Hi blaireo and cheer up JDSU thread: " If you blink, you
just might miss the market rebound ".
I posted this in SDLI thread another photonic co. I own .
I was heartened Friday's by the light volume. In order for markets to go down
you not only need no buyers but you also need lots of sellers.
I didn't see that Fri.
I saw prices stabilizing at lower levels.
Consider the following market analysis article from CNBC.
As a physiscian, if Kalkhoven has hi Blood Presssure, I
fully understand how he was TOLD to retire. Hi blood pressure
is called " the silent killer ". As far as i am concerned
telcos/photonics and JDSU are a high boiler aerea.
Kalkhoven could just as well have keeled over with a stoke
any time. Or he could have controlled it with hi dose meds
that dope you up and have more side effects at highe rdoses.
No company or amount of money is worth that.
He retired reluctantly but had to do so.
cheers,
back tomorrow. Going to see " Submarine " !!!!!
TA
-------------------------------------------------------------
CNBC
May 17 2000
Bull Market Will Return
cnbc.com
by Robert J. Froehlich
Vice Chairman, Kemper Funds Group
Special to CNBC.com
In order to figure out where our markets are going, you
first have to figure out where we are today and why.
After all, the first three months of the year it seemed
like the markets could go nowhere but up.
Now it seems like stocks will never go up again.
We got to this point thanks to the confluence of three
unrelated events that together caused this major market
sell-off ?
-margin calls,
-capital gains tax lock
and
-tax day.
Margin Calls
Don?t be mislead by the pundits, day trading is a great
business so long as the market goes up. Think about it, you
buy stock with other people?s money on margin, continue to
leverage your stock position and so long as the market
cooperates by moving upward, you can become a wealthy
individual using other people?s money.
This dream job, however, becomes a nightmare when the
market makes a dramatic movement downward for a few
consecutive sessions.
All of a sudden you face a margin call for cash that you
don?t have, so you are forced to sell your stock in a falling market.
Once this process begins, it has a spiraling effect.
Which is exactly what happened in early April.
The explosion in margin calls was one of the three factors that led to our
markets major correction.
Capital Gains Tax Lock
The second unrelated event was that investors rushed to lock in their capital
gains in April.
It is unprecedented and unheard of to lock in your gains as early as April.
To figure out why, we have to look backward.
Remember in 1999 the Nasdaq gained an unbelievable 86 percent.
I can remember a time when, if you generated an 86-percent return in your lifetime,
you were considered a savvy investor. Now we do that in one year.
Thus, with the 86-percent gain in 1999 as a backdrop, Nasdaq investors
watched as that market dropped 10, 20 then 30 percent in early April
until they finally screamed, "Enough! I?m locking in my capital gains now."
Thus, with the market up 86 percent last year, even with a 30-percent free-fall
from the top, it was still up more than 30 percent, and investors decided to lock in
those capital gains and take some money off the table.
Now, it is unprecedented to lock in your capital gains in April!
In a normal Nasdaq year this never would have happened.
Now remember in a normal Nasdaq year, the market would have
been up only 30 to 35 percent. (It?s still hard for me to write that
30 to 35 percent is a normal return. The old-school habits are hard to break.)
But think about it for a minute, if the NASDAQ were up 35 percent in 1999
and then in early 2000 all of a sudden it?s down 10, 20 even 30 percent,
no one would be rushing to lock in anything. Instead, investors would
be saying this technology revolution is for real and Nasdaq is coming back.
Not this time. Investors got greedy and focused solely on the short-term
by locking in their capital gains.
Tax Day
Now the final unrelated event that caused our market sell-off was that tax
day was fast approaching. It was as little as five years ago when tax day
was irrelevant to our market. You see, five years ago investors would typically
figure out their taxes in late January or early February, write a check and then
hold onto it until April 15. It?s a tradition here in America that no one is
going to pay Uncle Sam one day early.
Well, there has been a shift over the past two years in how
investors pay their taxes.
They still figure them out in January and early February, and instead
of writing a check and letting it sit in a checking account or money
market account, investors plowed the money into the stock market.
You see, they found out that this so-called January effect in which
the market goes up every January is now a January, February, March effect.
Over the past few years if you weren?t in the market in those three months,
you missed the bulk of the markets move. Thus investors (a.k.a. taxpayers)
decided that instead of letting their tax payments sit idol in their checking
accounts, they would put them in the stock market and let Wall Street pay
part of their tax bills to Uncle Sam.
This is a great strategy so long as the market goes up. This year, it went down.
Thus investors not only had to liquidate their investments to pay taxes, they had
to liquidate even more because their initial investment could no longer cover their tax
bill.
Thus it was the combination of these three unrelated events that fueled our major
market sell-off.
An Economy-Driven Correction?
Again, to figure out where we are going, we must make sure we know how we got here.
There are only three types of corrections ?
the first type being an economic correction.
In an economy-driven correction, economic growth is flat or declining, inflation
is soaring, unemployment is high, consumer confidence is low and consumer spending is nil.
Well we certainly didn?t have an economically driven correction.
Our economy just put together the strongest consecutive three quarters of
economic growth in the past 15 years.
Inflation remains nonexistent.
Unemployment is at 30-year lows, consumer confidence is at all-time highs
and consumer spending is on a tear.
Teenagers are driving spending ? just ask my high-school-age daughter
about her weekly mall excursions. Young adults are also fueling consumption,
as witnessed by my oldest daughter, who is finishing her freshman year in college
where she has become a more cost-conscious shopper, but make no mistake about it,
she is a shopper. And last but not least, my dear wife continues to help fuel
the economy (there is no doubt in my mind that my daughters came about
their talent naturally).
Earnings Driven Correction
The second type of correction is an earnings-driven correction.
In an earnings-driven correction you find numerous earnings surprises
that are negative across all industries. Well, we are having earnings surprises,
but the surprises are positive. So far 89 percent of the S&P 500 companies that
have reported earnings have met or exceeded earnings expectations.
In addition, earnings are up a whopping 25 percent on a year-over-year basis.
Well this certainly wasn?t an earnings-driven correction.
Market Driven Correction
The third and final category is a market-driven correction.
And if it wasn?t an economy- or earnings-driven correction,
it has to be a market-driven correction.
We should be getting good at this, because we seem to have
these market-driven corrections almost annually.
First it was the Asia-led currency crisis,
then the Long-Term Capital Management bailout,
followed by the Russian bond default.
Remember,
in an economically driven correction it takes about a year
for the market to rebound.
After all, if economic growth is flat, inflation high, unemployment
high with no consumer confidence, it will take almost a year for the
economic numbers to convince investors it?s time to get back in the market.
In an earnings-driven correction, it only takes
half the time to rebound -- about six months.
You see, earnings are issued quarterly, so even if you can turn earnings
around in one quarter, investors will not be back in the market.
They are skeptical that the accountants "cooked the books" to make earnings
happen this quarter. Thus investors want proof.
Give them back-to-back quarters of positive earnings (six months)
and they will be back in the market in a big way.
So it takes a year to recover from an economic correction and six months to recover from an earnings correction ?
and
it takes about six minutes to recover from a market-driven correction!
There is no timeline for a market-driven correction.
Because no economic or earnings fundamental brought the market down,
it doesn?t need any economic or earnings fundamentals to bring it back up.
Remember, the market rebounded every bit as fast as it fell
after the past few market-driven corrections.
This will be no exception.
If you blink, you just might miss the market rebound.
TA |
