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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: Bridge Player who wrote (6522)	4/16/2000 1:47:00 PM
From: Jill	Respond to of 8096

Here are some excerpts from Option Investor newsletter--maybe true, maybe not, any opinions? The carnage is incredible but if your 401k was turned into a 201K this week then you are already feeling the pain. The wealth effect Greenspan is always referring to became the debt effect this week. The $1.4 trillion that investors made all last year was shredded as more than $2.1 trillion was lost in the market this week alone. Margin investors are feeling more than pain as margin call after margin call has wiped out many over leveraged accounts. If you think this week was bad for margin calls the don't get out of bed on Monday. The huge losses Friday will produce record margin calls again for investors still hanging on by their fingernails rather than take the loss. Market cap was bleeding at record rates. Microsoft lost -$239 bln this week, CSCO -$167 bln, INTC -$100 bln. This was not simply a big cap problem. For example Akamai has lost -$25 bln from its high and now has a market cap of only $500 mln. Down from a high of $345 AKAM is now only $64. Microstrategy had a high of $335 and is now selling for $33. The brokerage community came under pressure this week and Friday turned into a real rout. Many brokers make a substantial portion of their profits off margin interest. Ameritrade for instance counts on margin interest for 25% of their total revenue. As investors accounts are liquidated to cover falling stock prices the brokers are exposed to margin shortfalls and then the loss of the margin income. Thirdly, they lose the trading commissions as accounts are closed or go quiet in the reaction to the losses. The major brokers all took big hits on Friday. LEH -17, SCH -12, MWD -8, MER -8. The surface trigger for today's sell off was blamed on the CPI but in reality the CPI just added speed to the downward slide. The base rate was much higher than expected at +0.7%, the highest in a year. The core rate was also much higher at +0.4% which was the highest in the last five years. This was twice the expected rate and puts the projected annual inflation increase at +3.2% which is much higher than the +1.9% rate from last year. The inflation monster suddenly became visible and bidders quickly evaporated as fears of a stronger than expected rate hike flared. There was significant worry that the Fed could raise immediately and not wait for the next meeting in May. In reality the Fed could have pulled the trigger today except for the market crash already in progress. Not wanting to be accused of pouring gas on the fire there was no announcement. Greenspan spoke at a noon luncheon and again was quiet on the markets and on economic matters that would have fueled the fire. Financial stocks took the change in Fed sentiment hard and many were double digit losers. AXP -12, JPM -7, GS -12. Another reason for the drop was comments attributed to a Fed governor on Thursday which were very bearish and set the tone for the CPI backlash. According to several brokers margin calls were up over twice the normal rate and many investors will get that unwelcome notice in their email this weekend. Sell stock or be liquidated. While the -1000 point drop this week may have been due to seasonal trends and tax selling there are repercussions that will carry over to next week. We are likely to see a bounce at the open on Monday followed by another bout of margin selling. The selling could drag over the next three days as investors decide to wire money or take the loss.

To: Bridge Player who wrote (6522)	4/16/2000 2:09:00 PM
From: Poet	Respond to of 8096

Very good question, BP, and I'm inclined to agree. I'm now bearish and will do my best to position myself that way until I see a definite and prolonged upward bias in the market. I have a large position in QCOM, which I've been mulling over selling or buying protective puts on. I've been looking for short/put candidates and have unearthed the following, which I think will see some more downside: TSCM (unsuccessfully looking for a buyer) CDNW KOOP ICGE RMBS AMZN

To: Bridge Player who wrote (6522)	4/16/2000 2:33:00 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 8096

>> As big as they are now, can they grow rapidly enough to justify that multiple? With dozens if not hundreds of companies nibbling at their franchise with innovative new products, and with the growth of optical, where they are not the strongest player, are they really WORTH the current price? You'll find the answers to those question here, CanastaMan: amazon.com Provided you are willing to be patient and accept safe, above average returns over a long period of time, I believe you'll find Cisco an excellent choice. jmho, uf

To: Bridge Player who wrote (6522)	4/16/2000 4:17:00 PM
From: YlangYlangBreeze	Respond to of 8096

How True BP, Who knows what PE's will be found acceptable if valuation is the guide for recovery from this crash. Can I say crash yet? Okay market event. What would CSCO, QCOM, JDSU, RMBS be worth if they were valued traditionally? joelle

To: Bridge Player who wrote (6522)	4/16/2000 4:44:00 PM
From: Seldom_Blue	Respond to of 8096

BP, I agree with your points totally. Their P/E scares me as well. But my interest in CSCO is somewhat speculative. When (not IF) there is a tech rally, CSCO will be the first to recover. P/E of 100 is not good, but P/E of 150 or 200 is even worse. That is what most of your tech is trading. When the bottom is reached and the big houses have done their buying, they will begin to tell people to buy quality. That means the CSCOs and INTCs and AMATs. For CSCO's P/E to get to 70, price will have to fall to around 26. If CSCO ever gets that low, God help us all. Come to think of it, I may put my buy order at 35. Seldom Blue