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    Leslie Walker
    ".com" columnist Leslie Walker

    Hosted by Leslie Walker
    Washington Post Columnist
    Thursday, September 9, 1999 at 1 p.m.

    Welcome to ".com - Live," a real-time, moderated discussion with people shaping business strategies for the era of electronic commerce. This week our guest is James J. Cramer, co-founder of, the scrappy subscription Web site that dishes up instant financial news analysis almost around the clock.

    James Cramer made a splashy debut with its public stock offering this year and attracted a minority investment from The New York Times Co. In addition to being the site's co-founder and a hedge fund manager, Cramer write a string of financial columns every day that are one of the site's main draws.

    Cramer was online to give his take on Internet stocks, the future of free content online and who will be the winners and losers in the emerging Internet industry.

    Transcript Follows

    Leslie Walker: Let's start with a broad question. What's your view on how the Net is changing the dynamics of the financial markets? And what do you say to folks who believe instant news services (yes, that would include and the Net's whole instant-gratification culture are fueling turmoil and short-term mentality in the markets?

    James Cramer: The Net is empowering individuals to make decisions themselves that they used to make with the help of others. There is an extreme portion that is using the Net to abuse the system and themselves with massive over -trading, but most products, including, are just helping people do a better job of handling their own investments.

    Leslie Walker: OK, the curtain-raiser on investing. The market's looking a bit tired now, with Fed fears hovering over it. For an investor-not a day trader--is this a good time to buy, wait, fall back or what?

    James Cramer: The market has had a terrific run here, so terrific that the Fed is fearful of it. The productivity gains we see from the NET and from tech in general are getting overwhelmed by a too hot stock market. The result is the bewildering "do nothing" market, one that is cooled by the Fed through jawboning every time it gets too hot. M y take: forget about it. Buy stocks you like. Don't worry about the Fed. Don't worry about the swings. Use them to your advantage.

    Norfolk VA: What do you think are the real loser business models online?

    James Cramer: The real losers are those who think that coke and pepsi and mcdonalds are going to advertise on their sites if they just give their sites away. A ton of companies are
    adopting a free model. They will all be pitted against each other by the few advertisers out there and no one will achieve profitability--that is the game in the end.

    Winston-Salem, NC: Mr. Cramer:

    After the huge sell-off in internet related stocks -portals and dot.coms-in the second quarter, I wondered whether the party was over for
    rocket priced stocks. Now we have the "RedHots" as you call them,but is that party over too? Or will there be another opportunity like this again from some other equity source?

    Patrick Vale
    Winston-Salem, NC

    James Cramer: First of all, it is not a party. The media likes to think of it as a party or a ballgame or a wrestling match. We are in a cyclical business. Things go in and out of fashion. Right now the net is out of fashion because companies keep pushing out how long it will take to get profitable. The market wants profitability to be within reach. when it is, people will come back to these stocks. Not until then, though,. Until then they will just be a trade.

    Washington, DC: What is your view of the profit prospects for many recent Internet start-ups that offer content free of charge, and lose money in the short-term in the hope that the "free for all" business model will translate into retained customer any paying e-commerce in the long haul.

    James Cramer: This the free lunch/the market is stupid/ theory. In other words, because day traders are willing to buy you can raise money with this model and then await profitability. it is precisely this model that will fail, because there are too many companies seeking the same non existent ad dollars.

    New York, NY: Are you a Tom Clancy fan? If not, who is your favorite author in that genre?

    James Cramer: I am not much of a Clancy fan actually. In fact, I like Laurence Block from the detective genre. Most of my reading these days is still concentrated, somewhat bizarrely I am afraid, on the period September 1942 to January 30 1943-, which I have decided is when civilization almost ended.

    Shropshire,UK: Jim , you wrote at the weekend of your intention to short Net stocks with a single revenue source - advertizing . In light of Sumner & Mel getting it on , are you omitting Content Companies from this strategy ?

    James Cramer: These guys are barely net guys i am afraid. they have a bizarre anti-net net strategy and I don't regard them as players in the Yahoo/TSCM sort of way.

    Vienna VA: Do you think the free Internet access trend, combined with the coming of broadband, is going to squeeze America Online in a serious way? Aren't the vast majority of its revenues from access subscriber fees?

    James Cramer: I am not that worried about AOL. (I am long the stock.) I think that it has a great base and that it will always be able to make people pay because computers are not easy to use and many people feel at home there. It is the inability of the public to be comfortable with the instrument, the p.c. that makes it all work for AOL no matter what.

