The Last Waltz:
March 02, 2001
The last waltz
Index Close Change
Dow 10,466.31 +16.17
S & P 500 1,234.18 -7.05
Nasdaq Composite 2,117.63 -65.74
Nasdaq 100 1,881.34 -86.68
Russell 2000 476.88 +3.58
Morgan Stanley Index 567.93 +1 3/4
Sox Index 582.20 +11.44
Bank Index 877.68 -1.02
XAU Gold & Silver Index 52.37 -0.47
Dow Transports 2,915.19 +46.83
Dow Utilities 389.99 +2.55
30-year Treasury Bond 5.36% -34/32
Let me just warn everyone in advance that since today is the last Rap at Silicon Investor, I've taken the liberty of making it a little longer than usual because there's a lot of things I want to cover. Overnight, Tokyo was down about 3 percent as that market continues to plunge. The important focus continues to be where the Nikkei closes at the end of March, the end of their fiscal year, which will have an impact on Japan's financial system. Obviously, things continue to be a mess over there. The overnight futures were lower on the back of preannouncements from Oracle (ORCL), Sanmina (SANM), Southwest Bell (DSW), Adaptec (ADPT), Lattice Semiconductor (LSCC), Amphenol (APH) and The Gap (GPS). Those were the ones I saw -- there could've been more.
Shaking like a leaf on the money tree. . . When the casino opened this morning, it was under pressure due to those preannouncements, most especially Oracle. The opening low was bought. We had a bit of a rally into the Michigan consumer confidence numbers, as everyone is now focused on them because Easy Al supposedly is. Also, folks were lathered up because Mr. Magoo was going to testify again in front of Congress, this time regarding Social Security, and visions of sugarplums once again danced in bubbleonian heads.
One look at the consumer confidence numbers, which turned out to be 90 instead of the expected 88 and change, produced a sell-off that took us to the lows, with the S&P down 2 percent and the Nasdaq down 3 or 4 percent. That low was immediately bought and we had a straight up move that basically carried the S&P up 2 percent and cut the losses in the Nasdaq to 1 or 1 1/2 percent. The lead index once again was the mighty, mighty Sox, which is why I've been focusing on it, and also because there are so many great shorts in semiconductor and semiconductor equipment land.
Take cover. . . The Sox went from being down a few percent in the early going to up a few percent in a slingshot move as folks once again chased the elusive bottom. I also believe there was a huge amount of short covering. To me it was just another tremendous demonstration of the machismo/hope/denial (dare I say stupidity?) that regularly continues to be on display, and probably will be, until we get the big catharsis that in my opinion must occur before there's a rally of any consequence.
But let me be clear -- that rally will only be an interlude rally before we go even lower. The best road map to use is the chart of the Nikkei -- that is our future. For the sake of reference, folks should remember that it peaked out at 40,000 at the end of 1989 and is now at 12,000, and has not quite found the bottom yet, although there have been many rallies along the way.
And that's not even annualized. . . After a slight pause following the first two-hour blast, the market took off on one more ramp-job. At the high of the day the S&P was up nearly 1 percent, the Nasdaq 100 was up 3 percent, flirting with the 2,000 level, and at one point the Sox was up about 8 percent. Just to give you some idea of the amount of latent speculation in the market these days, in roughly six hours of trading, from late yesterday through midday today, the Sox rallied nearly 20 percent. By the end of the day, the Sox still managed to cling to a gain of about 2 percent, but nearly all the semiconductor stocks gave up very large gains to finish with either small gains or slight losses.
Anything in the software area was hit pretty hard as well, as were a lot of the kinky stocks. I think that the enormous move we've had over the last day-and-a-half, and the way it sold off, proves my observation that it was largely short-covering and possibly hot money trying to find a bottom, which seems to occur on a daily basis. The fact that the Nasdaq closed on its lows after being higher on the day on big volume isn't bullish.
After the action of the last few days, if we get more bad news it would seem quite possible that we might actually blow the bottom out of this crap shoot of a stock market. It defies all logic and reasoning to conclude that what is going on, even after all the damage that we've seen, comes anywhere close to resembling investing.
Away from stocks, the euro was higher again, up about 1/2 percent, fixed income was spanked (not surprisingly), with the 10-year down 5/8 of a buck, and the metals were a mixed bag, with the yellow dog down1 percent, as lease rates have come down, and silver was up 1/2 percent. Oil was a little higher as well.
You know what they say: ignorance is nine-tenths of the law. . . Turning to the news, there was an interesting story in The Wall Street Journal that is a fine candidate for the "wave of the future" department. It described a lawsuit against Henry Blodget and Merrill Lynch by a disgruntled investor. I think that given the recklessness that we saw on the way up, there are going to be many suits against brokers, brokerage houses, analysts, mutual funds and companies as the public looks for a scapegoat. I've made this point many times over the last few years, but it looks like the process is actually starting.
On the same subject, in the "if it wasn't so sad it would be funny" department, my friend Colin Negrych reprised an ad for City Group's private wealth management that he saw on CNBC. The ad said, "My job is to help clients carry out their dreams." Colin's comment was: "Coffins can be heavy."
