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Fear of Buying

Wall Street's Pearl Harbor has come and gone, and the tide has turned, so why aren't you buying again? Come on, folks, the only thing you have to fear is fear itself!

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I told you things were getting better, but the bears keep proselytizing you and you keep listening to them! By now, people should respect this market for what it is: a new bull market, filled with new highs and broad advances on many different fronts. By now, people should be bragging about being in the market, not boasting about having gotten out before they got hurt.

But you aren't listening to me, are you? Because you're still too scared. Months after the colossal losses stopped, the damage from last year's nasdaq bear still oppresses us, like a radioactive cloud that's drifted far from the original blast zone. The losses were simply too great to allow any joy or celebration over new gains this soon. The collapse of the techs, where everyone had clustered, still has our capital tied up in losing positions, with no ability to move on to bigger and better things. And nobody at the big brokerage houses seems to have enough credibility to tell us to buy anything.

So the market has no champions. Those who loved it all last year are now silently indicted as charlatans; they lost us way too much money to still be called gurus. We don't want to hear them tell us to get back in now, since they never got us out before. The bearish strategists of last year, those who bailed before the carnage, almost all remain full-fledged bears, blind to the stocks that are ramping up and the Federal Reserve's aggressive actions that have made the market safe to invest in again. Many of them are hedge-fund managers who scored last year on the short side and refuse to cover and go long now because the "fundamentals" haven't yet turned. They are blind not only to the terrific breadth of the market but to history: Stocks always turn up ahead of the fundamentals. These guys are destined to give back this year what they made on the short side last year. With the exception of a couple of renegades, I don't know anyone who despised the market last year but loves it now.

I've seen it like this once before: a move up in the market without any of the usual enthusiasm or excitement. No one then seemed to be enjoying the sudden bounty. Then as now, nobody believed we could ever make big money again, even as big money started to be made.

I'm talking about 1988, just after the October crash of 1987, when the market began an ascent that, until it was briefly interrupted in 1990, continued until last year's horrendous sell-off. Back then, we saw this same kind of incredible action, with many different groups rising. There's just something about these crashes that makes people too skittish to do what should come naturally: buy.

Last year, when the Federal Reserve was still raising rates and stifling the economy, people wanted to buy every dip. Right now we are having a dip courtesy of an unexpected change in the Senate leadership (and some elusive earnings in technology stocks), and people fear this dip as if we were about to head back to new lows at any moment.

But look how things have changed compared with last year. Back then, we were just beginning to head into the tech decline, as we were seeing the total collapse of the dot-com movement and the drying-up of the initial-public-offering market. We had a Federal Reserve that complained regularly that the economy was too hot and the market too speculative.

Today we are just a season away from what the Street calls "easy comparisons" -- that's where companies get to report earnings that compare favorably with past weakness -- and analysts will be predictably ecstatic; it happens every time. The dot-com collapse is now so historical that people are bored with it, and the survivors are starting to order equipment again, making comparisons even in the ne'er-do-well tech group easier and better.

Most important, I have never seen the Fed more motivated to make us want to be in the market -- except perhaps after the crash of '87. The Fed is taking rates down to where cash will look and feel and earn like trash -- we are only a rate cut away from 3.5 percent, where people historically have said, Get me some stocks with dividends. And the only word we hear from the Fed is that it is still worried about the economy not turning around fast enough! Oh, sure, there are some things that aren't going the bulls' way: A GOP-controlled Senate would have taken some of the worry out of the oil drillers and the drug companies, both of which were benefiting from congressional leadership that was trying to outdo even our president in helping these industries. The earnings shortfalls and bankruptcies among indebted phone companies still continue apace. And retailers still haven't felt the spike that will come from a tax cut.

But Bush's just-passed tax bill should give you good reason to believe that the April-May rally -- a rally that took everyone by surprise -- will morph into a terrific summer explosion as consumers find no place to put their newfound money except into stocks.

Why am I so confident that 2001 is going to turn out like 1988, the beginning of a sustained multiyear move upward? Because just before 1987, I had turned bearish -- I still think it was my greatest call -- and I clung to that bear with all my might as a talisman for the future. I couldn't believe we could ever snap back quickly from those losses. I shorted most of the comeback for the year, ceding point after point to the bulls. I was so wrong. It took me a full year before I realized that the Fed had engineered a superlative, broad bull market. Just like now.

So sure, be skeptical of the turn. Take a jaundiced approach to the quick buck. Be wary of a speculative approach to the market, especially the nasdaq. But don't bet against it. This market's going higher.

TheStreet.com
Check out this week's "10 Questions" on TheStreet.com, spotlighting Tim Quinlisk, manager of John Hancock's Large Cap Value Fund and Focused Relative Value Fund. Available free at www.thestreet.com.

James J. Cramer is co-founder of TheStreet.com. He often buys and sells securities that are the subject of his columns and articles, both before and after they are published, and the positions that he takes may change at any time.

E-mail: jjcletters@thestreet.com


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