Tonight's Mark-to-Market is a scream...check out the "color commentator's" remarks:
NOTE: Column is at a new URL:
capitalstool.com
The Ice Shaft
« on: Today at 04:12:36pm »
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Mark’s Market Commentary – September 30, 2002
Welcome everybody to the new board.
Today, for new readers, we will review the current arena participants.
Over the weekend, George Washington on Wall Street Week was interviewing one of these ancient mutual fund managers from Baron Asset Management. This guy was droning on and on about “The Recovery” and “The Fed Model” and “Stocks Are Cheap”, etc. etc. These are the “Death Grippers”, the 68-year old mutual fund managers, kept alive only by the “Hold and Hopers” who haven’t sold their 401(k) plans yet. They continue to average down and buy the same old tired blue chip names like GE, AOL, TYC, and PFE.
Their performance the last three years is lousy. And every time they get a glimpse of Robert Prechter’s Elliott Wave report, they feel an immediate Ice Shaft in their stomachs, wondering if their lives will expire before the next New Bull Market begins.
But they are still in denial. So instead, they are borrowing on their mutual fund credit lines to grab the bargains of the century. According to Alan Newman: “We believe there is growing evidence that redemptions are being met and will be met by utilizing credit lines instead of selling shares. The prospect of mutual funds on margin represents the worst danger investors have faced in 73 years. If a break of the July lows is in the cards, a run on remaining assets could easily result.”
But the public hasn’t sold yet. As reported by Alan Newman: “Despite the decline in prices over the last 2 ½ years, belief that the long term will work in investors favor has kept most participants in the market. Although net assets of stock mutual funds have declined 26.5% from their peak, close to $250 billion has flowed into equity funds since the March 2000 top! The decline in assets is due primarily to prices, not redemptions.
The other breed of mutual fund managers are the young 27-year old guys running the more obscure funds you have never heard of, but are constantly paraded in the Mutual Fund section of Barron’s. These guys are the “New Age” fund managers who have never seen a bear market, and still employ the old momentum strategies from the 1990’s. These guys feel the Ice Shaft in their stomachs every time they read Investor’s Business Daily and see 15 stocks “breaking out on above average trade” from “18-week cup and handle bases,” and “notching new 52-week highs” as “investors are snapping up shares”.
Every day they wonder why they failed to identify those 15 stocks, so they usually end up chasing them immediately after some type of short squeeze, when it’s too late.
These are the “Stock Packers”, who have piled into the current “IDB leaders”. Again, no real money has left the market yet. So as long as new 401(k) money streams in, the latest cult stocks will continue to make new highs. Alan Newman reports that these funds are hysterically trying to “catch each and every investor dollar” and “believe that the stock market is for all seasons, unlike any bear market before in history mutual funds have purposely kept cash levels near historic lows.” But if we get another July wave of selling, look out. Just imagine what will happen when all these Stock Packers decide to exit Corinthian Colleges (COCO) at once.
Next, we have the Hedge Fund Managers “Hedge Hogs”, who subscribe to the black box trading models and employ U.S. Champion Nintendo gamers to execute their trades. These guys are long one day, short the next day, desperately trying to scalp their way to a winning score each month. The 24-year old gamers are constantly faced with the Ice Shaft hitting their guts when they come home and hear the answering machine message from their girlfriends saying they are “having a drink” with “a friend” (aka bankruptcy attorney making 7 figures).
And then of course, there are the ”Ameritrade Dippers”. I met a real life example of an Ameritrade dipper this weekend. He was a 42-year old dot.com millionaire lucky to cash out in 1999. He used his $20 million in cash out proceeds and bought stocks like EMC, CIEN, and QLGC during the early stages of the bear market, and actually grew his portfolio up to $40 million. Then he lost the $20 million gain a year later, and asked for help by his Wells Fargo Private Banking asset manager. The banker strongly recommended that he at least diversify out of tech stocks. He refused. Instead, he preferred to wait until the portfolio got back up to $40 million again, then he would cash out entirely.
Another year later, and his $20 million was down to $5 million. Again, he approached the Wells Fargo banker for more advice. Again, Wells suggested a portfolio asset allocation, encouraging him spread his money around in bonds, stocks, and cash.
He refused.
Instead, he opened an on-line brokerage account, and is now attempting to daytrade his way from $5 million to $20 million, where he “swears he will cash out”. So far, he has had some winners and losers, and is up to $6 million now.
The Ameritrade Dippers feel the Ice Shaft at least twice a day, when we have these spectacular reversals and/or extraordinary gaps in the stock market.
Today’s Action
On the open, we immediately nosedived to new lows on the Dow and Nasdaq.
