"The Winners Of The New World", Circa February 2000

Tyler Durden's picture

Because humor is always the best and only cure to pervasive central planning that has made a mockery of traditional investing and capital allocation, and because nobody delivers unlimited sheer, unadulterated humor quite as well as one James J. Cramer when he is "recommending" stocks, here is the full text of Jim Cramer's "The Winners of the New World" speech delivered in February 2000. Because it really never is different this time.

James J. Cramer is the keynote speaker at the 6th Annual Internet and Electronic Commerce Conference and Exposition, held at the Jacob Javits Center in New York City. From TheStreet.com

February 29, 2000

The Winners of the New World

You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now.

OK. Here goes. Write them down -- no handouts here!: 724 Solutions, Ariba, Digital Island, Exodus, InfoSpace.com, Inktomi, Mercury Interactive, Sonera, VeriSign and Veritas Software.

 We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over -- and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come.

There, now that that's done with, can we talk about the methodology that produced those top 10 so that you can understand how, in a universe of a gazillion stocks, we arrived at those, so you too can figure it out? I hope we can because I have another 10 and still another 10 and another. They all do the same thing: They make the Web faster, cheaper, better and easier to access anywhere, anytime. They allow you to get on the Web securely anywhere in the world. They make the Web economy the only economy that matters. That's all they do.

We try to own every one of them. Every single one. And if I had my druthers, I wouldn't own any other stocks in the year 2000. Because these are the only ones worth owning right now in this extremely difficult, extremely narrow stock market. They are the only ones that are going higher consistently in good days and bad. I love every one of them, just as I loathe the rest of the stock universe.

How did this stock market get like this, to where the only people who can make a dime in it are the people who are interested in the most arcane subject, the moving of data from one space to another, via strange new machines and software? How did it get to the point where nothing else matters, most particularly the 90% of the stock market I have studied for the last 20 years? How did all of that knowledge become totally irrelevant and the only stocks that work are the stocks of companies that didn't exist five years ago and came public in the last two or three years?

Let's start with the world in the early 21st century, a world where capital is abundant for a chosen few and nonexistent for just about everybody else. It is a world where the whole of Wall Street and Silicon Valley is at your fingertips if you are creating the infrastructure for the New Economy, and a world where neither Wall Street nor Silicon Valley could give a darn about you if you are using that infrastructure.

Or in other words, we don't care if General Motors (GM_) and Ford (F_) are going with Oracle (ORCL_) or with i2 (ITWO_) for their new parts procurement process. We don't want to own GM or Ford on any occasion. In fact, we would rather own the loser in that tech bake-off than the winner in nontech, because in this new world, there is so much business to be done for the i2s and the Oracles that the capital will remain plentiful for them, win or lose a particular piece of business.

Just yesterday I found myself wishing I had bought i2 when it lost out to Oracle for the giant business-to-business contract for the Big Three automakers. Others had the same idea because i2, the loser Friday, was up much more Monday than GM and Ford could be this year. i2 can own the world because the company with the access to cheap capital always wins. And the companies with no access have to lose.

Or, closer to home. We in the stock market don't care that The Street.com Inc., a company I helped create, has built a compelling new brand, has more than 100,000 paid subscribers and has $100 million in the bank. We just want to know which companies TheStreet.com employs to publish each day. We want to know who the host is, which publishing tool works best, which wireless strategy TheStreet.com is adopting and how does it automate its email? (By the way, the answers are Exodus, Vignette, Motorola and Kana  -- all at or near their 52-week highs as TheStreet.com languishes at its 52-week low, a triumph of the arms merchants over the combatants if there ever were one.)

How did this bizarro world where nine-tenths of the companies I have followed as a stock picker for the last 20 years are losers and one-tenth are winners? To answer that question, you have to throw out all of the matrices and formulas and texts that existed before the Web. You have to throw them away because they can't make money for you anymore, and that is all that matters. We don't use price-to-earnings multiples anymore at Cramer Berkowitz. If we talk about price-to-book, we have already gone astray. If we use any of what Graham and Dodd teach us, we wouldn't have a dime under management.

