Here is what will happen to the shorts in qdek!
The below article was copied from the PAIR thread. Makes you wonder what can
happen when a company is heavily shorted and comes in with good earnings.
Long APM
Shoe
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To: PHIL K. (7103 )
From: AlienTech Jul 10 1997 9:51PM EST
Reply #7167 of 7167
>> GO PAIR <NOE> << Whats NOE? or is it a NOSE?
Heres some intresting tid bits.. At least its not PAIR but dont we wish it was...
"
Cramer Explains How AMD's Terrible Earnings Boosted the Stock
When too many people are short, it just doesn't matter what a company has to say.
Take Wednesday's action. An Advanced Micro number comes out that is a pure,
unadulterated disappointment. I mean if you look up the word disappointing in the
dictionary you will find: "7 cents, AMD's second-quarter earnings report."
It not only missed the high-end whisper number, and the low-end posted numbers, it
even missed the number I thought they had done one month into the quarter.
Downgrades followed as sure as floods follow heavy rain.
At the moment before trading I happened to be talking with a Time magazine reporter
who was visiting the office as part of my Ernie Pyle program to educate reporters to
the front-line hazards of the trading wars. He asked me how far down AMD would
open on that terrible number. I mean, when mainstream reporters from weeklies know
numbers are bad, that's worldwide dissemination.
I looked at him askance. "What makes you think that it will open down?" I wanted to
know. I explained to him that in the new, post-momentum world, stocks don't
necessarily go down on bad numbers. That the only sellers of AMD might be
short-sellers, as the momentum players aren't in business anymore.
But even I, jaundiced, cynical, battle-weary James J. Cramer, was not prepared for
what happened next. AMD, which was initially looking down four, and then down
three, and then down two, and then unchanged, opened up. But not just up -- it
opened up a couple of points. Up enough to have a big hit if you had bet with AMD,
despite its Armageddon number.
How does this happen? Some speculated that AMD offered a decent outlook on the
conference call. But that's rubbish. Anybody who believes anything this company says
about its prospects after that travesty of a number should have his head examined.
Others, including some I caught in a Motley Fool chat room, were saying that AMD
was rallying because the semiconductors were in a rallying mode. Wrong! This group
doesn't trade monolithically. Each semi has its own beat. AMD went up because too
many hedge funds were short the ^%#^$#$% thing. Period. End of reasoning.
Let me explain the new world to you. The day before AMD reported, ADTRAN, a
maker of telecommunications parts, reported a gawdawful number. Really ugly. Not as
bad a miss as AMD's, but extremely inexcusable nonetheless. Bagged all of the longs.
But one minute after the opening Jeff Berkowitz, my diligent partner who follows
ADTRAN, said to me, "The world is short this thing, and it's already knocked down,
so everybody has to cover."
I asked him a simple question: "Do the fundamentals justify buying this stock at all?"
"Absolutely not," he said.
That's all I needed to know. I quickly grabbed 25,000 shares at 25 and a half, off a
fraction from the day before. Fifteen minutes later the stock was up a couple of bucks.
The panic was on. The shorts didn't have a clue why the stock wasn't going down. But
most shorts have no capacity for pain. As soon as ADTRAN didn't go down five
points, they all collectively panicked. Soon people were paying up three for this
stinker. And I let my stock go. Talk about being Wrong and making money!
How can this happen? Again, like AMD, those moron momentum buy-high-sell-lower
guys who should have been there to crater ADTRAN weren't there to sell. They did
their cratering last quarter. Nor did any of that whisper nonsense matter. Now that the
cat is out of the bag about the whisper number -- meaning that the public is finally
gotten wind of this game -- these "secret" numbers have ceased to mean anything.
What matters is that shorts have seeded these stocks with insatiable buyers: none other
than the shorts themselves.
To put it simply: Every hedge fund in the world has scoped out every bad stock
between here and Mars and laid down massive shorts ahead of the
soon-to-be-surprising negative news. When the longs don't sell on the ugly news, you
have the most voracious set of buyers descending on even the worst stocks. |
