The Market Rap
William A. Fleckenstein
05:30 PM 10|16|2001
Intel sticks in a yearning and pulls out an earning, and says, "Oh, what a good stock am I."
Overnight, the foreign markets were slightly firmer. Our futures were also a little stronger last night, but they milled around when the market opened. In the first half hour, we had a quick surge to the upside that was immediately sold, giving back all the early gains and then some. So today was kind of the opposite of what we have been seeing: Instead of an early-morning dip followed by a buying spree, we saw an early-morning rally followed by a selling spree. The net after the first couple of hours was that most of the major indices were either slightly up or slightly down. As for what themes I could make out, it was a case of bad news not mattering or not mattering too much. For instance, even though the Bank of America (BAC) reported less-than-inspiring numbers yesterday, it was up a couple of dollars. This helped to boost the bank stock index up a couple percent. On the other hand, in the early going Novellus (NVLS) was down $1.50, or about 5%, after last night reporting rather disappointing orders.
Ammo Makes The Tape Go Round All in all, I think the action of the early morning and most of the day was just marking time in front of Intel and IBM tonight. Regular readers know that vis-a-vis management's ability to accurately describe future trends, I do not hold an especially expansive soft spot in my heart for Intel and IBM. There, that's putting it like a diplomat. Tonight, I would not be at all surprised to see Intel try to hint that the worst has been seen and it expects things to get better. In any case, do not confuse this with my personal views. It seems that now more than ever, corporate America wants to lay out this particular fable, and I think people are drooling to believe it. The question is, Do they have the ammo with which to make the tape go in that direction? We will be trying to divine this over the course of the next few trading sessions.
And Visions Of Sugarplums Danced In Their Heads As the day wore on, the market found a bid. We spent the second half of the day grinding higher, to essentially close on the high tick. That wasn't exactly true for the S&P, but close enough. The Sox found its legs, up nearly 3%. Everyone was on tenterhooks, waiting for tonight's earnings results and hoping that good stories soon would be spun. As I have said many times, what's important is not what they say but the action that is taken in response to it.
Away from stocks, the metals were mixed. Silver was down 1% and gold was up fractionally. The dollar was up against both the yen and the euro. Fixed income was slightly firmer.
Uncle Sam-Antics On the subject of the complete bastardization of accounting in corporate America, the Heard on the Street column in today's Wall Street Journal ran a useful article entitled "Ignore the Items behind the Curtain: EPS Means Different Things to Different Earnings," by Jonathan Weil. (Registration required for a two-week trial.) The shenanigan of winging it with respect to earnings reporting began with Internet stocks, and it continues to this day. If the government wasn't so hell-bent on putting up stock prices in the name of patriotism, some regulatory body might try to do something in the name of doing the right thing. But when it comes to the financial markets, the government authorities have long since abdicated any sort of moral high ground. Their resolve to push stock prices higher only means we will have a bigger problem down the road.
Say It Ain't So, Peter And while we're on the subject of tape hyping, would someone please tell Peter Lynch to stop touting the greatness of America and its innovations as a reason to pay ridiculous prices for stocks. (America is a great country, technology is wonderful, and capitalism is great. But the stock market is ridiculously expensive.) I'm referring to the full-page ads that have been running in The Wall Street Journal and other places. In them, he opines, "Which way the next 1,000 or 2,000 points in the market will go is anybody's guess, but I believe the next 10,000, 20,000 and 40,000 points will be up." No kidding, since they mathematically cannot drop that many points. |