So how do we sort through which stocks get bought and which stocks get assigned to the waste bin?

We have a phrase on Wall Street. It's called raising the bar. If you can raise the bar, or brighten the outlook for your company, if you can see your growth accelerating, your stock will go higher and you will be given the currency to expand, acquire and do whatever you want. That's the secret of the quintessential New Economy stock: Cisco (CSCO_). This giant networker has the ability to control its own destiny. It can, as my colleague Adam Lashinsky says at TSC, buy any company it wants to. It can pay any price. Because it has a currency that it better than U.S. dollars: It has Cisco stock. It can do that because it raises the bar every quarter!

But what about the Old Economy stocks? Can Merck raise the bar? Can Pfizer? Can U.S. Steel? Or Phelps Dodge? Union Pacific? No, no, no, no, no and no. So what happens to them? Despite the billions in buybacks and the plethora of strong buys that the Street has put out about these companies, their stocks have no traction. They just stumble along, rising and falling haphazardly with every whim and quizzical speech of the Federal Reserve chairman that still controls their destiny. If Greenspan indicates that there is more tightening ahead, these traditional companies, the ones that you measure with traditional matrices, get pole-axed as we worry about where the capital will ultimately come from if credit gets choked off, while the arms merchants in the Web war, with capital to burn, just go higher.

It is no secret that the Dow, made up principally of companies that can't raise the bar, is down 12% while the Nasdaq, which is made up of companies that can raise the bar, is up 12%. And in the self-fulfilling jungle that is Wall Street, only growth can maintain growth!

So how do we find what are the great growth companies, knowing that growth and not cheapness of stock to company is what matters? We have to look for the fastest-growing industries and then select the companies that can make the infrastructure happen the fastest and the cheapest in those industries. The growth must be positively organic, if not viral. There must be heavy technological barriers to entry. And there must be an ability to scale without any thought to human cost. These companies must be able to dominate their businesses or be willing to become part of a larger institution that dominates.

So, whom does that eliminate? First, any company that is a commodity producer simply can't be owned, no matter what. The New Economy makes those be simply a function of low-cost producer with no ability ever to raise price. This, of course, is the crying shame of the way the Fed is trying to break the economy because the only place that could stand for a little inflation is in the deflationary commodity industries. But their inflation revolves around the ability to build inventory to anticipate future price hikes and the Fed is taking short rates to a height that makes it uneconomic to stockpile.

Second, it eliminates any bricks-and-mortar company that doesn't embrace the Net. To not embrace the Net is to give a cost edge to a competitor who does. It does so because the Net removes the middleman that was a product of the regional economy. There is $4 trillion worth of wholesaling that gets instantly eliminated by the Net. Before only the largest orders could be processed by the biggest companies because it was too expensive otherwise. Now all orders can be processed by the biggest companies through the Web. There is no need for the jobber or the wholesaler. Obviously, if you are still using that old distribution network, you can't compete against those who do.

Third, it eliminates any industry that does not have a proprietary brand. This is one of those weird features of the Web that people haven't woken up to yet, but it will seem obvious a few months from now. In the New World's economy, the desire to "name your own price" is too great to squelch. An outfit like priceline will change the very nature of brands in this country. It won't destroy the premium brand, but it will force everyone else out of the market. Why? Because the way priceline works is that we are trying to buy the premium brand for the price of the off-price brand. That means the off-price brands, whether they be Colgate or Dial or Hunt's or Ralston, are simply doomed by the Web. Why would you ever buy the second- or third-best when you can get the best via priceline for the same price as the lower tier? Ahh, that's a real killer. It leaves only the top brands to vie for supermarket space. The others won't be worth carrying. They won't move! Oh yeah, same goes for the airlines and the hotels and just about everybody else.

