Al Martin has some entertaining thoughts about the Wall Street denizens shearing the public through similar deceptions:
Who Will Be the Next Bag Holders?
"(Nov 25) The American people, wearing their hats as investors, are now being subjected to new psychological programming. They have become the Pavlovian (Market) Dogs. When average people (despite having lost half of their money since Bush has been elected) hear the word “BUY” so many times every day, they continue to “BUY.” Who will be next? Who will be left holding the proverbial bag again?
One of the very few negative segments on FNN was the man from the National Credit Council who was talking about the number of Americans who were borrowing off their credit cards to buy stocks. It's a record percentage now. People hear the word BUY and they can’t stand it they have to buy another 200 or 300 shares. The National Credit Council has a support group for stock junkies anonymous. These are people who, when they hear the word BUY and they’re watching the stock market like alcoholics or narcotic addicts, their hands start to shake. They can't help themselves. They have to call their broker and buy another 100 shares of something – even if they don’t have the money. They’ll borrow it from credit cards they’ll do whatever it takes. This is the new psychology.
That’s why I do this column. It’s a labor of love, trying to make the people understand.
I was watching Joe Kernan on CNBC who’s making jokes all the time. He started to say something about maybe it's time to sell or there might be some bearishness. Then he immediately puts his hand over his mouth and says, "Oh, I forgot. I’m not supposed to say that anymore.” And naturally everybody laughs in the background to make a joke out of it.
We’ll keep watching to see if one day the cane comes from offstage and pulls Joe off like the old vaudeville acts.
...The standard P/E ratios may be retired again. Some people may not know it but in conjunction with the information from this weekend market summary is that during the Internet Bubble Days, the venerable Standard and Poors index was not even tracking most stocks by the classic P/E ratyioone. It became what they call Sales to Share Price Multiple because so many companies weren’t earning any money.
They didn’t have a P/E multiple so they had to come up with a whole new idea. Buying Lucent and Nortel at 200 times “sales revenue.” waas then looked at as a good buy. In other words, the whole market dynamics by late 1999 and early 2000 had begun to change because you had fully one-third of all publicly listed companies not earning any money. Therefore you couldn’t say they had a P/E ratio, price to earnings ratio anymore. And you had to have a new rationale. You couldn’t use a book to share ratio because those same one third of companies traded had a negative net worth per share. Therefore you couldn’t use a price to share ratio anymore.
People then bought into it because they were told that this was the “New Paradigm.” Now we’re going to buy stocks based on a percentage of sales. And at the same time sales figures were being fraudulently manipulated. As we now know, many times sales figures were being pumped up through a lot of smoke and mirror accounting tricks.
(Parenthetically speaking it should also be mentioned that Razorfish.com, which was an awfully hot stock, the “integral systems management company” was sold. This company on a fully adjusted split basis once traded at the end of 1999 for $1700 a share. The company was just sold for 81 cents a share.)
Now they’re trying to bring back the paradigm foromm the 19999 early 2000 period. Did the Enron Debacle have any effect on people?
The American people not only don’t have a short-term memory when it comes to matters politic, it’s economics as well.
Amazingly enough all of the people who saw their 401(k)/ IRA accounts cut in half since George Bush was elected are buying again.
And they’re not buying solid companies. They’re buying high tech dot com stocks that were selling between one and two dollars 45 days ago are now selling between three and four dollars. More than 500 of them have doubled in the last 45 days. This action is coming from frustrated IRA and 401(k) people; it's not coming from real speculators.
The buying is coming from average investors who saw their IRA and 401(k) accounts cut in half and they’re frustrated and they don’t know how to get their money back So now they’re all speculating in these one dollar and two dollar dot.com stocks.
A lot of people are saying that this strategy is working. They say I bought this stock at a buck and a half 45 days ago and now its four bucks a share.
Even WorldCom “rallied” from eight cents a share to fifteen cents a share. It is the “average investor” who has been able to pump up these stocks again.
I'd like to know when they try to sell them and take their profit, who they're hoping to sell them to?
What the burnt- out 401(k)/IRA people are betting on is that there’s going to be a whole new series of bag holders available who will take the shares they bought for a buck forty fives days ago off their hands at four bucks a share before the end of the year.
The problem is -- where is the new class of bag holders when you had so many people burnt the first time?
Nobody has been able to make enough money since Bush was elected to be on the long side of the market to create a new group of bag holders.
The question remains -- so who are the new bag holders going to be?
At Al Martin Raw.com, we’re trying to find them.
If we could find out who the new bag holders are going to be, we could make a fortune.
almartinraw.com |
