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Strategies & Market Trends : Classic TA Workplace

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To: marginmike who wrote (51514)	8/28/2002 2:29:27 PM
From: reaper	Read Replies (1) of 209892

i dont think the 'sentiment' is largely as negative as you depict (i) bear cover stories READ the stories. there's a bear on the cover but the articles all say 'market ALWAYS comes back; LTBH wins; don't panic; yada yada yada' (ii) high short interest yes its high, but you need to consider the effects of (a) convertible arbitrage (and remember dynamic hedging makes you short more as the market declines) (b) success of traditional 'hedged' long-short funds and the incremental capital they are gathering (iii) corporate buybacks humming again bull-sh8t. corporate buyback ANNOUNCEMENTS humming again. read the financials -- they aren't actually buying back the stock, on the whole. and they don't have the FREE cash flow to do so. the lack of available free cash flow is also highlighted in the total dearth of cash acquisitions that are happening. Buffett is the only guy w/ any money. other things i would add: (i) corporate bond spreads at (recent) historic highs -- cost of capital increasing (ii) since the rally my friends have gotten back to calling me a 'broken clock' that of course is going to be right once in a generation. (i choose not to remind them they are long PALM at the IPO price and all my incremental $ went into zero-coupon treasuries and TIPS from 1998-2002) (iii) volume is drying up -- shows overall dis-interest / ambivalence. I am going to re-iterate what i've said here a gazillion times re: sentiment. The crowd is RIGHT. Stock prices aren't set in a vacuum; they are set by the MARGINAL buyer and seller. And the marginal particpant in the equity markets today is a SELLER. In a bear market one would expect sentiment to gradually get more negative (which it is doing), but i would argue that as per my examples above we are no where near the extreme negative sentiment readings that would be the mirror image of Spring 2000. This of course offers no help in 'wiggle' time frames (as far as i'm concerned anything less than 18 months is a 'wiggle') Cheers

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