Friday, November 7, 2008

Cramer Still Confused

A friend brought an article to my attention today written by Jim Cramer entitled, "Cramer: Four Reasons to be Skittish." Cramer starts off the article as follows:

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 four gentlemen are the heads of Las Vegas Sands (LVS), CBS (CBS), Williams-Sonoma (WSM), and Chesapeake Energy (CHK), respectivley. These stocks have all been destroyed in recent months, and their chiefs have been forced to sell their stock near the lows to meet margin calls.

Cramer's punchline is simple. "Four men. Four seasoned players. Four guys who didn't see it coming. So how are we supposed to?"

I take a somewhat different view of this. We have some very smart and successful guys who've been forced to sell their shares in the companies they run because they believed so strongly in their companies that they borrowed huge amounts of money to "back the truck up." As a contrarian, this type of news strikes me as fairly constructive. Smart guys don't get forced out of their shares at market tops.

Maybe Jim is really "freaked out" because the value of his 3.9 million shares of has fallen from $62 million earlier this year to $13.7 million today. And maybe he's freaked out that a prolonged bear market might not be good for his shock-jock style of investment "advice."

Either way, the fact that Cramer has turned more negative on the market long-term is probably another piece of bullish data.

Disclosure: The Rubbernecker is still short a "freaked out" Cramer.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.