    Shropshire,UK: Jim ,
    The pricing of many of the Net Backbone stocks assumes their customers will continue to enjoy pricing power . The number of entrants seeking to deliver broadband would seem to indicate that 2 to 3 years on , competitive forces as exist at present in Long Distance providers will hit this sector too . Are the prices of Net Backbone stocks over extended ?

    James Cramer: The real overextension is in the providers of voice and data systems --these are where the real problems are going to come in. Everybody is giving away minutes--no one can make money in that environment. The concept of long distance investability is what is being wrecked right now.

    Miami, FL: James,

    What are your top three favorite movies?

    James Cramer: My top three movies--wow, talking movies when the market is open!!:
    Conversation, Godfather I and Godfather II

    dahlgren virginia: What do you like in the B2B area?

    James Cramer: The B to B area has a bunch of red hot stocks in it. At the risk of forcing your hand, I would prefer you to see the article I wrote about the Red Hots and the B to B in last Sunday's

    Wilmette, IL: What do you think of CMGI, David Wetheral, and the different pieces of the internet they own? Do you have any predictions about how they will fare this quarter, when earnings come up in 2 weeks?

    James Cramer: CMGI was once one of my favorite stocks. It was under-recognized and undervalued. I now think it is an overplayed stock and I have no interest in owning it. I don't want to own the basket of venture capital stubs, I want to own profitable businesses or businesses that are about to burst into profitability.

    Los Angeles CA: If the fed raises again are you a seller of the red hots or a buyer??

    James Cramer: If the Fed raises rates again I have to presume, given the slower employment data, that the Fed will disappear from the picture which would make me want to buy Red Hot stocks.

    Leslie Walker: You're skeptical about online advertising, but let's face it, Net users have consistently resisted paying for content--especially anything other than financial news and sex-related stuff. What choice have quality offline publishers had, really, but to put their wares out there and try to build audience?

    In other words, I've never really understood what you thought The Washington Post, Time or ABC News could have done differently to try and collect money from their online readers.

    James Cramer: My point here is that the on-line versions are the real bargains and that it is unforgivable as a businessman to give away a more valuable product while you charge for a less valuable one. It is only a matter of time before the two are arbitraged and the free destroys the paid. All of history teaches us that. THIS TIME WILL NOT BE DIFFERENT.

    Dallas, TX: How do you see consulting companies that design websites faring in the short and long term, ie USWeb?

    James Cramer: There are too many consultants doing this. After a while we will simply play them off each other and drive their prices down to zero. Thats a crummy business model..

    Miami, Florida: When will interest rate increases begin to have an effect on corporate profits?

    James Cramer: I believe these rate increases are already doing it. The auto companies price most of their product off the short rates and their stocks have been dogs since the increases. Thats because their profits are already impacted.

    Gaithersburg, MD: After the recent slump internet stock prices, what do you think the market has offer to new companies going public?

    James Cramer: The market doesn't like these stocks any more. The ebb of the day traders has virtually closed off the market to all but a few players and believe me, after a day nobody will want those either.

    Dover, NH: Jim, the use of options as a form of payoff to many people are drawing a lot of attention. How should these options be priced into a company? Will they dilute earnings even further?

    James Cramer: They have to be priced in as rigorously as possible, as close to cash as the accounting profession will let us.

    Jersey City, NJ: Jim: How about the e-brokers. They are currently out if favor-- will they come back by the end of the year?
    Also: SUNW is getting whacked today -a board of directors resigned - Think the stock may come back by day's end?

    James Cramer: Two answers: One, the e-brokers are all too competitive and I don't want to buy them. Second, I hope that the director resignation isn't significant because I have bought 20,000 SUN since this call began via instant messaging!!!:)

    Miami, Florida: Are international stocks worth buying now?

    James Cramer: I like Japan very much. Everyday I buy a little Mitsubishi Bank of Tokyo. I have compared this stock to Citicorp in 1990 when everything looked terrible for our banks, MBK is the only japanese bank with bona fide american financials. I think this stock doubles in a year. It is my favorite way to play the turn in Japan.

    Columbia, MD: Is there a place for wireless ISPs? What about East Asian-Japanese ISPs? These sound like booming markets. How do you play them?

    James Cramer: I think this is too early an area to invest in. People tell me that RIMM , a canadian company, is the play here but i worry that someone could come in and crush them.