Fourth, it just destroys retail as we know it. Why? Because the companies that embrace the Web more vigorously will eventually be pitted against other companies that embrace the Web more vigorously, creating a virtual constant price war, the kind of war that Marx, of all, actually predicted would happen to capitalism. It will happen to retail once everyone realizes that Amazon recreated Wal-Mart online because it will forever have access to cheap capital. Why do I say forever? Because at a certain point, it will be done with its buildout and will effectively be able to cherry-pick whomever it wants to destroy while having it be subsidized by other areas. It will be Home Depot vs. Wal-Mart vs. Amazon in the end. Nobody else. And that's only if Home Depot figures out it better get on the Web and fast.

Fifth, it wipes out everybody who straddles the Old and New Worlds. Let's take the brokerage industry. If you are trying to preserve a price point, because you need those margins, you can't and you become roadkill. Same with journalism. If you are free online and cost offline, you will eventually not be able to charge offline. Why not? Because the Hewlett-Packards and Intels and Ciscos are bent on making the online version far superior to the offline version. And they will do it. They, too, have the access to capital to make it happen.

I can tell you from TheStreet.com that we have substantial cost advantages over our printed cousins. We can come out around the clock. We don't require paper, ink, delivery people or trucks. In that sense, we are much more like television, personal television, which is why we were wrong initially to think we could charge for basic news, and right to think we can charge a huge amount for proprietary analysis that can make you money.

The struggle between the offliners and the onliners in banking will also pan out just like these other industries, with huge wins for those with a fresh online culture and hideous losses for those who don't see it coming or are slow to adjust. If you have to preserve your giant branch network and the costs that come with it while someone else perfects secure wireless Internet transactions, you can forget about it. You can't afford to compete. How can Bank of America compete with Nokia as a way to bank? How can Goldman Sachs compete with Yahoo! as a way to invest? Isn't Nokia, with its wireless machine that goes everywhere a better bank than one that needs branches? Isn't Yahoo!, with its access to all of the information and quotes in the financial world a better place to buy stocks than Goldman?

Of course they are.

So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own?

A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10. And my next 10 and my next 10 after. Only those companies are worth owning. The rest?

You can have them.

Thank you.

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Rusty Shorts's picture

"What's important when you are in that hedge-fund mode is to not do anything remotely truthful because the truth is so against your view, that it's important to create a new truth, to develop a fiction."[26] Cramer described a variety of tactics that hedge fund managers use to affect a stock's price. Cramer said that one strategy to keep a stock price down is to spread false rumors to reporters he described as "the Pisanis of the world". The comment was a reference to CNBC correspondent Bob Pisani, who reports from the trading floor of the New York Stock Exchange. "You have to use these guys," said Cramer. He also discussed giving information to "the bozo reporter from The Wall Street Journal" to get an article published.[27][28] Cramer said this practice, although illegal, is easy to do "because the SEC doesn't understand it."[29] During the interview Cramer referred to himself as a "banking class hero." - Jim Cramer

Lets_Eat_Ben's picture

A banking class hero is something to be. He is probably a huge fan of himself.

Motorhead's picture

He's such an ass hole.

IridiumRebel's picture

Whatever Goldman and Cramer says....do the opposite.

The Gooch's picture

I just punched a hole in my monitor. Where Cramer used to be.

francis_sawyer's picture

lol ~ Oh now you did it... THE SEVENTH SEAL has been broken... Run for your lives!

Atomizer's picture

During a brief few seconds before changing the channel, Crammer always reminds me of a rake being dragged across a chalkboard.

“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

I'd like to my wipe ass with his head.

Pure Evil's picture

....and leave you with genital warts on your rectum in the process.

gould's fisker's picture

It's not booyah Jim, it's radioactive economic booshit advice--write another book called "the five steps to personal economic destruction." The first step is listening to Jim Cramer.

GFORCE's picture

Jim Cramer is a parasite and an embarrassment of a man.

CvlDobd's picture

Along the same lines, I have a copy of the book "It's Getting Better All the Time" if you need a good laugh.

Cdad's picture

Jim Cramer's insights into the world of investing are second to none, and profiting from his experience and wisdom is a no brainer.  

