Mr. November

By James J. Cramer

If they would ever invent a calendar with no month of October in it, I would never have to sell a share of stock again. Until then, though, remind me next year that you can never take off enough stock ahead of these 31 days unless you are a total masochist. What is it about this month that causes people to lose their senses and chop a third or even a half off the value of solid American companies, like Xerox or Raytheon or Unisys, that screwed up for a quarter? Why do people who are perfectly rational shareholders the 11 other months of the year get gripped with a frenzied groupthink that forces them to shoot first and not even bother to ask questions later?

History and memory are powerful forces in a market that has suffered through a trendless, choppy five-month period. With no conviction about its current direction, many traders always pause to remember the two one-day 500-point declines, both of which took place in October. Even Fed chief Alan Greenspan got into the October-scare game last week, talking about how stocks might be too risky. Of course, he immediately said they might not be. But he referenced the Dutch Tulip Bulb craze, and that sent the market into still another October tizzy. It finished the week down 630 points, or 5.9%. In November, we wouldn't pay any attention to him, but in the month of Halloween, he spooked us but good.

Given the curious one-off nature of those daylong specials--both of which produced monster returns if you bought bushels of stock the day after--some sellers are simply trying to raise enough cash for the expected mini-crash. Others, mindful that it has been a super market for tech all year, are anxious to take something off the table ahead of a quick sell-off that might wipe out those gains.

Given the buy-on-the-dip attitude that infects everyone from mutual-fund managers to individual investors, who can blame these sellers? The technology-fund investors have the added woe of not knowing what awaits them with the year 2000 changeover, something that a slew of tech companies that reported earnings this week said, suddenly, had begun to impact the bottom line negatively.

While these reasons all have resonance, your basic trader is a superstitious fellow, given to viewing charts that show graphically how a company's stock has fared over time. One quick perusal of the chart book shows a heart-stopping dip every 10th month of the year. Why tempt fate? Why not just get out ahead of that plunging line?

I wish I could tell you that in my business I am known as Mr. October, like some sort of stock-market Reggie Jackson who steps up to the plate to trade while others quake and shiver. But I'm not. I took an intentional walk. We sold a hefty amount of stock going into the month, raising cash to 50%, an abnormally high level for my hedge fund. As stocks have come down, I have reapplied that money to the market in a gingerly fashion. But the bulk of our spare cash is quietly benched in the bond market, waiting patiently for another 500-point sell-off to be put back on the stock field. Long-termers: Strictly sit tight. October too shall pass.

We've got only a couple of weeks of this horrid month left to get through. But that money won't burn a hole in our pocket, at least not until Nov. 1, 1999, when the spirits that haunt the market will vanish and the coast will once again be clear.

James Cramer, a hedge-fund manager, writes for thestreet.com This column should not be construed as advice to buy or sell stocks