Cramer: In Stocks, Loyalty Is Futile

 | Sep 24, 2013 | 7:38 AM EDT
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It's time to talk about the way this business really works, instead of how some less experienced players think it works.

I hadn't thought much of Apple's (AAPL) new phones going into last week's launch, because I had read the Wall Street research that said the new models weren't going to sell well. I had no reason to disagree with that view. The analysts were certainly closer than I was. They follow Apple for a living. The three downgraders -- analysts from UBS, Credit Suisse and Bank of America Merrill -- all said they were disappointed with the phones and the pricing.

So I figured they must be disappointing.

But then, last week, The New York Times' David Pogue and a number of other assembled opinion-makers -- who collectively do determine what we buy and don't buy -- came out and said, "Buy." So I changed my mind. Said so immediately. Many of these critics had become wholesale enthusiasts for Samsung's phones. No more.

Now, in politics you can't switch like that. You will be labeled a flip-flopper. Your base will throw you out. You will lose in the primaries. Your party will not support you in the general election. You will most likely have committed political suicide.

But, in this business, if you stay negative in the face of those critics' glowing reports, you will lose money. There is no political base. There is no primary. There will be no general election. There is no flip-flop. Something has occurred that you could not have gamed: The critics really like the phone. The key to nailing these last 30 points in Apple was to change your mind immediately on the stock, recognizing that the critics, not the analysts, were in control.

That's what a good trader does. He or she seizes that moment and recognizes that the three downgraders were wrong because the phones were better than they had thought. All of their checks and approximations were wrong. Their presumptions were wrong. Because they didn't recognize the greatness of either the new operating system or of the phone itself. Or, more important, they didn't understand how powerful the critics could be. They didn't recognize that the phone was good enough to charge a premium for, which was the underlying notion of the comments by the critics.

Should I have been able to game what Pogue & Co. were going to say? Wrong question. It didn't matter. The stock was barely up when their recommendations came out. There was plenty of time to switch. You didn't need to anticipate a thing.

But you did have to bet that the critics would matter and that they do have tremendous sway here.

Of course, I was immediately lambasted @JimCramer on Twitter for changing my mind even, as I said contemporaneously that these reviews were needle-movers, which was the gutsy call. The naysayers are like members of a base that isn't there. They are non-voters in a district that doesn't exist. They are people who either didn't read or didn't see that I had a good trade going in switching direction, or who don't think that directions should ever be switched.

They think they are being intellectually honest, but they are simply being financially barren.

Look, at no time is this business about pleasing anyone. It is about getting it right. I liked Apple at $50. If I stayed liking it at $700 and still liked it now, I would be someone who is "true blue" on Apple. But "true blue" to what? Apple's not a country. It's not a flag. It's a company with a stock.

You not only have every right to change your mind when something salient happens that can change the direction of the stock. You must change your mind if you are going to be any good and make as much money as possible.

Trading stocks is not and has never been about pleasing anyone or getting someone's vote or trying to toe the line through thick and thin.

It's about making money. It's undignified. It's not loyal. It's not friendly. It's just a question of "Will I make more money doing X or doing Y?" If you do X and it makes more money than Y, you have succeeded. If you do Y and it makes less money than X, you have failed.

The fact that I even have to defend making money shows you that there are plenty of people who think that X and Y don't matter or are the same.

They aren't.

Which is why so many people lose money in this business and then leave it.

They simply don't understand that it's not primary season, it is not an election, they are not single-issue voters and there is no Congress.

There's just money.

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