Or should that be Antisocial Insecurity?. . . Speaking of Colin, since this is the last day of the Rap at SI, I want my friends to help out and both Colin and Joanie made some comments that were worth passing along. The first is Colin's take on Mr. Magoo's yapping about social security:
It's pathetic to hear Greenspan arguing for private defined contribution plans for Social Security without making mention of the obviously adverse implications of demographics on this scheme and the consequences of the government retaining the responsibility for bailing out the losers, who may be large in number.
To wit, if everybody puts their "personal Social Security" in stocks, then takes them out over a relatively short time frame (as demographics suggests they would have to), then their stock holdings could produce serious l-o-s-s-e-s, which would leave the government having to provide a safety net, for which it would have reserved next to nothing. This scheme is phase two of the U.S. government's trying to push its debt burden onto citizens by making stocks the primary tool of policy.
Take it from us, please. . . Colin's second e-mail is even more important than the first. You should read every word of it s-l-o-w-l-y because it describes exactly what's transpired, which you need to know to understand what's coming next.
Greenspan's remarks are dancing around the obvious: he has created a bubble. The bubble has produced extraordinary capital gains receipts (both realized and unrealized). (He even notes that ex-capital gains, tax receipts are within their normal range as a percentage of GDP.) The extraordinary capital gains receipts have allowed the government to buy back a lot of publicly held public debt to keep, or push, interest rates lower than they would be if Bill Gross set them, rather than the Social Security system -- a captive account.
This process has led to a "surplus" -- even "on budget" momentarily -- at the expense of people being asked to willingly suspend disbelief regarding asset values, at the urging of the Fed, via constant promotion of "productivity:" Greatest wealth confiscation scheme in history.
Timing the market. . . Now on to Joanie. This morning she had a priceless and hilarious take on government (and for that matter, corporate/Wall Street) spew:
Anybody over 40 remembers that as kids, we were under pain of immediate drowning for going back into the water before a certain amount of time had elapsed between lunch and your next cannonball. Anyhow, there was an authority figure, usually a grandmother or a spinster aunt, who was in charge of determining this break-time for us kids, as obviously, we couldn't be trusted with such a sacrosanct detail. You would present yourself as soon as you had stuffed the last Oreo down your gullet and made to recite the litany of everything you had just ingested.
"Peanut butter and jelly, Hawaiian punch and a chocolate chip." "37 minutes." "Tuna fish, lemonade and an Eskimo pie." "42 minutes." "Large calzone, chocolate shake and a whole bag of Cheez-Doodles." "What size Cheez-Doodles?" "Family size." "OK, Anthony, you can't go swimming until you are 15." (Anthony was 9 at the time, by the way.)
And like little soldiers, we sat there, counting down the minutes until we were risk-free from drowning, asking every 45 seconds or so: "Is my time up yet?" Convinced beyond a shadow of a doubt that Nanny or Aunt Mary had the secret key to the mysterious relationship between dietary intake and the probability of death at sea and further convinced that they were actually counting down those 42 minutes with a stopwatch, we deferred time and again to their expertise. How ridiculous, right? Right.
The excuse here, though, is that we were only 10 years old and subject to the gullibility that goes with that precious age. Fast forward to the year 2001. Yesterday, we heard the economist for the NAPM intone that the February read of 41.9 implies GDP growth of minus 0.3 percent. He also pointed out that the number, while still in contraction, was an up-tick from January and had broken a string of 11 monthly declines. Conclusion? Manufacturing may have put in a bottom in January. Further conclusion? We could be at 2 percent growth by mid-year. Those are quotes, by the way.
Question: What is the difference in believing "29 minutes" is the gospel-truth response to "A slice and a Coke" and a NAPM read of 41.91 up from 41.2 in January equating to +2 percent GDP growth by June? Answer: Nothing, except maybe the recognition that after 30 years of life experience, we still haven't figured out that sometimes the grownups make this crap up just to keep us kids quiet and out of trouble for an hour or so. Now that you know what I really think about projections of this kind, you can extrapolate this out to encompass a whole lotta hocus pocus that we are hangin' our hats on these days.
Also known as a Pucker's Rally. . . I mentioned in the last couple of days that the market didn't do all that well when we had inflows, and asked what it would do when it had outflows. According to the Investment Company Institute, both of the last couple of weeks have seen outflows. If that process really gets started, you can really kiss the market sayonara.
I also want to take a couple of moments to talk about the sign-up at Grant's. All e-mails will be answered. If you have a problem, you can call 1-888-947-2687 during normal EST business hours, Monday through Friday (this is not a 24-hour number). The early problems we experienced have been corrected and the Grant's folks are at your service to solve any new ones that crop up.
I'd like to encourage everyone to be sure and follow Grant's sign-up directions. Some of the problems have been because of folks not being careful about their e-mail addresses, passwords and things like that. The system is working, even if it is a bit slow, and we will help everyone get their subscriptions handled. There do seem to be some problems, however, if you're from a foreign country. If you have a problem, send an e-mail to help@grantsinvestor.com -- please try to be specific -- it will speed the process along. Once again, here's the link to sign up: www.grantsinvestor.com/fleckoffer.
In the error department, in the final edit yesterday, Don Hays was misspelled -- there is no "e" in it. The link was wrong as well, and we've corrected that.
Time to name names. . . Finally, I'd like to give a tip of the hat and a standing "O" to my team of editors at Silicon Investor, they're the best -- Netter, T, and my man, Josh. Thank you all for doing such a great job. |
