Bob Brinker calling for COMPX to drop 70% from March high!
from the Street.com
And the Winner Is
I'm certain Bleier, Belski and Payne weren't the only ones talking bottom Wednesday, and the very fact so many people continue to make those pronouncements means "we're not even close to a bottom," according to Bob Brinker, editor and publisher of Bob Brinker's Marketimer and host of ABC Radio's "MoneyTalk." (Check out www.bobbrinker.com for more information.)
"When we get to a bottom, nobody will be saying 'Let's buy' because the spirit will have been drained from the Nasdaq monster," he said.
But those "animal spirits" are alive and well, Brinker said, noting Applied Micro Circuits (AMCC:Nasdaq - news - boards) rose as much as 5% in after-hours activity; the chipmaker produced better-than-expected earnings and revenue, and set a 2-for-1 (remember those?) stock split.
The financial press has a habit of overlooking Brinker, the overwhelming winner to last night's request for alternative suggestions for "Guru of the Year" (thanks to all the emailers). Maybe it's because he's in Henderson, Nev., and the antithesis of a media hound, but -- for whatever reasons -- this isn't the first time he's been neglected by the Fourth Estate. Back in 1998, readers selected him as the top Unsung Hero for calling the bottom in October that year.
In January, Brinker said he revised a 10-year recommendation that investors be 100% in equities, suggesting they reduce equity allocation to 40% from 100% and raise cash to 60% from zero.
Brinker's proprietary (of course) market-timing model has remained bearish since January, save for brief trading rally recommendations. In late May he recommended buying the Nasdaq 100 Trust (QQQ:Amex - news - boards) (a call that caught the attention of a noted trader ). The QQQs were trading around $74 at the time, and Brinker recommended selling them if/when they reached $100, which they hit on July 17. The QQQs declined thereafter and have since rallied back to as high as $103 33/64 on Sept. 1, but closed at $77 1/16 on Wednesday.
Nothing that occurred Wednesday (or any other day of late) has Brinker rethinking his view that we've entered a true, honest-to-Pete bear market. The market watcher believes the bear will not abate until 2001 at the earliest, and not until it has extracted declines in excess of 20% from the Dow, S&P and Wilshire 5000 from their respective tops, and up to 70% for the Comp from its apex.
Think those kind of losses are crazy or absolutely impossible to contemplate?
Well, that's because you're in what Brinker calls the "denial phase" (which features ridicule of those who are bearish), the first of three psychological stages of a bear market. The newsletter writer sees most market participants as having already gone through denial and now in the "anxiety stage," when they realize the downturn isn't going to suddenly evaporate.
At least, they should be anxious, given the Comp is now seven months into a decline that has shaved over 37% from its peak.
The "capitulation stage" follows anxiety and occurs when people "throw in the towel and say 'get me out at any price. I'm never going to invest in the stock market again'," Brinker said.
The very fact that you're reading this and I'm getting paid to write it should be a clue that we've yet to enter that kind of environment; Brinker offered another.
Back in May, the market watcher estimated the theoretical price-to-earnings ratio for the 20 largest stocks with positive earnings in the Nasdaq 100 was a whopping 182 times estimated 2000 results and 134 times estimated 2001 results.
This month, the newsletter calculated that the P/E for the 30 largest -- and presumably not the fastest-growing -- companies in the NDX was still a hefty 96 times 2001 estimates.
"We are nowhere near a final bottom. It's not even on the radar screen," Brinker concluded after reviewing the figures. "Anyone who thinks we're going to have a happy ending is not realistic."
Am I getting through to you, Alva?
P.S.: Bonus points for naming that cinematic reference.
--------------------------------------------------------------------------------
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task.
-------------------------------------------------------------------------------- |
