People ask me why I am so often freaked out about what is happening daily in this market. Let me give you four reasons: Sheldon Adelson, Sumner Redstone, Howard Lester and Aubrey McClendon.
All four of these gentlemen got overextended and bought too much of their own stock or the stock of another company and got margined out.
These are great American businessmen. They are much smarter than I am -- much smarter than almost any people in business -- and they completely and utterly screwed up. You cannot possibly say that they did anything else.
Howard Lester created Williams-Sonoma (NYSE: WSM) (Cramer's Take). He built that company into the best housewares company in the world with a name synonymous with quality. He is a titan. Lester sold 1,150,000 Williams-Sonoma shares to meet margin calls at prices that are down so huge from the highs as to make me think that if he doesn't know what to do -- and he clearly doesn't -- with his company or his stock, how the heck am I to know?
I owned Viacom (NYSE: VIA.B) (Cramer's Take) the first time Sumner Redstone took it private in the early 1980s. It was one of my first hits. The man was legendary back then as a shrewd wheeler-dealer who understood both the stock market and the entertainment industry better than anyone I have ever seen. What's he done? He's gone and blown himself up, having to sell CBS (NYSE: CBS) (Cramer's Take) stock at levels that are not to be believed. To think he had to come on the conference call and talk about his own financial problems and how they won't force him to sell any more CBS even though the situation hasn't been resolved is just preposterous. How can I understand CBS and Viacom and recognize their pitfalls if the creator of Viacom and the master of CBS doesn't know?
What's happened to Chesapeake's (NYSE: CHK) (Cramer's Take) Aubrey McClendon makes me sick to my stomach. Here's a guy who has made all of the right moves. We even talked on "Mad Money" about how if you bought when he did you almost always made money.
But he was buying with borrowed funds, and he got crushed. Just crushed. And he had to sell at the low. How can I know Chesapeake if he didn't? Aubrey has taught me pretty much everything I needed to know about oil and gas, and he gets blown out? And I am not supposed to be confused?
Finally, there's Sheldon Adelson. This man is a remarkable visionary who built Las Vegas Sands (NYSE: LVS) (Cramer's Take) into a global powerhouse. He had an equity offering in February 2006 that was one of the greatest buys of all time. Earlier this year, my friend Matt Horween, who does amazing accounting work, clued me in that Adelson's casino may not be able to make it; I quickly put it into the sell block after hearing all of the negatives. Adelson's in big trouble because he has borrowed so much money for his baby, which looks like it will now be thrown out with the bathwater.
Four men. Four seasoned players. Four guys who didn't see it coming.
So how are we supposed to?
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
11-07-2008 @ 10:25AM
sailor said...
Williams Sonoma is a great store...but... you can buy many of the the same products at Bed Bath & Beyond for considerably less. So, with a limited budget, where are you going to shop for the same item ? Cache only goes so far. Some business will price themselves out of competition. GM brings out a 500hp Corvette in a gas crisis...and then asks for a bailout...hello. Try a novel idea and provode what the consumer wants, not what you decide he needs.
11-07-2008 @ 12:03PM
beachpaul said...
And that is what all marketeers learn the hard way. When you can get it somewhere else cheaper, end of story. But, Comrade Cramer, that friend of yours that warned you, he didn't warn the rest of us. It is an inside game,huh, Martha?
11-07-2008 @ 2:47PM
Ken said...
Being a pessimistic or perhaps a realist in the following, please help me out!
If GM, FORD and Chrysler file for bankruptcy, how many total jobs would be lost?
I have lost over $140,000 in IRA money, who is helping me out?
Let these companies go under, I am sorry to be so selfish, but my money is as important as theirs!
11-07-2008 @ 3:42PM
Kent said...
If I had the smarts 6 months ago, I would have bailed out of the stockmarket then and also take advantage of the lower capital gains tax. I can't afford to liquidate no matter how bad it looks now. Now we're hit with a dummny whammy from a imploding stockmarket and now the expected capital gains tax increase from 15 to 28% under our new president. What else can go wrong?
11-09-2008 @ 11:04AM
JanRose said...
The "experts" are confusing many of us! Master Cramer got on NBC and cried "SELL". And many did just that.
Ok, so now the market is down---LOW. Some have said that it could go down much further to 6,000. (Blah blah blah).Guess what? I'm buying on this gravey train--now. Do your research and get on board. Positive attitude going forward here.
11-09-2008 @ 5:18PM
phil sharp said...
Tough times, tough decisions... But these guys have may have the answer. Check out www.twofatguyswithnothingtodo.com.
See if you agree.
11-10-2008 @ 4:36AM
ted said...
I am a retired accountant and have a few rules on investing. I am not rich, but comfortable.
1. I never let anyone control my money. my IRA were always self directed.
2. I research on fundamentals and trade on technical.
3. I never trade on margin, buy with credit cards, or have a debt for transportation.
4. I do not keep money in the market I can't afford to loose and never put all my eggs in one basket.
5. If not on margin you can never loose money until you sale for less than you paid. (I have done wash sales to cut taxes).
6. I pay no attention to people like cramer. (they market their product well, but they are a waste of money)
I got out of this bubble last year into low paying Gov. paper. better something than nothing, there were plenty of signs. I am now slowly going back into stocks.