Indeed you are correct...more often than not, when a general news magazine such as Time or Newsweek have a "cover story" on the general direction of the stock market, it is as a reliable contrarian indicator as you can get. Same goes for Joe 6-pack...when the retail crowd is flocking in groves one way, you know the end is near and the trend is about to reverse. These general news magazines tend to reflect the thinking of the retail public. When I got out of the retail brokerage scene to trade, I maintained active relationships with several of my old retail clients, because they were/are EXCELLENT contrarian indicators...in fact, taking a 180 degree route from what these J6P's were telling me has proven over time to be my most reliable/infallible trading tool. Like it or not, the average amateur Joe (and the general news mags that reflect J6P's current market sentiments) is/are nearly ALWAYS wrong when it comes to the stock market. So CNBC is on-the-money when they bring up these issues.
The Business Week "Inside Wall Street" pieces are a different story altogether. They have a notorious reputation for being WAAAYYY off the mark when reporting rumors. I'll never forget an incident approx. 10 years ago. Back in my early days as a retail broker, myself and a couple of my broker buddies incited a massive short-squeeze on an illiquid-but-heavily-shorted AMEX-listed stock. Goldman and Bear Stearns and/or their clients had immense short positions in this particular stock (Belmac--BLM/AMEX). Basically, a P.O.S. biotech wannabe, whose main claim to fame at the time was a potential hemmorhoid treatment that was administered through one's belly button (I swear I'm not making this up). We spoke to the AMEX specialist, who told us where Goldman and Bear Stearns' stop-loss buys were positioned. Beginning on a pre-holiday Friday session (can't remember if it was Memorial Day or July 4th), when most traders checked out earlier that day, we started dropping huge "MKT" buy orders 30 minutes before the close that day. In 15 minutes, we had tripped the first of the stop-loss buy orders the shorts had placed, and everything fell like dominoes after that. Within a month, the stock had gone from $6 to over $20--ON NO NEWS. When it hit $17, BW published a story on BLM in it's "Inside Wall Street" column, titled something like "A Wallflower No More," where they insinuated that this long-time loser company suddenly had caught the attention of Wall Street due to it's impressive portfolio of medication candidates. When in fact, the only reason the stock had moved was due to a cadre of 5 retail brokers in Nebraska and Arkansas who had effected a short-squeeze. Yet, by reading the article, you would've thought this company was "onto something big", a la Amgen.
Eighteen months later, the stock was trading at 50 cents and to my knowledge, they never did get anything through the FDA. Yet BW's Inside Wall Street column would've had you believe something "big" was going on when the stock was at $17. Yeah right...the only thing "big" about it was our commissions we were getting when we were cashing our now-ecstatic clients out at $18-$21, when they had bought this P.O.S. 2 months earlier at $6-$9. That particular Inside Wall Street column is still a source of humor to us...none of us is under the auspices of the NASD anymore (which is why I can write this, hehe), but we always share a good laugh about Belmac when we speak to each other and what a joke it was that Business Week wrote it up as if something huge was going on. And for those who will preach at me that we did something immoral...I say to you, we just did what the wirehouses do everyday in manipulating stocks for the benefit of their trading desks/institutional clients. The only difference was, our retail clients were the big winners and Bear Stearns and GSCO were the losers. Essentially, the opposite of how Wall Street really works (institutions win, little guys lose). David vs. Goliath played out in the pits of the American Stock Exchange...and I'm sure the Goldman boys' egos aren't too healthy, knowing they got oosiked by a couple of 20-something retail guys who called Nebraska and Arkansas home.
Perfect example of why CNBC frequently bashes the "Inside Wall Street" column...rarely does anything they print actually pan out. A good reporter would've done some digging around to see who exactly was doing the buying...had they done some due dilly and found out the BLM buyers were 5 retail brokers--none of whom had more than 3 years experience in the brokerage business--the story would've never made it to BW's "Inside Wall Street" column.
Hehe, then again, you never see CNBC reporters bashing Individual Investor magazine. I wonder why II's blunders are off-limits to the yuck-yucks on CNBC...you'd almost think someone at CNBC was related to someone at II.
Gary |
