Investors playing a dangerous game

Tech Data's post-earnings collapse is a cautionary tale -- that, or a buying opportunity.

By Jim Cramer Mar 5, 2013 9:53AM

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Red Arrow Pointing Upward Fotosearch Fotosearch Getty ImagesIt's difficult when we all know it's too high, isn't it? Come on, admit it: You know it's too high as well as I do. You want to buy a household name? I can't think of a reason you should besides, "They keep going up!"

Welcome to the world of the new bull market, in which stocks of all shapes and sizes and sectors break out to unprecedented and unproven levels. Welcome to a world in which the consumer packaged-goods stocks trade like the tech stocks of old, where all that matters is that they have a pulse and seem to be doing OK.

I find moments like these so daunting, because I sit here trying to find stocks that are cheap vs. the fundamentals, and I have to fall back either on stocks of companies I know aren't doing that well -- like Target (TGT) -- or on stocks that might do OK if the world gets better, notably in the tech space. But take a look at how Tech Data (TECD) did Monday, and you will see how hazardous this game is.

Tech Data reported a terrible quarter before the open Monday. Not only did the company miss, but it actually came out and said things could get worse, given that a replacement cycle is going on, from servers to tablets and smartphones. That means the company's own inventory is mismatched with the demand.


I read it and I said, "Oh man, this is terrible -- especially when you consider this tech supermarket has a history of doing it right, not wrong. This change from a high-margin to low margin business is happening so fast that it even smoked Tech Data!"


But the stock opened down and then actually proceeded to rally, and at a certain point it was only down a buck from where it went out Friday. I thought to myself, holy cow, maybe nothing matters!


Then, as the market shook off the Eurasian futures and started to rally, Tech Data fell apart before our eyes and ended up down $4.43, just a hideous outing. Now, here is what's really remarkable about the Tech Data journey. I have no doubt in my mind that, if Tech Data hadn't reported Monday, it would have been up huge. Why not? You could certainly develop a thesis that says, "Look, how long can tech really stay down? Don't I have to buy Tech Data before it has an Avnet (AVT)-style run?"

Come on, you know that's what would have happened.


Yep, it's just so hard to find anything that hasn't already exceeded your price target, maybe even a long time ago. That except stocks that are sent down -- and perhaps dramatically so, as with Tech Data -- if we've heard from the company that day.

My take, if you still want to play: Look for stocks that haven't done anything, or have pulled back, despite excellent numbers that the companies merely had the misfortune of reporting during one of those Italian Job days.

I know -- that leaves slim pickings. But what can I say? We are truly in rarefied territory, where the best we can hope for is that our companies don't talk, lest they tell the truth -- like Tech Data did -- that business isn't so hot after all!

Of course, there could be ultimate irony here. As the credential bear Doug Kass says, this market has no memory from day to day. Who knows? Maybe Tech Data is a buying opportunity!

Cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 

 

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70Comments
Mar 5, 2013 12:08PM
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Re-TOG - Seriously?  You're questioning the possibility of a 50% correction?  First off, I said it could be 50%, OR 10-15% - nobody knows.  Second, where have you been the last 6 years?  This scenario just happened, just a few years ago.  How quickly you forget, and on today of all days, when the Dow tops it's all time high, last reached in 2007.  What happened shortly thereafter?  Oh yeah, a 50%+ drop!  We're not talking about possibilities, we're talking about probabilities, and anyone who gives the Dow a 0% chance of losing 50% of it's present value needs only to look at recent history to see the folly in their thinking.
Mar 5, 2013 11:50AM
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THE CYCLE OF INEVITABILITY

Birth: A civilization is born out of a void. People work hard and gain from their efforts.

Growth: More people come and work hard. Prosperity comes because everyone works hard and makes gains.

Maturity: Pariah come; make laws so there are lawyers, taxes so there are bookkeepers, money so there are bankers and financiers, bureaucracy so there are politicians, paper so there are administrators.

Decline: People get tired of working so lawyers, bookkeepers, bankers, financiers, politicians and administrators can usurp all power and use corruption to suppress the masses into servitude. Civilization crumbles.

Death: The people rise up and destroy all pariahs.

Re-Birth: A new civilization is born out of the void. A “No Pariah” sign is posted. People work hard and enjoy life.

Mar 5, 2013 1:28PM
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The stock market is not a representation of the economy or an indicator of it's health, it is an indicator of the health of the companies listed on the stock market, nothing more, nothing less.  Companies are doing far to well for a 50% correction, period.  Thumbs down me all you want I know this discussion board has become a competition of who can have the most dire prediction but it's just not in the cards.  Japan has huge debt and slow growth for years and what do you know it's people are not burning grass for heat and eating rats for survival.  I've enjoyed the recovery in the stock market, I may very well take profits this week and revisit my portfolio, but this end of all times crash you all think is imminent is not in the cards today, sorry to break it to you all.

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CAN anyone out there say

 

MARKET CRASH

 

 

Pretty much it's Bernnake free money boosting up the stock market and when the Federal Reserve lose's it's world reserve currency position to China later this year the fall is going to be huge.

