on brokerage stocks, saying that they are too high; Wertheim goes out positive on the brokers, saying they are too low. I am long-brokerages Merrill and Travelers (meaning that I own these stocks and I expect them to go higher), so I know that I'm pulling for Wertheim's team. I'll control the Merrill opening if it is too weak off the Oppenheimer call by standing there at par (buying a large amount of stock at $100). CNBC, which beats constantly in the background at my place, has gone out with both calls, so there will be impact, but which way, no one knows.
       9:16: Lehman pounding the table MSFT (Microsoft)--they think it's the greatest stock on earth. It's my biggest position so maybe I will escape the opening unscathed. "Biz on fire," my research director, Jeff Berkowitz, scribbles in a note to me about the Lehman call.
       9:17: Looking at all research notes taken down by my staff. We get about 40 calls each morning from brokers. Everybody has to take info down about what they say. I review all the notes and look for patterns. Two guys going out positive on the oils means I should buy Texaco or Slob (Schlumberger) for a trade. Three guys being negative on Informix means I am a dead man if I own it.
       9:18: Telco Systems preannounces a worse-than-expected quarter. Great. I am long 67,500 shares. Nothing like starting the day with a big, steaming, unrealized loss. Release hasn't come out yet so I don't even know why they missed the quarter. Idiots.
       9:19: I call the analyst who recommended Telco to me but he is traveling. I am glad he is, because had I gotten hold of him at this moment I might of reached through the line and killed him.
       9:20: Some Midwest broker tries to give me some Hutchinson Tech, a disk-drive component maker that is doing a secondary offering. It's a really bad sign that he hasn't placed the deal and is still giving out stock 10 minutes before the opening. I say "pass."
       9:21: www.thestreet.com, my Web site, finally corrects the misspelling in my piece on Hurricane Diana that came up about 20 minutes ago. For 20 minutes I looked like an idiot. I want to get a printout of everybody who hit it up during this period--like my ISP could do that--and e-mail them to explain that I am not a moron.
       9:22: Getting option-expiration looks. Tomorrow is options expiration--not a big expiration, but it should "be better to buy," meaning that there will be lots of index-fund buyers at the close of the market tomorrow. That's good news; I am long the market.
       9:23: First looks--i.e., previews of market action. "Early look at MO is 50 to go," meaning there are 50,000 Philip Morris looking for a home at the opening.
       9:24: Morgan Stanley comes out positive on Sprint. I like this call and I ask for a look myself. (My traders usually get looks, but I keep my hand in by trading the opening every day). First investable call I have heard today. I like it because Sprint is right in this environment of slow growth and low interest rates. Possible worldwide telco player.
       9:25: In December we play Ride of the Valkyries right now to get everybody juiced. But it is February and instead I've got Holst's The Planets running through my head. (Better than that silly Seinfeld jingle.) Troops don't need pumping up. They are on fire.
       9:26: I get looks in Micron, which I am long, and Novell, which I am buying for a spec ahead of the quarter. Yes, Novell. It's no longer brain dead.
       9:27: Eyeing Intel. Looking at Mr. Softy (MSFT). Liking Amgen.
       9:28: Pumping up the volume. No more calls to me. My assistant knows that only my mother can get through right now--shorthand for no calls, as my mother passed away 12 years ago.
       9:29: Market still looks bad. Getting looks in Analog Devices. I am short in it and anxious to bring it in. Bunch of guys have cut numbers (trimmed estimates), so should be a win.
       Tape looks extremely heavy. Many sellers of Intel. Small buyer of Microsoft. Big seller of Sprint at Soundview. Too big. Gonna wait, looks like the stock will be weaker despite the Morgan call.
       "Get me Travelers," I shout. "Get me Merrill." Which means, Find out what these stocks are looking like on the floor of the New York Stock Exchange.
       9:29:30: Placing small bets on MSFT--I am a buyer. "I'll buy 10," meaning, I am taking 10,000 MSFT at 97, quarter point below last sale of the day before. "Buy 10,000 McBurgers at 46 and an eighth"--(I am buying 10,000 shares of McDonald's). No one calls it McDonald's because that would confuse it with the aerospace concern of the same name. "Bid for 10 Micron," I yell into one of my three phones.
       "Tasty Baking 16.87th bid for 25,000," I say to Clarke, my trading assistant. He places the order for the regional baker with Merrill Lynch, who helped me with the idea.
       9:29:40: Tape firming, buyers coming in, Morris. Size to buy--meaning there's a massive amount out there to buy, more than there is to sell--Merck. MSFT firming. Intel still looking ugly off the Cyrix story.
       9:30: "There goes Swifty," I shout. I always start the trading day saying "There goes Swifty," which is what the intercom blares at the Wonderland Dog Track outside Boston at the start of each race. I started saying it on a day we made a ton of money and I am superstitious enough to maintain the tradition.
