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"GE Secondary Crowds Out Other Dow Stocks"

By James J. Cramer
RealMoney Columnist
3/9/2004 9:15 AM EST

" "And where, my good sir, would you like me to put this big block of General Electric (GE:NYSE - commentary - research)?"

All day Monday that thought ran through my head, the thought of a frazzled moving man frantically trying to figure out where he could put down the big gob of GE before he breaks it -- or it breaks the house. "Can't put it here, not enough room," I kept imagining him saying. "Can't put it up there, won't hold. Could put it down here, in the basement, but that won't help the company much."


Yep, there's nothing like taking a stock that had some serious momentum going for it, a stock that had gone up by pennies and nickels since the last disappointing quarter, straight up from the $28 level, and just kiboshing the whole move with a gigantic secondary, one much too large for this market to handle. Instead of a having a stock that looked like it was on the come with some shedding of low-multiple businesses and adding of high-multiple businesses, we have a show-me situation where we had no signal whatsoever that we were going to be hit with such a sizable piece of merchandise. "What's that, you weren't expecting the delivery?" the moving man still stuck in my head is asking. "You didn't order this merchandise? You want to take it back? No-can-do, buddy."

What kind of softening would have been welcome? I don't know what went on behind the scenes at Yahoo! (YHOO:Nasdaq - commentary - research) from $48 to $42, but you know that merchandise placed like that is a treat, something that doesn't inflict much pain.

GE's 118 million-share block, on the other hand, is a massive pain-inflicter. And the timing couldn't be worse: right on top of an employment number that would imply -- rightly or wrongly -- that GE's business is getting soft.


Now the market has work to do. Things need to be shifted around, moved into different rooms, to belabor the analogy, to fit in the GE. Cast off the Caterpillar (CAT:Nasdaq - commentary - research)? Sell the 3M (MMM:NYSE - commentary - research)? Maybe trim the Intel (INTC:Nasdaq - commentary - research)? Bail from United Technologies (UTX:NYSE - commentary - research) or Ingersoll Rand (IR:NYSE - commentary - research)? All were being tried Monday.

The move still isn't done. I think the merchandise will have a $30 handle on it when it finally leaves the store for your account. More pain ahead for the Dow Jones Industrial Average as its big-cap stocks get sold to make room for the new GE stock.


Remember my thesis, one that I have pounded into my head because of the next book I am writing: The businesses aren't as important as the supply of and demand for the stock. Right now, there's not much demand for the big industrials as the 10-year slouches toward 3.5%.

The supply, however, is massive, so large that it blots out the fundamentals, which, I believe, are getting better, not worse.

"Hey, ya mind if I throw this Microsoft (MSFT:Nasdaq - commentary - research) in the dumpster while I bring in the GE? Or would it be better to toss out the Citigroup (C:NYSE - commentary - research)?"

"Whatever, just don't touch the Guidant (GDT:NYSE - commentary - research) or eBay (EBAY:Nasdaq - commentary - research) on the way out." "

(in www.realmoney.com)