WHAT IT WAS LIKE AT GROUND ZERO

By James J. Cramer

The week began with a frantic, sweaty call from the greenroom at Good Morning America. "How do I tell people I am scared without scaring them?" I asked my partner, Jeff Berkowitz, at 7:34 a.m., four minutes before going on air for my regular "The Buck Starts Here" segment. "How do I tell them that this bull wants to pull in his horns, even if for a day or two?"

Jeff knows me well, having shared a foxhole in the equity markets for half a dozen years. "You can't go on Good Morning America and start a panic. That will generate a headline, way too high profile," he said. "Just don't be yourself. Don't be upbeat. People will get the message. Stress long-term, but don't smile, don't laugh and don't be glib." Sure enough, 10 minutes later, 10 excruciating minutes after I gave my first downbeat, frowning talk on GMA, my cell phone rang. "What's the matter?" my wife asked. "Who died? How can you be so negative?"

"The market made me scared," I replied. "It's going down big." "Hah," she said. "That's the signal I need. When bulls like you run scared, I want to load the boat up. Everybody will be real negative by the end of the day, setting us up for a terrific snapback rally." Moment of hope. "When?" I said, hoping that my wife, known as the Trading Goddess (for her prescient days as a head trader), would give me a buy signal. "Now? Soon? What time?" The Trading Goddess spoke softly. "I will let you know. But it will come today."

So began a tumultuous week as Hong Kong's tail wagged the U.S. dog down 550 points--and then the dog barked back with 330 points up before returning to the kennel. Once again, the public deserved praise for its ability to put Hong Kong's woes in the correct, minuscule perspective, even as Wall Street bigwigs deserved scorn for trying to incite panic over a country that represents an infinitesimal amount of our commerce.

Strangely, despite the intense selling pressure from overseas, the market opened simply garden-variety ugly at 9:30 a.m. Monday. We dumped and dumped and dumped; we were sure that a global sell-off would ensue from the Southeast Asian fallout, and we wanted to beat the panickers to the exit. The sell-off remained orderly until Barton Biggs, one of the reigning rainmakers on Wall Street, conducted a conference call with Morgan Stanley Dean Witter clients. Set up by brokers who actually thought Biggs might be bullish, the big shots who dialed in got a dose of fear that would have chilled Roosevelt in '32. Biggs, it seems, had just come back from the Far East, and he was terrified by what he saw. He invoked all the bearish icons: the Great Depression, the Crash of '29 (I guess '87 seemed too benign), 40%-to-50% declines ahead in emerging markets, and, of course, the long-awaited great bear market in the U.S. Sure, he threw in a couple of caveats, but the tone was all scare. You could see the market aflame even before Biggs had finished spraying lighter fluid. Within minutes I heard traders tell me everything from "Biggs thinks this is the end" to "Biggs says get out now because the market's gonna crash today." No matter that Biggs had been wrong before, including a devastating get-out-of-tech call right at the bottom in 1996. Biggs has clout; he could do damage.

For a few minutes there, around 1 p.m., I found myself saying, Don't worry, the circuit breakers will kick in. That's what we all believed about the never tested market collars designed to let the market--and buyers in particular--catch their breath. Of course, we had never had to use the collars, so who knew? Didn't take long to find out. Traders used these anachronisms, put in when the Dow traded at one-fifth its current valuation, to figure out what to sell. The halt was spooky, flushing sellers from the woodwork when the market reopened. We must have lost 100 points in the time it takes for a bomb to drop from 10,000 ft.

3:08. Sure enough, right at detonation, the Trading Goddess rings and whispers those three little words: "Don't blow it." She was alluding to 10 years ago, when I failed to buy in the last decade's most famous October buying opportunity. My toughest critic/guardian angel unflinchingly said, "Stand there with a bushel basket as stocks come in." What stocks? I wanted names. Too late. She was engrossed in a dot-to-dot with our three-year- old. "I'll leave something to you," she said, and the crystal ball went dark. I would only have a few minutes to buy. At 3:30 the market rammed the 550-point barrier that triggers an hour shutdown. But the exchange closes at 4 p.m. Game, set, match.

