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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: Louis V. Lambrecht who wrote (5377)	11/30/2000 10:37:44 AM
From: macavity	Respond to of 19219

People have got to start to understand just how much of a company is tradeable and how much is not, and start thinking about supply and demand if they are going to invest for the long-term. The indexers are partly to blame. Most of the indices are calculated 'around' capitalisation. If at COMP = 5000 say 25% of these companies had only 15-20% of their outstanding shares then its a fair guess to say that as the shares come on line that those 250$ newer-than-new economy stocks are going to start heading south as its shares leave various lockup clauses. If the indices were calculated around float (not capitalisation) then this fall in share price would not be reflected so greatly in the indices. The reverse also holds, as these (relatively) illiquid stocks have to get bought for tracking purposes we see the price spikes when they enter/leave indices. Stock options are a different problem altogether - these are a cost to the company as you said - full stop. As shares start heading south people are going to start wanting cash not shares / options. Hmm, so that's why labour costs have been so low for the past 3 years - because free shares for cash do not appear as expenses to corporates. FMO - they sell car parts and are highly profitable - the P/E i guess has got to be between 0.5 and 1.00 depending on if you look at the bid or offer <ggg>. They went on an acquisition-lets-use-our-shares-as-currency buying spree of companies and executives up until mid 98. These guys have simply been selling the (free) equity that never appeared as a charge on the FMO balance sheet in the go-go days. If the company had paid in cash the balance sheet would have been hit in the same quarter, but the smoke and mirrors of takeover accounting / employee stock options meant that you only feel the problem when the new stock holders sell. FMO: They have some litigation issues, but then so does tobacco and that is not trading at a 16 yr low (I ran out of data pre 1984) EVERY one of the top-20 NDX stocks has this problem. I think CISCO may be the worse. If, sorry WHEN, these insiders sell then I do not care how fantastic a company, or great a product, the stock price will go down. If this selling occurs in a bear market (like the one we are in now) then the market will be flooded with paper, and a lot of tech charts will start looking like FMO. This is why people are still so bullish - they are still are long 2 the ying-yang (as we say).