Wow! Do you think he read the thread today?! From the Daily Rap authored by Fleckenstein. Excerpt followed by the full text.
>>Stock disclaimer: I'd like to make the following point clear. In the past, whenever I have mentioned a long, on whatever rare occasion I've done that, I've always been very careful to make that point clear. However, I haven't always done that on the short side, and the reason is, because I'm a bear it has a disproportional impact potentially when I find something to like. And more important, there are literally thousands and thousands more people who are able or willing to go long for every one who might be willing to go short.
I have always felt that it didn't make much difference if I disclosed the things I was short. That's because it really didn't make much difference in terms of market impact, given the fact that few people are able to take any action on what I might say, even if they felt like they wanted to. Having said that, I'd like to make it perfectly clear that I do have an ax to grind in some of these situations. The short portfolio that I have often times is focused on some of the areas that I mention negatively, which is why I'm aware of the fundamentals.
I would like to point out that in the last month or so, I have spoken negatively about certain PC stocks or chip stocks. So what I'd like to do is just include the list of the names of the companies where I have actually spoken negatively about their stock price or spoken indirectly about the industry that they're in. I'm sure this won't be much of a shock to people who read me regularly, as most folks know I run a short portfolio and can pretty much tell that I have an interest on the down side. But in the interest of complete interpersonal full disclosure, here's the list in no particular order: Compaq (CPQ), Intel (INTC), Micron (MU), Gateway (GTW), Dell (DELL), IBM (IBM), Apple (AAPL) and Rambus (RMBS). So in the future, if I mention something specifically negative, I will disclose if I have an interest.<<
Daily Market Rap
Bill's Upcoming TV Appearances:
First Thursday of the month, 2:20 PST, CNBC debate.
June 8, 1999
Market Rap with Bill Fleckenstein
Another bad day for stocks
Asia was pretty quiet last night, except for some of the smaller markets that were a fair bit stronger. The strongest was Indonesia, up about 12 percent on the back on election results that were perceived to be quite positive.
Indonesia makes a move... The Indonesian market has had one hellacious move, almost doubling in the last six weeks or so. We passed along that we were kind of friendly toward it when the Central Bank of Indonesia decided to hitch its star to the New Zealand Central Bank. Obviously we weren't bullish enough or aggressive enough, but I know a few readers took advantage of it. What to do now? If the thing starts to act shaky behind this election, you might want to take some profits. On the other hand, it might be the start of something really big. I really don't know. Your guess is as good as mine at this point.
Yesterday was the second-lowest volume of the year on the New York Stock Exchange, so the explosion to the upside was really pretty thin. There was no big news overnight, and the only news we'll see will come from the Paine Webber conference.
Internets head south... Initially this morning, action was again fairly light. We had a lot of movement in the Internet stocks - some up a bunch, some down a little, some up and down. But as the day wore on, the direction mostly turned south, with a few exceptions. Almost all the Internet stocks closed down 5 percent or so. There were some that bucked the trend, like Priceline (PCLN) and a few others, but mostly they headed south.
PCs names sink... We had a negative PC call out of DLJ. The analyst there is a borderline live fish; at least he's been more on top of the situation than some of the others. That negatively affected the PC stocks all day long and they closed pretty much near their worst levels. In the early going, the exception was the number-one memory producer, Micron (MU), which was up a couple of bucks. But about the time the company's presentation began at the Paine Webber conference, that stock began to take on water. God knows why it was up - the stock had rallied nearly $7, or about 20 percent, as the price of DRAMs has gone nowhere, after having been cut in half. (And that occurred while the world economy was strong and PC sales actually held together.) It's just a marvel to me to see the disconnect between business fundamentals and prices.
Chip stocks slide... In the rest of technology, chip stocks were for the most part down, and down rather indiscriminately with no particular rhyme or reason or pattern to the movement. The semiconductor equipment stocks were slightly firmer. Interestingly enough, Microsoft (MSFT) was up a couple of dollars and quite firm in the early going on the back of its presentation at Paine Webber, but it too ran out of gas. So all in all, it was a very heavy day in technology. The Nasdaq 100 and the Morgan Stanley High Tech index both were down about 3 percent.
