This was posted last night on one of my other boards, WAVX. This looks like the closest
thing to a possible reality I've seen for the crazy stock swings. What do ya think?
--uphilldeb
Good evening?
Picture this?..
I am a mutual fund manager invested in high-tech stocks. For the last quarter I have
managed to pull out a decent gain even though the market has been very tough to say the
least. The end of the quarter is near and I know that I should dress up my portfolio before
I issue my quarterly report. I will need to sell some of the losers and buy some of the
winners in my portfolio so the shareholders remain confident in my abilities. I should
determine what I need to sell and make adjustments before the end of the week.
(This was the psychology going into Monday)
On Tuesday Abbey Joseph Cohen issues a cautionary statement about high tech stocks.
She doesn't say she is pulling out, she only says she is no longer overweighting the sector.
This shakes the market a little initially, but then everything gets better. However some
managers think they better hurry up and sell the stocks they have chosen to sell so they do
so. They hold the QCOM and CSCO types of course.
On Wednesday this is followed up by 6 additional bear-side analysts chosen by CNBC to
support those comments. 1 mutual fund manager, Mark Mobius, is an emerging country
analyst and doesn't even cover US tech or Net stocks in the first place who has a horrible
track record in the second place. More mutual fund managers join in the selling, and now
a bunch of retail sellers join the party too. All of a sudden we have a snowball rolling
downhill and starting to build momentum.
By Thursday everyone wishes they had sold and any sign of gains are met with heavy
selling pressure. The institutional buyers let the prices drop and decide they will only try to
buy all they can at the rock bottom.
Every Manager begins to not only sell his losers but also sells his winners to lock in gains
and save face for the quarter. The fear and panic escalates, and there is no end in sight.
No bull-side analysts are chosen by CNBC to refute this bearish point of view so the
NASDAQ continues to decline on that momentum.
Finally buy ratings begin to come in late on Thursday and the market begins to look
healthy in the last few minutes of the day.
Questions: Does Abbey Joseph Cohen and the rest of the analysts featured on CNBC
realize that they were making VERY negative comments in the front of likely heavy
selling pressure anyway? How can they justify making calls like this during the final week
of the quarter when they know how mutual fund managers treat the 'window dressing'
issue? Does it make sense? Yes, is my answer, if they wanted the market to decline so
they could buy cheaply.
Next, how can CNBC feature all bear-side analysts and no bull-side analysts for 3 straight
days? This is a disservice to the investment public. I personally know 2 very well
respected bull-side analysts who wanted to be featured. CNBC was riding the momentum
and has added to the fears considerably.
Combined these two issues are the cause of the market dip and it's continuation this
week. This dip should not have taken place; it had just taken place a week ago! There are
no fundamental changes in the market. I know all of the bull side analysts bought
high-tech stocks at the end of the day today, and the NASDAQ will recover immediately
tomorrow. Earnings begin next week, and you can bet that the high-tech companies will
be leading the way.
The bear analysts surely will watch their firms buy these high tech companies and I bet
they currently agree that the prices are acceptable.
The icing on the cake is when CNBC brought Barton Biggs on tonight. As a former
MSDW broker I know that Biggs gets paid to be bearish. He has never been bullish. He
has been a bear for 20 years straight. That was the last sign that we have seen a bottom
in my opinion.
I pull out my hair and teeth when I get caught in this game, and I admit that I am caught
right in the middle. The question begs itself: what should we do?
The answer is try to hold what you have. Do not sell out of fear. A week from now those
same analysts who fueled the Abbey-Syndrome will re-issue buy recommendations in the
sector, and their sheep will be buying at the high prices. Don't be sheep, be shepherds!
Lead the way, and buy at the lows.
These prices are the best that you will see for the year in the high tech sector. Buy as
much as you can. You will look back at this in a week and thank the Blue Monkey that
you did. If you are leveraged to the hilt, just hold tight, everything will be much better in a
few days. |
