You are correct margin selling in the last hour of trading, and will continue tomorrow morning. The market will rebound after the morning sell-off and be Up for the day 305. points.
The Scoop on Liquidations
By James J. Cramer
8/31/98 6:32 PM ET
Liquidations cause this kind of selling. So let me explain what
liquidations are. When someone borrows money to buy a stock, and that
stock goes down substantially, the broker demands that more money be put
up. When the client doesn't have the money, the broker sells him out.
This situation is akin to the homeowner flipping the keys to the banker
because she can't meet the mortgage payment.
That kind of selling is writ large on days like today, particularly in
the afternoon, when the broker goes to his boss and says, "My client is
hosing us. He's not sending money in." The boss then instructs the
broker to sell and close the account and keep the proceeds for the firm.
That's why you can be standing there trying to buy some McDonald's (MCD
:NYSE) at 57 and get a 56 report. The seller at 56 is just a market
seller, ordered by a brokerage house, not some thinking, living person
making an investment decision. He didn't negotiate that price with me.
He sold it through me!
These kinds of sellers can't be stemmed and don't stop for imbalances,
bargains or buybacks. These sellers are automatons driven by the need to
raise cash, not to perform.
Usually it takes a couple of days for all these liquidations to sort
out, which is why no one wants to buy any sort of opening tomorrow. We
all want to see how much forced selling is left to be done.
My bet is that these vicious cycle of selling can't run its course until
all the speculators are sold out, and that is not only a price issue but
a time issue. Liquidations create great opportunity for the long-term
people. They are crummy for everybody else.
Oddly, there are some people buying stock right now at above-market
prices in Instinet. That seems a little silly to me, so I gotta go whack
'em if they are buying things I am long.
Stay tuned.
thestreet.com
Hosing will continue in the morning. A day to pick up many bargains.
Anyone else will will like to take a Stab at the closing price tomorrow. I say plus...305.
Regards,
R.T
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