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To: Thomas M. who wrote (51094)	12/25/2000 2:08:21 PM
From: Thomas M.	Respond to of 436258

(from another forum): <<< Thanks for your note. Your point about being an "inflexible ideologue" is well taken. I have certainly endured enough painful and expensive lessons in that regard. You are not the first person to accuse me of being inflexible. Six weeks ago, I sent James Cramer an e-mail with the message that dip buyers were drinking their own koolade. He was incensed, lecturing me that "flexible and open minded is key." The Nasdaq dropped a quick 23%; Cramer dropped out of the money management business. I am proud to be a part of the contrarian fraternity. We all share an intellectual framework for making investment decisions, one we feel best models reality. We are, above all, skeptics. Our function is to keep markets from getting out of hand - tethered to reality. This mania has trivialized our role, and thinned our ranks. With it we have witnessed the "suspension of disbelief." In manic times, our skepticism takes on even greater importance. Within contrarian circles we need to be critical. We shouldn't always agree. This is what I like about Grant's Investor. I don't have to agree with every piece. Debate is healthy, a competition of ideas, a constant seeking of the truth. I remember the investment advisory fraternity after the 1987 crash. They all went to the same conferences, lived in Georgia and Florida, and wanted to be like Bob Prechter. They all followed Prechter in expecting another stock market collapse. This kind of group-think was devastating to the industry. I have a great deal of respect for James Bianco. I enjoyed both articles on rising cash levels. There is nothing wrong in looking for short-term rallies, however, long-term bears should recognize the dangers. Intraday, the Nasdaq 100 has bounced 23%. Intraday, it rallied less than 9% after the Liquidity Trim Tabs article and slightly over 3% after Bianco's article. Barton Biggs was too late in calling for a 20% rally on Monday: the NDX was already up 19% from its intraday low. CNBC trumpeted the Biggs call as a long-time bear turning bullish, suspending disbelief for another day or two. Too many people seem to be trying to call a tech bottom. One of today's articles: "Frank Cappiello: Pieces are in place for a tech turnaround." Cappiello unsuspectingly let's the cat out of the bag: "One final point: the unique technical condition of this stock market is reflected in investors' desires to continue to hold equities by selling one stock and buying another, rather than selling and raising cash. This seems the key technical difference between this stock market decline and others in our history." This supports my observation that few seem to be willing to act on their fears, leave the party, and actually raise cash. A great deal of quantitative evidence also supports this view. One of the best measures of tech stock fear is the percentage of Nasdaq 100-based bull and bear fund assets in the bear camp. This leg down began September 1 (NDX = 4099) with bear fund assets at just 3.8%. By October 12 (NDX = 3004) bear assets were up to 11.7% (still overwhelming optimism). The action of the past two months - gradual decline interrupted by violent rallies - has only served to strengthen the conviction of the tech bulls. On November 3 (NDX = 3322), bear assets were back down to 4.0%. On November 30 (NDX = 2507), up to 9.8%. And December 11 (NDX = 2973), just 4.2%. The speculative long position on S&P 500 futures has grown from 52,100 to 91,700 contracts since the Labor Day high. The VIX is currently 26.25, reflecting little fear and no panic. There will be a time to turn intermediate-term bullish (I'll leave the short-term predictions for others). I'll be looking for the signs: a spike in the VIX, total bear funds assets over 50%, S&P specs getting short, massive volume overwhelming exchange systems, recession fears, public investors swearing off stocks, etc. Even this will be tricky business. Roger Babson predicted the '29 crash near the top, but then turned bullish too soon, during the late '29, early '30 sucker's rally. I hope not to repeat his mistake. This mania is much greater than the late 1920s variety. I suspect it will take a great deal of patience to avoid being bloodied by this bear market. >>>