CvlDobd's picture

His investing insight allowed my broker to profit massively from my account collapse! I couldn't be happier for the two of them!

ebworthen's picture

For Cramer, every day is a new reality.

What he said yesterday, or last month, or last year, or decade - isn't reality anymore.

If he was 180 degrees wrong, he will:  apologize, blame it on regulators, blame the CEO, pretend he warned everyone, pretend he never recommended it (multiple choice - obfuscation builds empathy).

As he says at the beginning of the program "You need to get in the game!"

It's about getting people in the game (casino). 

The craps table Croupier of Wall Street.

Cdad's picture

Jim Cramer understands the pitfalls of equity investing, and the need to take a longer term view when price temporarily moves against the little guys.  

His investment advice falls into the category of "value" and he admonishes people regularly against momentum stocks and the dangers of chasing performance.

ebworthen's picture

Like I said, Cramer is a Casino Croupier.

"You want to avoid those 30-to-1 bets on double zero, but going black or red is a good bet."

"Put a bet on the come line and some on the pass, this game is fun."

"Never go all-in with less than a full house."

"Never hit on 16."


The house always wins.

Long term investors get screwed; they provide the cash for the fund managers fees and bonuses, the day traders, and the HFT machines.  And if by chance long term investors succeed they have to cash out at exactly the right time.  And then, they have to deal with the tax man.  The stock market is a rigged casino, nothing more.

goldenbuddha454's picture

I think that's what's termed a Sociopath?

booboo's picture

Cramer Kudlow and Liesman is how TPTB and Wall Street operate public relations. They don't hire large firms, too messy. They just give clowns teevee shows like they did in the 50's.
The Howdy Doody show sponsored by General Mills. We grew up watching clowns shows sitting on the floor with our cowboy hats and coon skin caps. Now the same generation sit in a Lazy Boy watching queer clowns talk about serial klepto markets.
Hey kids, what time is it?
Go watch Reruns of Howdy Doody and Cramer and tell me the difference.

Yen Cross's picture

 That was a great post! /+1   

  Matter of factly, I can't stop laughing, as this whole thread is full of good posts!

Cdad's picture

CNBC, and the various personalities that make up its staff, are an invaluable tool for investors.  Some of the greatest financial news journalists work there, and the network quite literally sets the standard for the entire media industry.  

goldenbuddha454's picture

You're saying that tongue-in-cheek I hope!

orangegeek's picture

Jim Cramer is a creepy dude.

dark pools of soros's picture

cocaine is a helluva drug

Yen Cross's picture

 I wonder if Jimmy Cramer pays his dry cleaner to roll up his shirt sleeves for him?

Cdad's picture

Jim Cramer's fashion sense is best described as classic Wall Street, and he has impeccable taste in brands.  By rolling up his sleeves, he reveals to Americans that despite the trappings of his business, he is there on The Street representing them, the little guys who need an ally in an increasingly complex investing environment.  

dark pools of soros's picture

the Pied Piper of the greatest fools

Yen Cross's picture

 Jimmy "Tool Time" Cramer. OOPs wrong sitcom.

Pure Evil's picture

Reminds me of a billboard in Florida of a lawyer where said lawyer is wearing a three piece suit and is rolling up the sleeve on one of his arms and the words in his ad state that he is willing to do what it takes to fight for the little guy.

JR's picture

Exactly. He was a stockbroker with Goldman Sachs Private Wealth Management division, for Heaven’s sake. So he took a shower and he’s not Goldman, anymore?

He’s Harvard and was even a research assistant for Alan Dershowitz, helping Dershowitz acquit alleged attempted murderer, Claus von Bulow. In fact, according to Wikipedia, Cramer admitted to himself that von Bulow was “supremely guilty” of administering an insulin overdose to his wife, Sunny, and left her in a persistent vegetative state for the rest of her life.

Yen Cross's picture

 Jimmy Cramer was the equivalant, of an IB (introducing broker) With the Squid...

ukmetman's picture

Ah....Exodus Communications. Fond memories of my beginnings as an investor. Not only did I lose my shirt, but I doubled my holding on the way down and lost my pants as well.

