Cramer: The Churn Hurts

By
James J. Cramer<br>Commentary from
January 6, 2006, 1:21 AM ET
7 min read

N E W   Y O R K, Dec. 21, 2000 -- The churn is hurting people so badly.

The churn is the real enemy of capital appreciation. Churn means Ariba can be up four today and down four tomorrow, that JDS Uniphase can be up a couple today and down a couple tomorrow. Churn means Broadcom, up 10, down 10, where she stops nobody knows. Churn means no streaks. Churn means no momentum.

Momentum Traders Would Be Thrilled

If these stocks were to go up or down in a straight line, people would be whooping it up.

The momentum traders would be thrilled. The swing traders would be coining money. The investors would be thrilled. They could be in if it were going up, or in tidy cash if they knew for sure it was awful. Instead we have a market that pleases the fewest.

That’s why I have been so adamant about looking at things away from tech, where the churn is minimal. There hasn't been much churn at all in PNC or Mellon or Wells Fargo. General Mills and Phillip Morris and Pfizer and Schering-Plough have been churn-free.

Churn Destroys Capital

Of course, these don’ have the oomph that many of you, particularly the full-time traders among you, want.

Those who were so used to coining money intraday don’t want to hear about how International Paper and Alcoa seemed to have bottomed or that CVS is in a long-term uptrend. Those bore you.

But I am someone who loves boring. I love boring because I hate losing money. Churn destroys capital. Tech is a trade. Because of the churn. Lots of other stuff is investible, because there is no churn. Explore new fields. Look at new stocks. Check out the stocks on the new high list and look for those characteristics. They got there because they weren’t churning. You get the picture.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.