Re: 175 to 90
>>Maybe we should ask everybody on this thread to volunteer their thoughts as to how we went from 175 to 90 (with no bad news, great earnings, etc.) in just a few torturous weeks<<
I'll tell you what happened. Word to the wise - I have botched this snapback rally worse than anyone I know. Take what I say with a huge grain of salt.
Big money wanted to lock in the $30 - $90 runup in AOL. A TRIPLE for a mutual fund holding - can you dig it? Large institutional money always sells all the way down. When you want to lock in $90 what do you do? You run it up to $170 and sell ALL THE WAY DOWN.
You may ask yourself why they would do this? IT LOCKED IN THEIR YOY PERFORMANCE. Big Money Boys are immensely satisfied with any positive return YOY, let alone what AOL had done for them. They keep their jobs and prance like pampered prescient prognosticating poodles when they call it right. Here is my scenario, based on what just happened to AOL and every other stock that enjoyed the immense March run-up:
AOL was consolidating in the $90 range, absorbing the huge 4 - 5 month run up it had in its stock price (since the October low). I think Cramer even had an article about how AOL investors were pissed about the lag in the stock price in late February compared to other internet stocks. Seems we hovered around that price for quite awhile (in internet years). People couldn't believe that the other internet stocks were flying past their beloved AOL. Meanwhile, Magellan (and no telling how many other institutional owners) decides that a triple from the October lows is a LOCK FOR THEIR YEAR. What would you do if you wanted to dump 65 million shares to cash in your monster gain?
You would BUY of course. You would whoop up the buying frenzy and get Maria to utter those magic words "STOCK TO BUY IN SIZE" from her admittedly lame post next to the AOL specialist. What happens when you hear those words STOCK TO BUY IN SIZE? It makes you think that it's OK to jump in, if the BIG BOYS are buying I can't be wrong. Big Money probably used 6 million shares as chum to unload the remaining 90% of their stock. How many people do you think looked at an exorbinant PE, an overvalued to the hilt internet play, a confused (or if you prefer - all encompassing) broadband strategy and decided to get in? Not too many, and the ones that did profited handsomely - IF THEY SOLD.
Magellan dumped like 65 million shares onto the market with nary a whimper or loss of profits. Standard correction they called it. They wanted to lock in 90 and they got their wish. You and I bought all the way up (after all, how could huge block buys by institutions not be a good thing?) while they sold it all the way down. It doesn't take a licensed gravedigger to prepare your plot.
Unfortunately, I saw this WAY LATE. By that time I had become FEARFUL OF THE MARKET (which is what they wanted) and I was too gone to see the truth.
I admit it - THE BIG BOYS FAKED ME RIGHT OUT OF MY HEFTY JOCKSTRAP!
I figured last Monday's selloff was the start of a massive internet capitulation. I WAS WRONG. I COULD HAVE BEEN RIGHT JUST AS EASILY. I BET ON THE NUMBERS, AND THEY WENT AGAINST MY POSITIONS.
I still maintain that I am right to adopt a DEFENSIVE POSTURE and to lock in gains when and where I find them. The bears will have a great big stick this fall, namely the Y2K problem. Believe me, you will see the most negative spin imaginable on the least little YK2 glitch. I can almost hear Pisani now, though Lord knows that man haunts my dreams, confirms my nightmares, and otherwise ruins my summer days.
However, I think we will have a nice little summer rally. Too much sideline money chasing too few quality issues, of which AOL is one.
Yours in admittedly ambiguous amalgamations,
C Nelson |