Bob, the Color Commentator reported in:
“Gary Smith, the crowd’s favorite slideruler over at theStreet.com, had a convenient double bottom bounce picked a couple of days back. All too easy as it turns out. Thwarted again. Violations everywhere. Bottompickers and rubber gloved proctologists will have to begin scoping sigmoids for new areas of 'support'. The game is never ending and has cost the public trillions. Joey 'the SquirrelHead' Battapaglia, Chief of Colonoscopy at Sinai Central has even admitted so much over the weekend, that the real money making has been on the short side. Too bad this comes only 3,000 points below his aggressive bottom calling. Oh well, we can't get them right all of the time. Experts should be cut some slack. I hear there is a position as Head of Bowel Surgery opening over at Cedars', maybe someone reshuffles him upstairs there at least until the next great bull starts up which could be any minute now. Capitulation is likely to be either right around the corner or sometime over the next years and several thousand points.”
Then the usual chaos which typically accompanies “double bottom” and “bullish shakout” scenarios, as the Parimutuel betters at the dog track attempt to front run the bounce by piling into the fastest moving sectors. The same violence occurred when we “double bottomed” at the April 2001 lows, and “retested” the September 24, 2001 lows. Unfortunately, some of the dogs got loose before the starting gun went off, so we had some of the typical pandemonium:
Which greyhound should we put our money on today? Boob Stocks (BTK) or Supermodels (SOX)?
From the Color Commentator:
“Just saw first 950 uptick heading into noon. Hounds were unmuzzled at 800 SPX and shown fake video of wounded Hare in Woods on Virtual Screen some 400 yards off on horizon. Could create panic situation. Will wait to reset shorts depending on how much amphetemine was used to lace the kibbel this morning. Hoover administration proceeding apace as predicted. The managed cratering of all Indices appears to be relentless. The Lizard of Oz may need to pull last ace out from under slimy green sleeve sometime this week as lower “Bullinger Bands” bulge hideously South setting up possible Prilosec-type Reflux Regurgitation.”
“BTK getting heat mapped since SOX is down. Keno players swarming around IDPH table where all the action is today, ambulance called into front lobby of Harrah's (HET) and carted off several hapless traders who weren't digitally adept enough to exit and cover off lows. Eighteen year old Red Chinese traders, highly skilled in ping pong and Nintendo, are leading in biotech pit today, making flawless, lightning speed entries and front running most of the slower crowd. Art Crashin whose slow, stubby, arthritic fingers are no match for the Asians' has taken the day off as we head into lunch.”
“There is a considerable amount of excess bond money out there waiting for the inevitable Pavlovian rebalancing into worthless stock certificates. Also, metals could be dumped on a dime to raise cash to chase the Old Whore Screamers that are languishing in the Chips Dungeon as we speak. Madam Domino, the Semiconductor Dominatrix, has AMCC, PMCS, BRCM, and a host of other 'bad boys' chained to the wall down there. If they promise to be good, they may see some fresh air and sunshine for a few hours, no one can say. It’s really up to Madam Domino.”
Towards the end of the day, the Working Group on Financial Markets came to the rescue with some futures jamming in an attempt to close the 3rd quarter with at least a 7800 Dow print and a 1200 Nasdaq print. That triggered the typical maniacal buying surge by mutual funds buying all stocks at precisely the same time, resulting in an unprecedented streak of over 4 consecutive +1300 TICK readings in the afternoon.
Just goes to show you how the power of the bear is building as we work lower. The lowest TICK of the day during the colossal drop on the open was only –800. No fear. Hope hysteria has reached fever pitch, and the upside TICK explosions typically result in some type of collapse within the next two trading days.
This time, the collapse occurred within 15 minutes, and we closed to the downside.
From the Color Commentator:
“The manic depressive 6 year old caught wind of the latest gaming fad this afternoon and is running with it. Does the Fed cut in interim? How much? Bill Gross said what? All of it sheer nonsense. Just multiple starter pistols going off to get greyhounds moving North on track for a time. The endless stream of noise and heatmapping is comic. Upticks much higher today than downticks even though we just made new multiple year lows in indices. Child may need hospitalization again. Medication simply not working. The Lizard doctor has been writing off the book prescriptions of Ritalin for patient. Keeps 6 year old constantly restless and prone to bouts of violence and the “hearing of voices.”
……………
Not much to report, other than that the “forced buying” in Treasuries continues, credit spreads continue to blow out, emerging markets are being desperately “propped up” by phony “Bankruptcy” options to buy more time, and the U.S.- centric global Speculative Arena remains highly dependent upon the “Resilient Consumer” and the “Strong Housing Market”.
Position Summary:
No changes.
We are 77% short, 3% long, 20% cash.
Half Short:
XLNX at $22
CLS at $25
QCOM at $30
DELL at $28
TOL at $27
MMM at $128
COCO at $37.
T at $13
NCEN at $30
PG at $91
CDWC at $46
LEN at $56
COH at $28
IDPH at $42
AMAT at $13
BBBY at $36
KBH at $49
Quarter Short:
FRE at $68
EXPE at $78
MCHP at $33
SBUX at $24
EBAY at $60
NYT at $51
WHR at $78
AMGN at $44
CCR at $49
NVLS at $52
SYMC at $42.
INTC at $31
MBI at $54
PNRA at $34
JPM at $35
YHOO at $19
MXIM at $39
THC at $47
QLGC at $39
Half Long:
BGO at $1.31
HL at $4.10 |