       Taking Dell, just 5,000. Buying MSFT. Baanf, another software company, coming in for sale. Sellers of Cascade and Ascend coming in. Travelers multiple-six-figures for sale. Damn, the OPCO call is trumping the darn Wertheim call.
       "Get me Analog Devices," which will be late because there is too much for sale.
       Fabulous, I think, to myself. I am short!!!
       Novell is ramping--going up. Alex (Brown) said some positive things and a big seller has cleaned up. Looks like a winner.
       Can't pay up. Will ruin my basis.
       9:31: Opening is ugly. U.S. Robotics down a dollar. Same with Intel. Same with Dell. Only Cascade is up and I am short Cascade. Buyers coming in for the drugs right now. Merck down only a touch.
       9:32: Warner-Lambert's got buyers. Taking 10,000 Merck.
       9:33: GE looks weak, taking a little. Now buying another 25,000 Merck as I just learn they are in front of the FDA today for an extension of Fosamax use. For preventive use for bone weakness. Could be huge, huge, huge. Jeff shouts out that everyone must go on "Merck watch," meaning we want to be the first firm to hear what the FDA is saying. My four traders hit wires to let brokers know we care, Merck/Fosamax.
       9:33: Nothing but buyers of Novell. I think it is a winner. Dell is a loser. Down a quarter on my Mr. Softy (Microsoft) already.
       9:34: Drillers are weak. Brokers really weak. Buying some Travelers. Can't get them open. Too many sellers.
       9:35: Buyers taking the savings and loans despite the weak bond market as speculation heats up of more takeovers. PG (Proctor & Gamble) down big. Merrill making cautionary comments. I am taking 10,000 PG because mutual funds love it and it shouldn't be down the two bucks that it will shortly be down.
       9:36: Buying some of the oil drillers. They've been weak because it is so warm, but I like the group down here. They are "oversold."
       Intel can't stabilize. It is off another half. MSFT is firming. "Sell 10 CISCO." Damn. MSFT isn't working. It's big for sale at Alex. "Maybe it isn't going to work for a trade," I think. I urge my trader to go into Alex Brown and see how much Microsoft he has to go. Alex assures my trader not to worry. Seller is not big. I think he's wrong.
       The Dow Jones average is now open and it's down 26 points. Bummer. But there are buyers of over-the-counter stocks coming in. Except Intel. Nothing to do for about 20 seconds.
       9:37: We are okay. Market is stabilizing. Buyer of Amgen, large, my trader screams. Buyer of Merck. "Buy 10 Dell," I tell my trader. "Time to buy Intel. It is down two. Buy five Intel." Given that I love Intel it's a totally tentative trade. Just 5,000. But I get scared, too. I am also buying 10 Ascend.
       9:38: Some clown on television says MSFT is really expensive. I throw a squeeze ball at the set. Need that guy like a hole in the head. Buying 5,000 more MSFT just in case sellers come in off this bozo's comments.
       Intel is firming; buying another 5,000.
       9:39: We are out of the woods. Market stabilizing down 40 points. Drugs and banks slightly lower. Lots of GM for sale. But nobody is panicking out of stuff. And Novell, one of my biggest bets, is roaring. Time to bring in all my shorts, including Analog Devices and McBurgers. Buying more Travelers.
       McBurgers in free fall. I am short 200,000 and bringing it in gingerly. Great trade off my daughters' preference for Burger King's toys over McDonald's last Sunday. (Fries don't hold a candle, however.)
       9:40: Lots of red on screen. But I am ready for it. Pretty lean. Gonna be a long day, but I've made the right bets.
       Hewlett-Packard coming in. We have a fabulous position with Hewlett, literally long above $55 and short below it, because of a derivative trade I put on. Can't lose.
       9:42: Market still down 40 points. But NASDAQ with the exception of Intel is stable.
       9:43: Buying some Boeing. Buying some more Intel. MO (Philip Morris) down two bucks, time to buy more.
       9:45: I've put about $10 million to work in the last 15 minutes. I feel good about it. Now I've got to sit back and see how I do. Can do no more at this level. I know, already, though, that I've bought too much Intel and Microsoft. They are still heavy and look like they are breaking. Ugh.
       I still think we will make money today.
       9:46: Now gleefully bringing in McBurgers and Analog Devices, two great shorts!!!!
       9:47: Market bounces off the down-45 level. One hundred points straight down between yesterday and today. I commit another $3 million in the same names into this dip.
       9:48: All bets are placed. Time to stretch. Grab a Diet Coke. Looking good. Feel confident enough to take a call from my wife. Give her an optimistic view of the action.
       9:50: Stepping off the desk. I tell my partner Jeff, "if you haven't bought in these 20 minutes you will make no money today." We figure writing this "Diary" cost us about 20 Gs in lost concentration. (Note to MEK, that's $74 lost for you.) Price tag on everything at this joint.
       9:52: Things are looking up except INTC and MSFT. I think I got great prices. But in my biz we'll know by 4:00 whether I am right or wrong.
       See you tomorrow.