At least there was a happy ending. While most of my eager dotcom buddies vowed never to invest in stocks ever again, I was determined I'd get my money back from the thieves on Wall St., discovered gold, and have not looked back since. If it wasn't for good old Exodus, I would never have joined the gold train. Thanks Ellen Hancock (Exodus CEO), you transformed my life for the better.

JR's picture

Cramer February  29,2000: “Here goes. Write them down -- no handouts here!: 724 Solutions, Ariba, Digital Island, Exodus, InfoSpace.com, Inktomi, Mercury Interactive, Sonera, VeriSign and Veritas Software.”

Cramer is plugged into the government lies.

The showmanship that Cramer uses is often the most dangerous part. A favorite stock of his can be called, literally, the greatest chance you’ve ever had, and it’s almost a shame to wait for morning to buy it as it may take off in the night.

It turns out these flashes of exuberance, if you are a great Cramer fan, can cost you huge dollars, such as these:

…Ariba was one of the first business-to-business Internet companies to go public (in 1999).[6] The company's stock more than tripled from the offering price on opening day,[7][8] making the three year-old company worth $6 billion. In 2000, the stock value continued to climb, and Ariba's market capitalization was as high as $40 billion. With the bursting of the dot-com bubble, Ariba's stock price fell dramatically to the low double digits in July 2001, where it has remained since, with a market capitalization of just over $1.5 billion as of June 2010. -- Wikipedia

…Exodus Communications was an Internet hosting service and Internet service provider to dot-com businesses. It went broke, along with many of its customers, during the bursting of the dot-com bubble. It declared Chapter 11 bankruptcy in 2001 and was purchased by Cable and Wireless in November 2001 - Wikipedia

…On May 13, 2001, the Digital Island board met and voted unanimously to approve the execution of the Merger Agreement (with by Cable & Wireless, PLC ("C & W") with a per share tender offer price of $3.40 and to recommend to the shareholders that they accept the tender offer.- United States Court of Appeals, Third Circuit.

…InfoSpace: The company was founded as Infospace in March 1996 by Naveen Jain after he left Microsoft. He served as CEO until 2000. The company, which started with six employees, built an online yellow pages service to be funded through advertising. A set of simple chat rooms (based on HTML and meta refresh) were also available on the site.  InfoSpace went public on December 15, 1998. The company raised $75 million in the offering.[5] In July 2000, InfoSpace acquired Go2Net… Also, in 2000, InfoSpace used a controversial accounting method to report $46 million in profits when in fact it had lost $282 million. Company executives skirted SEC trading restrictions to sell large blocks of their personal stock.[7].. By June 2002, the company's stock price, which reached $1,305 in March 2000,[10] had dropped to $2.67.[11] – Wikipedia

Just started looking and this is a far as I got…

The tragic part of the Cramer phenomenon is that he is an insider plugged into the power structure. And, as a public personality, it certainly qualifies as abuse of power. One is reminded of the famous Dilbert cartoon where Wally, put in charge of office relocation, has become obsessed with newfound power creating “Wallyville”: two floors of luxury housing, shopping, and gambling.

Asks Dilbert: “Do you think you might be abusing your power?”

Wally: “What would be the other reasons to have power.”

adr's picture

Poor InfoSpace, they just came out at the wrong time. The controversial accounting method they used to report a $282 million loss as $46 million in proft is a GAAP now. In fact the $282 milion loss would probably be able to be booked as an asset now.

God, if Amazon can have a 3800p/e, InfoSpace could have been in the 200k range. Wow, and think of a merger with Facebook, it would be Apple what? InfoFaceSpace, the first multi trillion dollar market cap corporation!!!!

What was still is. Hundreds of millions in losses booked as profit. Mass accounting fraud. Only what has gone on over the past four years makes 2000 look like a kindergartener at play.