    Leslie Walker: Barrons just had a piece about the "seasonal timing strategy," saying November-to-May is when the market makes it gains. What do you think of this notion of entering the market on the last day of October and beating a retreat in May? Anything to it?

    James Cramer: There are periods for stock sectors that make sense. We are in a seasonably strong period for tech. The beginning of the year is the time to buy cyclicals.But the calendar really isn't a way to invest. I like to invest by buying good companies and buying more of them if they go down because of macro concerns not related to the business.

    New York, NY: What are your thoughts on the internet travel business and internet travel stocks -ie. Preview Travel, Travelocity, Leisure Planet, etc.-

    James Cramer: Here is another business I would avoid with a passion., There are way too many players and not enough profitability. I would steer clear of those.

    Columbia, MD: Any thoughts about internet infrastructure plays, like Exodus Communications, which TSC has reported on recently?

    James Cramer: I think that Exodus is booming, but I don't know if everybody is happy with the service. THis is a tough call, the stock has rallied a great deal. I had a small short on it after a brokerage house recently cut numbers, but I covered for a little gain because the company has a lot of momentum.

    Arcata, CA: James,
    is running an Internet company any different from running a traditional company? Do you see new organizational patterns or a new workplace culture emerging that are different from companies as we now know them?

    James Cramer: I am adamant that these are just businesses, not net businesses. But they do require more promotion than regular businesses because of the clutter out there--gold rush clutter because of the initial lack of barriers to entry. Let me get personal for a second. I have always regarded myself as an operator. But to make come alive I had to turn myself into a promoter. Because of the nature of society, that had me pegged quickly as a self-promoter. In my eyes, that's an awful thing to be. But we could not have been successful if we didn't make waves. Without waves we would have died.

    New York, New York: Jim. Do you think the oil drillers are going to break out towards their old highs?

    James Cramer: OIl service stocks are still hot pending the upcoming opec meeting. I think they will peak then. I run the risk of being early but this market seems up artificially to me.

    germantown, md: The markets are diverging between high-tech and non-high-tech -everything else- sectors. It has been a constant tug-of-war. Everyone feels the need to park their monies in the markets, hence long term bullish trends for all the sectors. Do you see a potential leprechaun on the horizon that will pop the bullish sentiment?

    James Cramer: First, i don't think there is that much bullishness out there. there was during the overheated ipo boom of the spring, But that is history. I think the Fed has dampened enthusiasm for the market and will continue to do so every time we have a run up.

    Leslie Walker: When will the flood of venture capital that has floated the Internet commerce boatstart to abate? Meanwhile, what will the effects will be from the next wave of Internet venture funds that are just getting off the ground, like Softbank's?

    Will they throw increasingly large sums at increasingly marginal business strategies? I guess I'm asking what you see as both the short-term and long-term changes looming in the venture capital market for technology startups.

    James Cramer: YES YES YES. Their desire to maintain their high returns is going to cost all of us a ton of dough. these guys are running too much money. There simply aren't that many ideas around. I see great parallels the LBO industry six years ago. They just ran out of deals and had to return the money. That will happen to the v.c.s this time.

    Pasadena, TX: What would it take for you to turn bear?

    James Cramer: Pasadena Texas wants to know what would turn me into a bear? I thought that was an optimist's neck of the country!
    Seriously, I have cash on the sidelines, which makes me a lot less bullish than others. But lets think. I bought my first stock in 1981. Since then, other than a few months in 87,90,.94 and 98 my bullishness has been justified in spades!! You wouldn't give a darn about what I have to say had i been bearish during this 18 year stretch.

    Ft Lauderdale, FL: The internets, then the red-hots. Will the internets come back, yhoo, ebay, amzn, aol reach those astronomical highs again they are down over 50% from?

    James Cramer: The internets actually are starting to look cheap versus some other ends of the market. I know i never thought i would write that. You have to sift among the rubble and find the ones that aren't burning all of their cash who have hopes of profitability in 2001

    Baltimore, MD: You've been a fan of tech infrastructure for a while. What do you like in the fiber optic manufacturing world? What about among the fiber optic carriers?

    James Cramer: I am long JDS-Uniphase. This is a company that is at the heart of your question. However, it is capacity constrained so it cant blow away the numbers. it is the strongest player in the industry though.

