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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (67367)	1/20/2001 9:08:28 PM
From: Square_Dealings	Read Replies (1) \| Respond to of 99985

""Everything looks good from a liquidity point of view, unless we are missing something very big. "" How about the CA energy crisis? I think people are assuming that the financial impact will be limited to CA or just ignoring the whole thing all together. If CA has to start actually paying for energy there will definitely be an impact to liquidity. M.

To: Les H who wrote (67367)	1/21/2001 12:16:40 AM
From: Boplicity	Respond to of 99985

Les thanks for that post, re: Those outsized gains in assets will continue, in our opinion, until broadband technology is widely available. At that point we could have a major correction in asset values since the rate of gain in asset growth will likely drop dramatically. That's pathetic. No way will I buy that statement. Yes, sure broadband is the next big thing, but to accept their premises one has to accept that we will reach nirvana when broadband is widely deployed. That's a ridiculous statement. We just have a small inkling of what the net will be like with imbedded real time video, Not to mention having it be clickable, as in interactive. Greg

To: Les H who wrote (67367)	1/22/2001 9:01:36 AM
From: Les H	Respond to of 99985

The Intel Economy msnbc.com

To: Les H who wrote (67367)	1/26/2001 12:15:36 AM
From: Les H	Respond to of 99985

WEEKLY LIQUIDITY UP DATE Monday, January 22, 2001 trimtabs.com Liquidity was quite strong over the week ended last Thursday even though we estimated a small US equity fund outflow that same time frame. The biggest factor was $13.5 billion of new cash takeover announcements led by Nestle's $10 billion offer for Ralston Purina. That was the biggest week for cash acquisitions since DLJ was bought by Credit Suisse at the end of August. Besides the Nestle deal, there were nine other new cash takeovers announced. The junk bond rebound must have said to M&A types that if they can get a buyer and a seller to agree, they can now finance it. That was not the case during November and December. New stock buybacks were also popular, with over $7 billion of announcements, as earnings season took off. The rebound in both cash takeovers and buybacks were what we had been hoping for when we made our bullish call last week. The only sour spot in the liquidity picture was a bigger than expected bounce back of new offerings. Williams and several other already public outfits sold more new shares than expected. CommScan says that $1 billion of new shares are expected this week. However, more is likely if the market holds up. FLOWS SLUMP EVEN THOUGH MARKET TRENDED HIGHER. INDIVIDUALS NOT ON BOARD We estimate that there was a small outflow from US equity funds over the four-day week ended last Thursday. That's somewhat surprising since Net Asset Values for US equity funds were up 2.5% over that time frame. We do expect that last Friday had a big inflow following last Thursday's 1.2% NAV gain. Two fund groups getting lots of attention were junk bonds and money markets. High Yield funds got about $800 million in new cash last week following a 1,5% NAV gain and are on track for a $3 billion January inflow. Junk's best month was a $4.7 billion flow in November 1998 after the LTC crisis ended. Retail money funds are still drawing big due to higher yields vs. other short-term instruments. TWO WAYS OF LOOKING AT RECENT LACK OF INDIVIDUAL INFLOW, ONE BULLISH ONE BEARISH. By our estimates, US equity funds have gotten just over $10 billion of new cash flow during the first three weeks of this January. That is somewhat below the $17 billion for all of January 2000. One way of looking at that is individuals are still leery of equities given the September - December NASDAQ meltdown. That could be bearish if that means there isn't a whole lot of new cash ready to pour into the market to keep any upturn going. A bullish way is that it is better for the longer term when individual investors are lukewarm while corporate investors are wildly bullish. The reason: corporate investors are a much better leading indicator of future market direction having pointed the way to all the recent major tops and bottoms than individuals. By the time fund investors have gotten wildly bullish, historically the market was ready to go the other way. WITHHOLDING PAST TWO WEEKS GROWING @ 5%. ëOTHER,í INCLUDING CAP GAINS, DOWN. Income tax collections withheld by employers and paid to the US Treasury rose about 5% over the amount collected during the same two weeks of January 2000. The Congressional Budget Office estimates that December's year over year withholding was up by 6% or so, after adjusting for calendar quirks, etc. That December 6% gain plus a 5% gain over the past two weeks could mean we are finally seeing the much touted slowdown causing withheld income taxes to slump from a 10% year over year rate the first 11 months of 2000 WITHHOLDING DROP + CORPORATE INCOME TAX SURGE COULD BE DUE TO SLUMP IN OPTION SALES. However, we can explain the entire slowdown plus the surge in corporate income taxes -- if in fact option conversions have dropped from $30 billion monthly last year to $10 billion this December. We have been estimated that option conversions were $30 billion monthly starting last December and running through March. The day an option is converted, employers have to not only take back the exercise price, but also withhold the estimated tax due at ordinary income rates even if the option is not sold. If $20 billion more options were exercised last December than this, and the average exercise price was 25% of the market price, then at a 35% tax rate, some $5 billion more income taxes would have been withheld last December than this. Since the CBO estimates that withholding this December grew by just 6% over last December, adding another $5 billion would boost that 6% to 9.5% -- right in line with the year over year average over the prior 11 months. What's more, $20 billion extra options last year would explain why corporate income taxes were $5 billion higher this December than last. The reason: employers get a dollar for dollar credit on their taxes for each dollar paid by employees as a result of option conversions. A weaker stock market not only reduced withholding, but also hit capital gains. The plunging NASDAQ obviously is the reason why the category 'Income Taxes Not Withheld' which includes capital gains and partnership income -- is down $10 billion over the past six weeks. ANY GROWTH IN TAX COLLECTIONS THIS YEAR BIG GIVEN COMPARISON WITH YEAR AGO HUGE TRADING PROFITS. To repeat, a drop in option conversions does not immediately impact the US budget deficit since a drop in individual tax collections creates an equal size boost in corporate taxes. However, more important than the zero impact on the deficit, if $20 billion less options are converted each month, that means thereís $10 billion less spending money for option holders monthly this year vs. last. Add that $10 billion, to smaller capital gains and less overall trading profits and no wonder the economy is slowing. In other words, the drop in the stock market has reduced take home incomes by at least $20 billion monthly, or about 5%, of the $400 billion monthly total for Wages and Salaries. Given that big an income drop from the end of the 'Wealth Effect,' that income tax collections are still growing at 5% year over year signifies the truth strength of the US economy. Only if income tax collection growth year over year disappears, then we will join everybody else in worrying about a recession. BOTTOM LINE: WE REMAIN STRONGLY BULLISH. INTEREST RATE CUT COMING NEXT WEEK. We remain strongly bullish as long as corporate investors keep on shrinking the float. A healthy junk bond market says there will be lots of lower priced loans available to finance any cash takeover or buy back that 'pencils out.' UBS tells us there is some $25 to $30 billion of new European telecom equity in the 1Q 2001 pipeline; that starts this week when $6.4 of France Telecom is hoping to get done. We doubt much will be sold in the US. However, if there was to be a big pickup in new offerings, that could temper our enthusiasm. Yes, the Fed will likely cut Fed Funds another 50 basis points next week. Anticipation of that could fuel a healthy rally this week. If that does happen, then fund investors are likely to pump huge amounts of big bucks into the stock market. If and when they do, that likely will make for a short-term market top.