Last week Barron's had an article on "Liquidity Trim Tabs":
"Banking on Santa: Tracking the Float of Shares and the Money to Buy Them" by Kathryn M. Welling, Dec. 15, 1997
interactive.wsj.com
It's an interview with Charles Biderman, who publishes "Liquidity Trim Tabs". He attempts to track both the available supply of stock and the money available to buy it.
He can only track a portion of the float and money flow, but is attempting to gradually improve it. He tracks the available float by looking at IPOs, secondary offerings, takeovers, convertible bonds, insider selling, etc. His primary source of money flow is mutual fund data. Among his conclusions:
1) From fall '94 to summer '97 the float of shares was shrinking, while fund flow was increasing.
2) Since August the float increased, mainly due to a heavy IPO schedule and at a global level, government privatizations. This explains the market's weakness since August.
3) New share offerings virtually come to a halt every year for about a month starting at Christmas and ending around the third or fourth week of January. This is the real cause of the January effect which causes stock prices to rise in January.
4) He predicts that if the market makes it thru to Christams without being derailed by Asia, liquidity should support a strong market and possible blowoff in January '98 until the new round of IPOs hits the street in late January.
5) He thinks this potential Christmas rally could be the "last hurrah". Record levels of new offerings, record insider selling, and slowing cash takeovers are running up against flattening fund flows. |