    Leslie Walker: We are more than halfway through this hot discussion, folks. But keep those questions coming because James Cramer is one super-fast typist!

    Ft Lauderdale, FL: September and October are historically bearish. '98 was very volatile, but both months ended in the plus column. What's your expectations for '99?

    James Cramer: It would not surprise me to have a down 500 point day or two during the next 60 days. If the Fed tightens and says it has to tighten some more you will get that decline. I am not betting that way but you will get it. Also, if oil goes to $27 it will happen.

    Washington, DC: How badly does the market get burned if Al Gore is elected? What impact will the elections have on the market over the next 12 months?

    James Cramer: Gore might not be so good for the market. But I would like to reserve judgment on this. Who would have thought that Rubin would have run the Clinton economic policy. Gore is very smart about business but is perceived to be a massive regulator.I don't think that will be the case.

    Alpharetta, Georgia: Jim,

    When you trade do you just comb the largest 100 stocks and look for ones that are "working" at the moment? From your writings it seems that way.

    James Cramer: I am sorry if you think that, I try to write about what I think will interest people. You raise a good point though. I have very sophisticated software which shows me what stories people like and what they don't like. I tend to pander to those numbers. the numbers show that people like it when i write about what is hot and what is not--even if that is not the way i am investing. For example, I have very few positions in the Red Hot Index that I devised, but people cant get enough of it so i keep writing about it.

    Alpharetta, Georgia: Jim,

    Do you have many long-term large cap holdings? It seems as though you just trade large caps and have long-term small caps holdings?

    James Cramer: I NEVER write about small cap stocks. In fact I use my father's paper jobbing business, National Gift Wrap, to describe activity in small cap. I do that because on February 10, 1995 the Washington Post did a story that questioned why I wrote about my small cap stocks and wondered whether I was doing it to move them. I have never gone there since then. AND I NEVER WILL.

    Hyattsville Maryland: Jim, you manage LARGE quantities of stock. Can you tell me an example of how buying and selling large quantities affects the price? How much harder it is for you to get out of a stock than us little guys?


    James Cramer: This depends heavily on the stock. While I have been chatting I bought 20,000 Sun Micro. that did nothing to the stock. But if i had bought 25,000 of a little guy, I would have moved it a buck. The difference is that when I want a smaller stock I buy it in small pieces so as not to move it. Liquidity does matter though because i don't want to buy a stock i cant get out of.

    Leslie Walker: After Yahoo, which of the Web portals do you think have the best chance of succeeding in the long term? And do you buy the argument that over the long haul, the general-interest portals' relative value to the vertical Web portals will decline? Will they lose the premium they claim today?

    James Cramer: My partner Jeff Berkowitz recently had me buy some lycos because he sees them coming on strong. So I have to vote for them. to me the only clear winner is Yahoo and we own ten times more Yahoo than Lycos.

    New York, New York: I am very interested in your
    impressions and opinions of
    CNBC. Specifically, what do
    you think their role -should
    be- and what do you think it
    actually -is-? Do you think
    CNBC is able to impact market
    sectors and-or specific stocks
    and if so, do you think that
    is appropriate? Do you think
    that it is ethical or
    appropriate that the regular
    anchors of CNBC are able to
    offer their opinions of
    specific stocks and sectors

    James Cramer: I believe that they can do whatever the heck they want. if they stray too far from the reality or the facts or they distort, the public will tune to something else. I think that Mark Haines is the fairest journalist in the business and the way he runs the show is the way a show should be run.

    Alpharetta, Georgia: Jim,

    What percentage of your hedge fund is for trading vs. long-term holds?

    James Cramer: 40% is buy and hold right now. It usually is higher.

    Detroit, MI: What is the "asset allocation" of your fund at this point? %Long, %Short, %Cash, etc.


    James Cramer: I am 65% invested in stocks with the rest in cash.

    Gaithersburg, MD: What do you think the market has in stock for biotech and other start-up companies involved in vaccine development?

    James Cramer: This market has gotten extremely hot and will stay hot as long as the Fed stays tight and the medical companies, the big med companies, don't have enough stuff in their pipelines. I wish I had more positions in the group but they are very very homework intensive and we cant seem to find the time to see all the good ones. But we will.

    Dover, NH: Jim, the online medical information area appears to be one that will grow. Your thoughts on HLTH, KOOP, etc...
    I am neither long nor short these two companies.

    James Cramer: This sector is too overheated for me and I want to wait. I thought the NY Times piece on Koop was great by the way.