Mar 5, 2013 10:34AM
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so stocks aren't on sale anymore!  now you have to buy because they are a decent product.  not because you think you'll make money on sporadic surges
Mar 5, 2013 1:43PM
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You could easily make the case that if the future were so bright then every company would do whatever to invest their cash in new plants, equipment, and new product development.  If those companies with mountains of cash believed there was a pot of gold at the end of the rainbow they would undoubtedly invest.  I say the mountains of cash we now see in reserve scream they do not see prosperity to abound in the future.  Actions speak louder than words.
Mar 5, 2013 11:13AM
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Here's the Deal....We have had these highs before and will again...imo

 

To think it took 6 years, lets put that in perspective...Hmmmm??

 

We HAVE HAD a terrible RECESSION for about 6 YEARS !!!!!!

Sweet Geezus..

Mar 5, 2013 1:38PM
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Well we do have some history of the market correcting to the down side in a massive way. The dot-com bubble. Some here believe the QE money has created a similar market. If that is the case then the possibility of a bigger than 10% correction is likely when it happens. JMHO

Mar 5, 2013 10:47AM
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Not sure if Cramer really has a point here.  But it should make us nervous when even Cramer is comparing this rally to the tech rally in the 90s, and we know how well that worked out.

There's no question, the market is in a huge rally right now.  We can debate and pontificate about what the rally is based on, but it's still a rally, no matter how you look at it.  There's no telling how high it might go or how long it might last, but history tells us it has to end sometime.  The question becomes, how big will the correction be.  We could be looking at 10-15% or we could be looking at 50% or more.  Either way, we've probably reached the point where, if you haven't done so already, it would be prudent to quietly start moving to safety, even if that means cash.  If you've been in it to win it, you should've already won. Claim your victory and protect your spoils.  Failure to do so will have you kicking yourself for years to come.  Remember, "Buy! Buy!" can and will turn into "Bye-bye!" in a heartbeat.

Mar 5, 2013 11:49AM
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Well we're permanently screwed now. When market manics can break a record without an economy, you can best believe we are headed for war. Greedy people really suck when they don't have some sort of unique advantage to cheat with. Flat out, Wall Street... 100 MILLION families just saw any chance of hope for recovery to disappear. You tell me... what value is there in wealthy ME Generation seniors, bankers, financiers and their ME2 Generation college-bred paper and button pushers? None. We do not have an economy. We're hugely in debt funding the enemy--- YOU.
Mar 5, 2013 2:11PM
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Remember cramer you said 5 years ago stay out of this market if you need the money in the next 5 years....

That call alone should prohibit you from ever writing or speaking on the airwaves or netwaves EVER AGAIN !
Mar 5, 2013 1:59PM
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You can't fight the fed and Bernanke insists on keeping rates low for at least the rest of the year.
Mar 5, 2013 1:13PM
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Well once again Brutus, the Chicken eggs aren't falling out the sky, killing the Chickens..

 

Saying the "possibility" and then "could be" are ONLY Redundancy in sematics...

So you either think it can/could be a 50% correction or NOT.

Like I've said and it is, SERIOUSLY; Damn few are making a call anywhere near that..

I have mentioned the possibilty of a 10% correction and will stick with it..

Not some WAG that no one but non-market watchers are throwing and a few Crazies that want to sound like they have the inside track..??

Say it long enough.....AND SOME YEAR it MIGHT HAPPEN ?

We had a Financial Collapse of the Banks and Housing went to hell for specific reasons, back in 2007-2008, this is not 2007-2008.

Housing is somewhat correcting itself, jobs picture is looking a little bit better for the time being.

And Banks are FLUSH with cash..Although they do have a "shadow inventory" on their books..

 

I'm well aware of some of our "pitfalls", but am not enough of a Pessimist to say we are headed towards total failure again...

Yes I treat it very serious, because I am an Investor and a Retiree..

Mar 5, 2013 11:17AM
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Spooker...You only have to look towards the Rich, Elite, Large Corporations and the Banks..

 

THEN YOU WILL SEE THE PROSPERITY....

Although on the flipside of all that, you will see the DISPARITY between the other Classes.

Mar 5, 2013 1:48PM
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Ahhhhhh, there it is..

Your suggestion is a good one....Taking some money off the table to cash..I can concur.

I'm not going to say we doubled our money in the Markets....But that all depends from whence we came....

Anyone that hasn't "more then" doubled since the "bottoms" of end of 2008 or spring of 2009...

HAS REALLY MISSED THE BOAT...

So yes it would be very PRUDENT....To maybe take some of those PROFITS to cash or safe instruments..

It all depends on ones Avenues of Investments, their mindsets and what they are willing to, or can invest safely....That agenda, I AM IN TOTAL AGREEMENT WITH...  

Mar 5, 2013 12:29PM
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Pat...... Anyone that does not believe there is a huge disconnect between Main Street and Wall Street is mainlining pixie dust.... I believe the Dow record is due to QE money and companies sitting on their cash and keeping cost down and I don't see how that is helping Main Street.
Mar 5, 2013 10:54AM
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The DOW is at a record high - put it into perspective - it took almost 6 years to get here.
Mar 5, 2013 11:36AM
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The FED's printing $85 billion a month to keep rates low and inflate asset values and the US cut spending by $85 billion a year. Well if the FED wants asset values to inflate than that's why stock are inflating with other assets. Looks pretty simple to me.
Mar 5, 2013 1:52PM
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I am in a position where the money I have in mutual funds is beyond my control so the money I can control is in a money market that makes nothing but can't get caught in a sudden market down draft. I hope the folks that do the investing on my retirement account are fast and nimble but I doubt they can get out of the way of individuals.
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