Journal Displays Bubble Hindsight in Banner Type By Bill Fleckenstein
12/16/2002 17:16
Scrooge Says, Let Them Eat Fruitcake: Today's Rap is being put to bed extra early, as I'll be traveling most of the day. I won't spend any time trying to recap the market action, since it will be totally changed from as of this writing. People can just check the box scores to see the final results. However, I would point out that in an early-morning announcement, Wal-Mart WMT once again said that sales for the previous week printed at the low end of its forecast, roughly around 3%. So there are still no signs of anything exciting happening on the Christmas front.
High-Tech Topographer Strips Tech Tinsel: Turning to the news, there are a handful of things to recommend. First of all, grab a copy of Barron's and read "Up and Down Wall Street." It has a terrific mini-interview with Fred Hickey, in which he succinctly lays out the problems with tech. I would also recommend an excellent article in today's Wall Street Journal titled "Aftermath of a Market Mania." This overview of the boom chronicles how everybody was sucked in, with lives warped and ruined. Obviously, the story could be expanded to hundreds of thousands if not millions of people, and given the massive damage, it is a story that was worth bringing to print.
Of Epiphany and Erratum: However, I must say that it's somewhat disingenuous of the Journal to word a couple of things as it did, since during most of the boom it was out there cheerleading and dignifying the spurious notion of a "new economy" by capitalizing the n and e in this phrase. Specifically, I object to the following: "Not only did the boom represent all the classic signs of one of history's great manias, but it created some remarkable shifts in the way the economy and financial markets worked." The implication of these words is that our experiencing one of the world's greatest manias was so obvious. Now, I believe it was obvious, and some us were there at the time, saying so. But the Journal wasn't. To be perfectly accurate, the paper might have instead pointed a finger at itself and acknowledged, "Gee, even we sucked in for it."
Journal-Come-Lately: Likewise, I found this next observation a little late in coming: "The stock market, in turn, came to dominate economic life, as soaring share prices fueled mergers and a spending boom, leaving behind a hangover of excess that will take years to work off." Well, I'm glad they are now beginning to understand the situation. This is the point I've tried to make relentlessly for a couple of years: Having a mania is a very serious problem with long-lived consequences, which is why manias are supposed to be avoided.
Fed Petri Dish Spawns Red Mold: That is why I have such contempt for the Fed . In the aftermath of a mania fomented under its watch, the damage has been widespread. And as I have stated often, the unwinding has hurt people who really saw no benefit during the mania to begin with. In any case, despite my objections to the Journal being a part of the problem at the time, and certainly not doing much to try to warn people, the article it printed today is still terrific, in terms of illuminating the points about what happened during the mania and what has gone on since. So again, I would encourage everyone to read it.
Index Close Change
Dow 8627.54 +193.83
S&P 500 910.41 +20.93
Nasdaq Composite 1400.25 +37.83
Nasdaq 100 1042.43 +36.58
Russell 2000 394.90 +6.92
Semiconductor Index (SOX) 325.65 +16.38
Bank Index 774.20 +23.83
Amex Gold Bugs Index 143.13 +3.44
Dow Transports 2359.00 +40.53
Dow Utilities 211.36 +2.26
NYSE advance-decline +1,338 +287
Nikkei 225 8450.94 -65.13
10-year Treasury Bond 4.13% +0.068
Levy-Led Backpacking Trek: Higher on my recommended list, for an understanding of the same problem, would be a new book titled The Mind of Wall Street by Leon Levy (whose recent interview in Forbes was reprised here last Friday). I have begun the book, and it's terrific. I think you will all find it educational as well. So, your homework assignment while I'm on vacation is to read the book, and become a whole lot wiser in the process.
Fete Accompli: Finally, I would just like to wish everyone a merry Christmas and a happy New Year. I'd also like to thank everyone for their helpful and supportive emails. (Even the people who sent me hate mail were helpful in their own perverse way, so I'd like to thank them, too.) Regrettably, over the next couple weeks, I won't be seeing my email, so I will not be able to hit the "respond" button. I look forward to returning full strength on Monday, Jan. 6. In the interim, please enjoy the following little poem composedby my wonderful editor, Mary Levai.
'Twas the night before earnings, when all through the house,
Not a profit was stirring, from cell, DRAM or mouse.
The stock certificates hung by the chimney with care,
In hopes that a bull market soon would be there.
The wide-eyed were up to their gullets in tech,
Fretting from troubles induced by the dreck.
While bear cubs were nestled all snug in their beds,
As visions of vindication danced in their heads.
When out on the Street there arose, not Saint Nick,
But the thud of a Nasdaq Composite downtick.
From winless PCs, folks flew like a flash,
Saying, "Nah, here's not where to go long the cash."
The moon on the breast of the new-fallen SOX
Brought sheen to some short positions in stocks.
When, what from the post-bubble years should appear
But twelve rate snip-snips and, say, eight reindeer.
With a driver so clueless, ensconced at the head,
It was patently clear, he hailed from the Fed.
To "new-era" cries, the antlered ones came,
And lustily he cheered them on by name:
Now Maxim , Dell , Intel , Big Blue and Sanmina
On Cisco , on Hynix (you laughing hyena).
Oops, one mammal short -- please accept this apology --
And sound the Bronx cheer for ... Micron Technology .
These eight stomping steeds pulled a payload nefarious
Of stock market games in guises quite various.
There's still days till Christmas, so if you've the time,
Sit back and read them in rollicking rhyme:
Write-offs and jam jobs and false-bottom calling,
Quarter-end mark-ups, it's ever so galling.
Preannounce now and guide downward hence,
To hell with the assets of ladies and gents.
Managements yearn to earnings-embellish
They go gun the shares, then cash out with relish,
While hapless investors and suckers-to-be
Watch hoodwinked and hooked to CNBC.
But enough of this brew-ha-ha, confound the mess,
We've a tale to Rap up, from which we digress.
To quote Clement Moore (on whose ditty we call),
"Now dash away, dash away, dash away all."
The Fed's sled touched down with a clickety-clack
On the snow-covered roof of the market Nasdaq.
Its driver made tracks for the soot-lined chimney
(His monogrammed bath sheets read ALAN, not JIMINY.)
When he looked and saw darkness all over the place,
He forthwith proceeded to make about-face.
Then sprang to his sleigh, to his team gave a whistle,
Which is subtext for "nearing the end of epistle."
Don't worry, he cooed, amidst economic blight,
Technological changes will make it all right.
And at lift-off ho-ho'd whilst he jingled his reins,
"Don we all now productivity gains." |