JR's picture

+ 100 as usual, adr. Fits nicely with your take on ZH’s post yesterday, ISM Beats Expectations on Surge in Inventories. It bears repeating (emphasis mine).


adr (February 1, 2013) :

More fucking survey bullshit. Inventories are the public corporation's way of fudging books.If you own a productive business you need to order product, it is how you make money.

In the real world I live in, not the goal seeked data massaged fantasy land of Wall Street, there have been no orders. Inventories left over from last year are higher than ever, and retail isn't buying.

Go to a store and look at the inventory levels.

People need to get a clue and begin to understand how publicly traded retailers game the system. Comps are not based on actual increases, they are based on increases in the percentage of inventory sold. If you have four units of inventory and you sold 2, you sold 50%. If you had 10 units before and you sold four, you sold 40%. Your comparable sale is a 10% increase even though actual sales fell 50%. Nobody in their right mind would say a store did better selling 2 units when they sold four units before. But in the world of corproate accounting actual sales don't matter.

Its all fucking bullshit. I've been to three trade shows since the beginning of January. If the bullshit is to be believed, I should have see booming business. What I saw was a morgue. Boots on the ground can't lie. I mean if you step in shit, you know you stepped in shit. Some guy from a skybox can say "Don't worry folks, it was just mud." But you stepped in it, and you can smell shit.

goldenbuddha454's picture

Or it could have been a very soft and melted Babyruth?

Tombstone's picture

You have to understand that CNBC is in the ad selling business, not the make-you-rich-through-investing-business.  As long as they can keep the average investor interested, they make a buck.  You couldn't run this operation with government funding like a totally dull NPR.  Krammer provides excitement and keeps the unknowing begging for more slop and spit.  At least you can get some sense of reasonable blather from Ricky S.  The sad fact is that there are no gurus worth their next reco, and there is no magical money making system.  The best you can hope for is that Uncle Benny keeps pumping the jury-rigged markets with funny-money and the NASDAQ hits 5,000 again...

goldenbuddha454's picture

The exchange between Jeff Gundlach and Melissa Lee was damned funny to watch a couple weeks ago when Gundlach was saying AAPL could see $425 pretty soon.  Mellissa's face kind of turned from excitement to sorrow and dismay at what Gundlach had to say and the rest of the interview he was stomping on her buzz.  I loved it actually!  It was hilarious to watch the pump masters moods change so quickly when they have a contrarian on for an interview.  Hilarious!

slackrabbit's picture

You just wish a hand would come in from the side with a gun in it and put him out of our misery, like some Monty Python skit.


Rathmullan's picture

When I was in the stock analysis business leading up to March 2000 wall street had coined terms such as "virtuous circles" which fueled "infinite demand for bandwidth". Because any mathematic based financial models were inept at explaining the valuations of the dot com era companies, one wall street firm (think it was lehman or first boston) hired a sociologist who hit the road to expain to the buy-side that that the collective wisdom of the consensus was vastly superior to any individual or sub-group insight and, thus, the consensus should not be questioned (sort of a "don't fight the fed") concept.

Man, have we learned not to fight the fed over the past 4 years. But in the spirit of hope, I would add a couple of words to that old 3 martini lunch, 60s madmen brokers' slogan. "Don't fight the fed until its dead".  

JR's picture

It used to be that the goals of many wealthy men coincided with a goal for overall progress of the country.

Yen Cross's picture

   Mother Nature sorts things out... ( being snarky)  J.R. imagine yourself as a renter, in an apartment complex with 500 units.

 You have a compliant with the land lord, and get tossed to the leasing agent, that has a boss, that has a boss, that has a regional boss, that has a V.P. of Operations, Boss of Regional/Boss.

  J.R. It used to be, that you call the principle and get an answer. Now you call the (idiot) that answers the phones, if you're lucky!


JR's picture

Yen! You have just described our new Obama health care system. And the procedure to have your ailment repaired. I never did like Mother Nature; she reminds me of Madeleine Albright, Hillary Clinton and Nancy Pelosi rolled into one – America’s new all-caring matriarchal force – the fist that smashes the cradle.