Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (3528)	3/22/2001 12:45:42 PM
From: John Pitera	Read Replies (3) \| Respond to of 33421

The Crescendo Is Rolling In By James J. Cramer 3/22/01 9:29 AM ET The Trading Goddess always called it "The Crescendo." It wasn't so much capitulation, or giving up; it was when everyone who had to sell, sold. It is what is happening right now. Crescendos always feel like the end of the world. We know we share that common denominator. It sure looks and feels like that out there. Crescendos involve the selling by people who don't want to sell. For the past year, we have seen a lot of selling by people who wanted to sell. We saw a lot of money taken off the table. But we have seen, other than the margin calls of last April, very little "forced selling." Now, if you read our Columnist Conversation, you know that the rumors are rife of hedge fund failures. I suspect that most of the rumors are true. There were lots of funds that were levered to the convertible bond market, which seems to have just shut down. There were plenty of converts in the telecom and biotech areas and those seem to be where the hedge funds are imploding. We know that the margin-call selling is back, wiping out any of those who "doubled down" with hope of making it back with borrowed money. The news out of Schwab, the firm most emblematic of "retail," shows that the "retail" game is now in full retreat. Next: mutual funds. They won't go bust, but the next several weeks will see massive redemptions as people need the money. They haven't needed the money for some time because they didn't have taxes to pay and they had tons of job security. Both are now in jeopardy. The funds that are in trouble? The usual suspects I write about every day. They generated the gains without the profits. They are being scorned by individuals. When people who don't want to sell have to sell, you have to buy. They are selling for non-fundamental reasons. They are selling because they have no choice. This particular round of forced selling is probably coming to a head because of several factors: April 15 taxes, the coming end of the quarter where funds will want to show they sold a lot of tech, the peculiar nature of hedge funds that often have openings for rich people to take money out to pay taxes, and the drastic downturn in the economy. Only the last one, fortunately, will be a factor three weeks from now and you know I am steadfast in my belief that the Fed's actions will change that six to nine months out. There has never been a crescendo I didn't buy. There have been some selloffs that turned out not to be crescendos and I got hurt, but the odds favor buying this forced selling when it runs its course. Unfortunately, it is only March 22, so The Crescendo, while building, is not here yet. But you can hear it coming. Many, many of you have listened and taken that tech money off the table at much higher prices. Some of you haven't. You have to ride it out from here. Get ready. The opportunity is coming. Random musings: How bad are things at Lucent (LU:NYSE - news - boards) that they are cutting this deal and cutting this deal and cutting this deal? Really horrible, that's how bad. And the inability to do this deal at good prices only exacerbates that. You know how I feel about Lucent. Bad balance sheet, bad business. In other words, stay away.