Four gazillion television shows wanted me that night--more an indication of TV's grudging recognition that money plays almost as big a role in people's lives as sports. I headed home to my wife and kids. Perhaps it was the screeching headlines waking the bears from hibernation, but I awoke at 2:30 a.m. that night. I couldn't believe I had been dumb enough to buy in that last half-hour. And I had told everybody about it, yet.

Tuesday morning, the first day of the fall, the sun had no warmth. GMA wanted me at Wall and Broad, the mainstream media now covering this sell-off from ground zero. Walking up Wall from my office at the corner of Wall and Water, I was set upon by reporters. Had they waited all night for me? Or did it have something to do with the fact that I was the only one there save for the vendor who sells coffee and bagels. Yet when the paratrooping reporters chute into Wall Street, it smells more like a bottom than a top. Out of nowhere, my bullishness was renewed.

Everybody knows by now that we put in a bottom in that first hour, one that we will no doubt retest in the coming days, but one that smacks of as much of a bottom as its '87 counterpart. As in all bottoms, there were no sellers, just buyers--panicked ones at that--and I had to reach for stocks 2 and 3 points above where they looked to be trading at the time on my screen.

How did we all know it was the bottom? Conventional wisdom has it that IBM's massive buyback triggered the optimism. But those of us in the trenches know that it was a Merrill Lynch monster buy order of Pepsi, entered at 9:31 a.m. by the beverage company itself, that convinced many scared traders that they had better start buying. The cool calm of Pepsi opening flat--most other stocks indicated a $3 or $4 dip--changed everything. Within seconds after the opening bell, Pepsi let it be known that it would General-Jackson its own stock, standing there, Stonewall-like, right under the bid for millions of shares.

For old-timers like me, that smacked exactly of the bottom in '87, when companies took advantage of the madness to buy stock incredibly cheap. Sure enough, by 9:40, even as the market was "looking" down 200, Pepsi was up. We traders, herd animals by instinct, take heart when we see a big capper like Pepsi rallying, and we pull our sell orders. Boom, there goes the supply, and nothing begets demand like no supply.

Next thing you know, by 10:20 the market is flying in the exact opposite direction the pundits told us it would. It rallies 100, pauses for its breath down to plus 30, and then rallies another 100, and it is clear by midday we will have a rout to the upside. Guys who passed on buying Citicorp at 105, and then 110, and then 115, and then 120, and then 125, reach for $128 stock. I personally moved Telebras 10 points in a futile attempt to buy 25,000 shares. At the bottom the screens simply failed to function, and nobody really knew where anything was, but we all knew that something had changed, something for the better, and it felt as lasting as you can get in this nanosecond trading world. I was able to scoop up some Dell Computer at 79 at 10 a.m. and flip it at 89 by 2:30. Same with Chevron and Microsoft. By 2:45 it was an upside panic. In fact, Intel triggered a frantic wave of buying simply by not denying a rumor, reported on CNBC, that it was about to announce a massive buyback. In fact, it has one already, but why knock a specious but positive report? In the closing hour I locked in profits from the morning that normally take me three to four quarters to ring up. The rest of the week traders staggered in and out of stocks madly until Friday, when trading seemed to just stop out of sheer exhaustion.

What happens now? As every trader knows, we have to retest the ugliness of last Monday before we have the cathartic capitulation. In fact the rest of the week unfolded in textbook irony, almost exactly like '87's postcrash aftermath. Which means we are probably a few more days away from a bottom. How will you know? Easy: business will be back on the business pages where it belongs, and talk of a year-end rally will fill the air. And the only people still at the corner of Broad and Wall at 6 a.m. will be selling coffee and bagels.

The author is a hedge-fund manager. He currently owns option calls on Pepsico. His regular musing on the stock market can be found on the Web at TheStreet.com