MB and gang:
A few quick comments.
Last day of quarter and they have bashed the Nasdaq rather brutishly of late (heh, heh, heh), so a rally would not surprise me, especially in tech-nicolour land. If a rally does occur, it might last a couple of days. But if there is no rally, the margin calls will really start to tighten the garrot around this market's throat. I checked with a bunch of brokerage house credit managers and they are nervous but also irresolute,..... no check by noon hour = an "at-the-market sell". Incidentally, they confirmed that the big margins appear concentrated in the Naz stocks, which is what even a casual observer would expect. The Naz led this flying pig up, and it will lead it down.
IBM's chief has beaucoup problems. By June, the accounting has to be cleaned up (to comply with the SEC's nasty mandate to the industry). That alone should create a nice little "negative surprise" for the "dead fish" analysts (Bill, that is a classic phrase). On top of that, he is running out of borrowing power with which to buy back his stock (running at close to $2.0 billion per quarter of late). Then there is the brou-ha-ha with the IBM employees, who didn't like Lou's manipulation of their pension dough. They rebelled and did so very publicly (don't blame them a bit) and picked up the support of CALPERS (the massive and muscular California pension fund). When CALPERS speaks, EVERYBODY listens,.... even Lou, so there goes another bottom line lever. Then there is the fact that he seems to running out of pieces of IBM to sell, so the delightful sleight-of-hand trick of (somehow) finding an auditor who will let you slice a nice chunk of the incoming cash off and plunk it onto the SG&A expense line (which of course enhances the bottom line) is also drying up. Sigh.
With problems coming out of the woodwork in mainframes, the PC business still bleeding profusely, service contracts flattening out, and semi prices sliding, this should be the quarter when old Lou's transparent clothing becomes apparent to even the blindest of the sheep. (Not even wearing underwear you say? Oh my.)
Put options make much sense to this observer over the next few days. Make mine Julys and D-O-O-T-M.
Best, Earlie |
