Bookends on the Tangible-Value Spectrum: Gold, Tech
By Bill Fleckenstein
12/11/2002 18:28
Ramp at Reveille: The overnight markets were a snooze, as were our stock index futures, other than a pretty decent jam job a couple of hours preopening, which in the space of 30 minutes hoisted the S&Ps up about 1%, to take them marginally positive. However, by the time the casino opened for business, they were under pressure, and ditto the market in general, to the tune of 0.5% or so.
Dog-Paddling Through Seaweed: Immediately, of course, the dipsters surfaced. The buying was apparently precipitated by what looked like a good-sized ramp in the S&P , which pulled up the tape. That said, there were some problems in technology to deal with, namely a preannouncement from CDW Computer Centers CDWC (more about that below), and foremost, that the much-anticipated Seagate STX storage-tech deal turned out to be a dog. After an original target range of $13 to $15, the stock was priced at $12 last night. Then, at the bell this morning, it immediately opened down about 50 cents, which is also where it closed, not exactly an indication of strong demand. I don't remember seeing such a widely ballyhooed deal bust so hard on the opening print in many, many years.
Mediocre Trip to the Midway: The early-morning dip-buying spree carried until about midday, when we established the highs for the day, up about 1%, plus or minus, depending on the index. From there, we drifted sideways, basically settling about midway through the day's range. There was nothing too remarkable to report, other than a generalized ability to shake off a little bad news, though not much upside progress was made when the market appeared to gain some momentum.
Of Polls and Corinthian Columns: Tomorrow we'll learn about retail sales, and Friday, the University of Michigan confidence survey. If the two most recent polls (one by ABC , and the other, the IBD/TIPP survey commissioned by Investor's Business Daily ) are any indication, consumer confidence has taken a turn for the worse. The fact that the "refi index" has been down three weeks in a row may also indicate a further weakening of consumer demand. We'll see if the next two data points corroborate that view.
Index Close Change
Dow 8589.14 +14.88
S&P 500 904.96 +0.51
Nasdaq Composite 1396.59 +5.83
Nasdaq 100 1036.34 +3.27
Russell 2000 393.88 +0.41
Semiconductor Index (SOX) 323.61 +0.60
Bank Index 763.64 -2.60
Amex Gold Bugs Index 126.61 +3.08
Dow Transports 2348.06 -5.32
Dow Utilities 205.21 +2.22
NYSE advance-decline +340 -863
Nikkei 225 8727.66 -76.86
10-year Treasury Bond 3.99% -0.055
Desire Under the Ingots : Away from stocks, fixed income was up 0.5%, ditto the metals, while the dollar was more or less unchanged. Gold has given a very good account of itself around the $325 level, whereas, in the past, if it was not making upside progress by the minute, it tended to get clubbed. I am told by friends of mine in the know that we are seeing an unusual level of physical demand at these prices, from buyers not usually active at these prices. In other words, it appears that this is not just a bunch of speculators buying futures, in hopes of some kind of breakout. What we are witnessing is real physical demand, something that gold bulls would obviously like to see happen.
The Fort Knox/Fed Knucklehead Equation: The gold market does seem to have taken on a different tone, ever since Fed Governor Bernanke talked about the printing press and, by implication, the sheer worthlessness of these pieces of paper called dollars. (Here's the playback of that admission: "The U.S. government has a technology, called a printing press -- or, today, its electronic equivalent -- that allows it to produce as many U.S. dollars as it wishes at essentially no cost.") Whether or not there is a true cause and effect, I don't know, but it certainly makes sense to me.
Of Fortune Telling and Insider Selling: Shifting to the cause-and-effects-you-can-taste department, this morning, CDW Computer Centers finally gave up the ghost (though after trading down a couple of dollars, the stock did manage a small gain for the day on very heavy volume), preannouncing that the PC market has been "softer than it anticipated since mid-November." There was massive, across-the-board insider selling in early November, just before things started to turn "soft in mid-November." It's amazing how lucky these insiders get sometimes, isn't it? In any case, as I was saying yesterday, this makes virtually a clean sweep for PC purveyors, with the exception of Dell DELL .
Morose Monotone: To recapitulate, a couple of weeks ago, Tech Data TECD talked about weakness in the PC arena. Then, in the last week and a half, in addition to CDWC, we heard from Gateway GTW , Hewlett-Packard HPQ , Ingram Micro IM , Circuit City CC and Best Buy BBY . It should be rather obvious from this list that things are worse in PC land than anticipated by those people of bullish persuasion. (However, anyone who has been paying close attention did not expect things to improve.)
Dell a Cappella, for Now: So, given the unison of this Greek chorus, Dell is now looking as vulnerable as it has in a couple of years to potentially missing earnings estimates, even as people's expectations remain rather high for this quarter. (Of course, when you have a multiple like Dell's, that would suggest a disproportionate consequence on the downside.) It also means that Intel INTC will be vulnerable, and other suppliers to the PC market as well. Here, I would just reprise some made by comments by Andy Grove last night, in response to questions about when the chip industry might recover: "I have no way of guessing how long it's going to be."
In any case, it's obvious that if the people selling the PCs misjudged their inventory requirements, unless demand somehow springs to life, there is going to be some carryover in the first quarter, and the first quarter will be worse than it otherwise would have been. All in all, it's not a pretty picture, and I'm sure this had something to do with why the Seagate deal did so poorly.
The Shirk of Field Work: Meanwhile, in the face of this reality, you have to just wonder what indications of demand Mr. Denial and Mr. Kurlak were looking at that they cited as reasons to be bullish a couple weeks back. This is a glaring example of dead fish who continue to be unable to connect the dots (which doesn't take a genius, given all the help from the field). If Wall Street is to be paid for its research, it's going to have to start doing a better job. |
