Twenty days at Amagansett, without a care in the world. Well, sort of. Last year, when I quit the hedge-fund business, I looked forward to taking a real vacation, one where I wasn’t watching CNBC and checking in to the office seven times a day, buying and selling stocks from the cell phone under the umbrella, oblivious to the waves, to the wife, and, yes, even to the children burying my body under the wet, hot sand. I had never taken that much vacation, ever. I always stayed in touch, even during the honeymoon. (Especially during the honeymoon, since my wife and I worked together at the time.)
This year, though, all I had at stake was my personal portfolio: $3 million and change that I had decided to run on my own to keep my hand in the markets. I chose to run it publicly – announcing every trade as I made it on TheStreet.com’s subscription section – for the benefit of my readers and those who watch me on CNBC. The funny thing is that whether it’s the $300 million-plus that I was running privately for a bunch of rich people or the $3 million now, it’s still just as painful to lose money … and this vacation, I lost money.
I tried to tell myself, when I drove my mountain bike to Lisa’s Deli each morning, that I was buying the Journal for those crackerjack front-page stories in the first section and not the morose numbers in the third section. I tried not to punch in symbols the few times I went online, particularly for the more problematic of my holdings. And I certainly didn’t want to ask my assistant for my personal fund’s net worth … even though the rest of the world already knew it. (For a snapshot of my portfolio at the time I wrote this, click here.)
I had left standing instructions not to bother me about any stock that I owned or was thinking about buying unless it plummeted substantially. Which was why it was so jarring to get a call from Rachel, one of my assistants, before I had even gotten to the Manorville exit on the L.I.E. Fluor had hit my buy point, she told me. The construction-and-engineering company had touched $38, where I had said I would pick up some more. Frankly, though, I never really thought it would hit $38, not unless thermonuclear war broke out. So I bought some more then and there, by cell phone, and the trade was dutifully tallied up on my public Website portfolio.
“Looks like I picked the wrong time to go public with my buys and sells,” I told my dad, who was driving with us to the beach to begin our Hamptons holiday.
“Wait a second,” he said, hearing the slight panic in my voice when I explained that Fluor had hit my extreme price target for buying. “I thought you got out of that game.” My dad was thrilled when I retired from the hedge-fund business last year; he feared that I would never get out of that pressure cooker alive.
“Don’t worry,” I told him. “This is just a little portfolio I run to show everybody what I do.”
“You mean people know you’re taking a beating in Fluor? You’re making it public?”
When I said yes, he said he thought I had sacrificed one high-paying headache, where I was compensated millions of dollars for getting it right, for another, where I made nothing and would receive more ridicule than any one person should have to handle. When I told him I intended to give the gains away to charity, he said I should have my head examined on the spot. “And I don’t think there is enough Zyprexa in Amagansett for the job,” he added, knowing his pharmacology cold.
But despite Fluor and a couple of other stinkers I had been buying because I like the engineering-and-construction sector, I have to admit it’s a pretty cool idea to run money so all can see it, to wrestle publicly with all the questions a portfolio generates, and to do it yourself, without being able to yell over to an analyst, “Find out what’s wrong with Fluor, and I want to know now!” It’s kind of like … well, like real life. It’s how most people run their money, and at least until now, I’ve enjoyed the challenge. So far, I’m down about 5 percent since the experiment began in April. (Better than the market, but still painful.) I let everyone who subscribes to my portfolio product know what I am going to do, ahead of when I do it, via e-mail. I fret over declines, debate selling the winners and adding to the losers, and attempt to cut losses as best as I can by simply admitting I have made a mistake. (Contractually, I can’t sell until four months after I buy, to prevent flipping. I also can’t touch a stock that I mention on television for five days.)
I am trying to do things differently from the traditional Wall Street don’t-blame-us approach. When I think I have made a mistake, instead of saying “I would hold that until it gets cheaper,” I just call it a mistake – as I did in March when I bought EMC in the thirties – so that my readers don’t copy me into oblivion. I rail against analysts who downgrade my stocks because the stocks have lost momentum, and I buy stocks that are beaten up after they are downgraded because I don’t care how I do this quarter and am willing to sit with the position.
I bought a ton of Microsoft and then helplessly watched it run up after its appellate-court victory, something that would have led to some quick scalps had I owned the position at the hedge fund. I own oil and oil-service stocks that have simply cratered, and I own retail stocks that have been hot as a pistol going into tax-rebate season.
Unlike most portfolios that were created in the past few years, mine has very little tech. I’m “overweighted,” to use the portfolio term, in financials, meaning I own a ton of brokerage and financial stocks, because I think they will do well in a lower-interest-rate environment – so far they haven’t.
It’s been a humbling and, at times, just plain embarrassing experience. People e-mail me and tell me what a knucklehead I am for my bad buys. They praise themselves for following me on the good ones. Still, I wouldn’t have it any other way. I think that showing the process, blemishes and all, is the easiest way to demystify the investing game, which is a mission I’ve been on for five years now, ever since we started TheStreet.com. With this crummy market, that means there won’t be any rest on my next trip to the Hamptons. Fortunately, I’m not going back until next summer!
Check out TheStreet.com’s “10 Questions” feature this week. Jordan Schreiber, manager of the Merrill Lynch Healthcare Fund, is on the hot seat. Available free of charge at www.thestreet.com.
James J. Cramer is co-founder of TheStreet.com. At the time of publication, he owned stock in Fluor, EMC, and Microsoft. 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.