Is the end near?... So if we're going to have a dip-buying rally that fails, this is kind of what it might look like. Not to say that this one will fail, but it looks the most like a failing rally of any we've seen so far. Especially if you like to look at the squiggles on the chart, you could make a case that that potentially has happened. But as we all know, and as I have said many times, figuring out the end to the biggest mania of the 20th century is going to be a low-probability event. So our guesses are liable to prove wide of the mark most of the time - as they have in the past - but that doesn't mean we won't keep trying. I would think that all the people who've bought the dip and have been using margin, while they've had some relief, a lot of that relief was taken away today. So it will be interesting to see what happens next.
Once again volume was very light today. I happen to think that's a bearish development: you need big volume to move things higher. But being a bear, a lot of things look bearish to me that don't look bearish to other folks.
Gold drops... Gold had opened with a giant thud, down $3 in the early going, got down as low as $4 and actually closed down a little over $3. It continues to be unable to mount much of a rally, and actually pulled silver down about a percent with it.
Euro gets a bid... One of the more interesting developments today is that the euro, the newest dog currency, got quite a bid this morning, up about a percent and a half against the dollar, and the dollar was down about a percent and a half against the yen. What appears to be happening is, money is actually moving out of dollar-yen and into euros. Apparently the crosses are not deep enough and so the dollar gets beat up in the transition. Obviously money must be flowing into the yen to some degree as well. There was a tremendous amount of crosscurrents and rumors today. While it's certainly possible that the Japanese could be making some currency shifts, it is also possible that some large hedge funds have been getting into trouble with their carry trades, which would explain the violent move up in the euro and the yen, as well as in the Swiss franc.
For people who don't know, the object of these trades is to borrow money in a low-yielding currency, so therefore your cost of funds is not much. You then short that currency and move the money into dollars, and you collect a big coupon on U.S. government debt. Today all parts of that trade went against folks. (The owning of bonds or owning of 5-year notes or 2-year notes has been going against people for a while now.) So we had pretty big moves in the foreign exchange markets. We'll have to see if this is the start of something big or if it's just noise.
Battle cry for bonds... Once again in the bond market we had an early bid, which completely fizzled, and the bonds fell back in their own weight. Late in the day, as the bonds were flirting with unchanged, they basically fell apart in the last hour and closed down half a dollar, right about on 6 percent. So it was just another bad day in the bond market. And I stick to the battle cry that I've maintained all year: bonds can't rally until stocks get smacked. Repeat after me: bonds can't rally until stocks get smacked. That's the biggest problem the bonds have had and it's something I've actually been right about. I'll try not to break my arm patting myself on the back for getting something right.
Stock disclaimer: I'd like to make the following point clear. In the past, whenever I have mentioned a long, on whatever rare occasion I've done that, I've always been very careful to make that point clear. However, I haven't always done that on the short side, and the reason is, because I'm a bear it has a disproportional impact potentially when I find something to like. And more important, there are literally thousands and thousands more people who are able or willing to go long for every one who might be willing to go short.
I have always felt that it didn't make much difference if I disclosed the things I was short. That's because it really didn't make much difference in terms of market impact, given the fact that few people are able to take any action on what I might say, even if they felt like they wanted to. Having said that, I'd like to make it perfectly clear that I do have an ax to grind in some of these situations. The short portfolio that I have often times is focused on some of the areas that I mention negatively, which is why I'm aware of the fundamentals.
I would like to point out that in the last month or so, I have spoken negatively about certain PC stocks or chip stocks. So what I'd like to do is just include the list of the names of the companies where I have actually spoken negatively about their stock price or spoken indirectly about the industry that they're in. I'm sure this won't be much of a shock to people who read me regularly, as most folks know I run a short portfolio and can pretty much tell that I have an interest on the down side. But in the interest of complete interpersonal full disclosure, here's the list in no particular order: Compaq (CPQ), Intel (INTC), Micron (MU), Gateway (GTW), Dell (DELL), IBM (IBM), Apple (AAPL) and Rambus (RMBS). So in the future, if I mention something specifically negative, I will disclose if I have an interest.
If anyone missed the 1929 analogy that we wrote on May 5, click here to read it.
Please be sure you've read "What is the Market Rap?" before you send me email. As highlighted in this outline, there are certain questions to which I am unable to respond.
William A. Fleckenstein <fleckenstein@go2net.com>, special to StockSite.
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