Just thought I'd share a little Fed Humor and market observations, courtesy of Goran Yardanoff,Tradingmarkets.com
"Wow, that Fed meeting had as much drama and suspense as a Baywatch episode (minus the eye-candy).
Here's the key excerpt from the Fed's statement following the 50 bp rate cut: "The possibility that this excess could continue for some time and the potential for weakness in global economic conditions suggest substantial risks that demand and production could remain soft. In these circumstances, when the economic situation could be evolving rapidly, the Federal Reserve will need to monitor developments closely."
Once again the herds rushed in to buy stocks after the spinsters on television made it look like this statement hinted that an intermeeting rate cut was a real possibility. For the love of God! The FOMC's 50bp rate cut barely had its umbilical cord cut before the spindoctors on bubblevision began hyping yet another cut. After all, Fed cuts mean free money for investors, right? This is not reasonable behavior nor does it lend any validity to the argument I have been hearing that the Street is too negative. Au contraire, the Street thinks the Fed will be there to help inflate the bubble once again and there is absolutely no fear to be found. Bottom? We haven't even begun to see a hint of a bottom yet.
Tell me what there was to fuel this speculation? The fact that the statement ended with the words "the Federal Reserve will need to monitor developments closely"? What the heck did we expect them to say "the Fed will play with their Sony Playstations, drink martinis, and generally ignore all economic developments from now until the next scheduled FOMC meeting"?
In addition, the Fed went on to state that the decline in the stock market is having a negative influence on consumer spending. Really? You mean when people open their mutual fund statements this month and see their (CSCO) under $19, (INTC) at $24, (JDSU) at $21 and their (SUNW) at $17 they won't feel like running out and spending $80 on a ripped up pair of shorts from Abercrombie and Fitch? You don't say?
Which leads me to my ultimate point (you knew we'd get there sooner or later, didn't you?):
I had a revelation today. That although certain sectors have been decimated, the psychology that created the market bubble in the Nasdaq composite is still alive and well. In fact, it is hungrier now than ever before. Investors who rode the gravy train of the technology sector bubble from 1997-2000 are now looking for the next hot sector to make back all of their losses. You may think that many of these same people who are down 60+% in their portfolios would be afraid of stocks at this juncture? Forget about it. Perhaps they may have learned to be a bit more cautious about the stocks they buy and their asset allocation? Fat chance. Stocks like Chicos FAS (CHCS) which is up almost 3000% (yes, three thousand percent) since 1997 continue to catch big bids after they make the "hot stocks" column on the front page of IBD this morning.
Investors still don't learn that the "trendy" small retailing stocks that are all the rage one month are commonly lining the bottom of the bird cage the next month. How anyone in their right mind can buy a stock like CHCS when it has been up 3000% in the past four years and displaying a clear double top on its monthly chart is beyond me. No, I take that back… they buy this stock because they are told to buy it. All the while, insiders continue their historic dump of holdings in all retail stocks -- check out (AEOS), (ANF), (CHCS), (JNY), (BEBE), (TJX), (FD), etc.
Investors are told by the retail analysts not to miss out on the "breakout" that's coming. Similar to the "breakouts" we saw on (CHKP), (VRSN) and (CMVT) when they made their heroic moves to new highs a few months ago? What happened after those breakouts? They all broke down in horrifying fashion. (Check out their weekly charts and go back to 1997.)
Reason? They were all up multi-thousand percent over the past two to four years and we all know that trees don't grow to the sky. Find the patterns and profit on the stupidity and greed that is still alive and well on the street. As long as this mentality that helped create the bubble still thrives, as long as the "greater sucker" theory still works for the brokerage houses pumping trash like CHCS and BEBE, this market will in no way form a bottom in the foreseeable future.
By the way, does anyone still have that awesome Mossimo outfit that the Street was raging about a few years back? |