    Mercerville, New Jersey: What should the core technology holdings of an aggressive portfolio be?

    James Cramer: Aggressive portfolios should probably be dominated by tech because that is where all of the high growth is, save one or two biotech situations.

    chevy chase, md: There is this notion that when the fed raises rates three times the market performs poorly for sometime thereafter. it happened in 1994 and 1987. yet you seem to think it won't happen now. if the fed raise rates in october, won't it crush this market.

    James Cramer: the Fed eased three times last year to save the world from the Long Term Capital blunders. So the removal of those three would not mean as much to me because the rates were made artificially low to provide liquidity.

    Alpharetta, Georgia: Jim,

    What is your portfolio allocation among large caps. vs. small caps?

    James Cramer: A third of my fund is in small cap right now.

    Arlington, MA: Can't a company like Real Names reduce the need for search engines. After all who needs one if you can get the same result from a browser?

    James Cramer: Maybe, but that is not how the net has developed.

    Atlanta Georgia: 1 year ago the Dow closed
    at 7615. What is the most
    important lesson a trader
    could learn from the past year.

    James Cramer: NEVER LET A TRADE TURN INTO AN INVESTMENT! Never buy something for a quick pop and then ride it down. Thats what happened with a lot of the Net stocks and it sapped people and generated monster losses.

    Arcata, CA: James,
    If you look ten years or so into the future, will business-to-business transactions be all conducted over the Internet?

    James Cramer: People like b to b on the net for smaller orders, but bigger orders mean negotiations and only people can negotiate.

    Leslie Walker: Peer into your crystal ball and tell us what, in five years, you think the Internet industry will look like. Specifically, which foundations (banner advertising, free access, reverse pricing systems? ) will have crumbled and which will grow into skyscrapers?

    What are the key trends to watch?

    James Cramer: I think the net business will be like the cable business. there will be premium, super premium and basic. Basic will be your Yahoo, premium will be's and super premium will be people who will pay for any convenience. In that world you want to be the CNBC or the ESPN or you want to be the big pipe (which is Yahoo)

    Minneapolis, MN: 5o minutes into this chat and the only financial mentioned is a Tokyo-based bank. With rates going up, do you like any financials?

    James Cramer: I HATE the financials. Right now as I am typing I am taking gas on my chase position, and chase is a good one. There is too much competition and these do poorly in a rising short rate environment. I am adamant that these stocks stink!!

    Leslie Walker: On that personal note you sounded earlier, journalists tend to wonder about the strange mix of opinion and live trading that is your special brew. One of my colleagues calls it "speculation verite." And here I am watching you type your answers on our Web site, as you IM your instant trades, then bark trading orders out loud, too. Then you go write about it!

    I want to know what, for you, has been the hardest part of your live-wire act. What do you struggle with the most?

    James Cramer: I believe in massive real time disclosure. I also believe that the public is best served by a mix of reporters who are not invested and investors who are not reporters but commentators who put their money where their mouth is. I have never said I am objective, never. I have always said I put my money where my mouth is. I think that I am an insider who is willing to blow the doors off my own institution to make you a better investor. If you don't trust me, don't like me, or don't think I can make you money, I will wither and and nobody will read me. That has not been the case. I have written about the market, both in print and in real time for 15 years. that is enough time to make a judgment. Again, disclosure is the key and I practice it loudly and clearly. I wish others did it as much as i do. Some people try to pass themselves off as objective. I never do.

    Leslie Walker: We are wrapping it up folks. Great questions.

    James Cramer: I want to thank all of you and especially my gracious hostess Leslie Walker who has the best print column about the web in the country. I said it on my site, I am happy to say it here. For me the Web and the Post are made for each other. It was impossible for me to read the excellent business section until it was too late to matter, until the web. And, as Leslie knows, in the Alice in Wonderland world we are in with bricks versus Nets--IT'S FREE. the print edition costs me hundreds of dollars to be flown in. go figure!!! Thanks again

    Leslie Walker: Folks, that's all we have time for today. Sorry we couldn't get to all of your questions. Thanks to James Cramer for taking the time to answer so many of your questions today (and for that plug he gave my column!) -- and thanks to the hundreds of folks who sent in their two cents.

    We hope to have's instant stock analyst back again soon. Meanwhile, hope to see everyone again in two weeks!

    © Copyright 1999 The Washington Post Company

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