I find this column revealing, particularly the comments concerning Dell and Cramer's summation of the events that unfolded on Friday.
Following a Bouncing Ball in a Game That
Never Ends
By James J. Cramer
2/14/99 12:18 AM ET
The sheer number of variables that go into a stock's price move defies the
odds-makers daily.
Let's take a day's worth of Intel (INTC:Nasdaq) trading. I came in long Intel on
Friday. We had heard the Intel presentation earlier in the week, had dinner with Intel
and had checked in with virtually every Intel analyst all week to be sure that Intel
wasn't going to be hurt by the low-end price war.
On Thursday, Mark Edelstone, the incredibly influential chip analyst from Morgan
Stanley Dean Witter squawked that he liked Intel very much at the $131 level,
which juiced the stock -- and us -- into taking some more Intel.
We figured that Edelstone, a numbers guy, had a good take on how the first quarter
is cooking. Edelstone's comments were verified repeatedly during multiple sessions
with other tech companies at the important Goldman conference.
Then the world turned upside down Friday. A First Call note, put up overnight, from
Dan Niles at Robertson Stephens, called Dell's (DELL:Nasdaq) revenue numbers
into question.
No matter that Niles hasn't been a bull on Dell, the computer company reports this
week, and it was too close to that report date to refute Niles' call with any authority.
The company can't announce the day before it is due to report just to try to deal
with Niles' call (although I remember before Cabletron (CS:NYSE) became an
also-ran, it did this a couple of times when the bears had it on the ropes.)
So the silence was defeaning. The stock tumbled from the get-go. Of course, if Dell
goes down, so goes Intel. It does so regardless of what it said just the other day.
I tried to off-load the Intel I had bought on Edelstone's call at the opening. The start
of the market on Friday was weird. As it was clear that Dell would color everything,
the tech world was surprisingly upbeat at 9:30. In fact, the first thing that happened
was that Microsoft (MSFT:Nasdaq) rallied. I sold some Intel but then kept some
back because of the Soft rally.
The rally in Mister Softee was incredibly visible at 9:35 a.m. as the 163 bid kept
growing and then people started taking 163.25 stock. I know I started screaming to
Jeff Berkowitz, my partner, "What am I missing? What am I missing?" as if I were
going left when everyone was going right. I stopped selling everything else I was
trying to kick out.
"Did the government screw up?" I continued. "I thought the government was starting
to do better, looking like a win for the Feds. Maybe we are wrong on this Dell
impact call. Maybe it's not that important." Finally, Jeff shut me up with " 'Soft is
wrong. 'Soft's a false tell. We gotta go some 'Soft and 'Tel."
It shook me out of my reverie, and I immediately blasted out of my trading stock in
both of them. 'Soft kept climbing for another five or ten minutes, and then it and Intel
began their long dives. They never reversed course for the rest of the day.
The funny thing about a potential Dell shortfall is that a slowdown in revenues
literally impacts just about every aspect of the personal-computer business -- that'
s how big Dell is now.
So at what level do you buy back your Intel if at all, especially if you believe, as I
do, that all of the negatives about Dell are probably overblown at this point ?
One by one, the adherents of Dell "reiterated" their buys, but to no avail. So
throughout the midday, it dragged along Intel with it, right through the impeachment
proceedings. Then at 2 p.m. word swept the Street that Tom Kurlak had quit
Merrill to go to Tiger, the giant hedge fund. There was a time when Kurlak's name
was synonymous with Intel, and I would have blown out a ton of the chipmaker's
stock if we had still been in that mode.
But Tom missed this move -- weirdly he will be known by newbies as the man who
missed this move, as opposed to the man I know who pioneered the notion that
Intel was a great manufacturer, that transcended the simple notion of boom-bust
p.c. technology. Oddly, the man who made Intel a mainstream core holding had no
impact, or even a ripple, on the market now that he is moving to my side of the
Street.
As Intel headed to $126 I bought some of my stock back, on the assumption that
cooler heads would prevail Tuesday. I recall that even in the horrendous selling
earlier in the week Intel held the $122 level, and it was still above that. I would have
bought more, but I am just plain scared of these mirror NDX mutual funds that
accentuate the direction of the NDX. Intel is such a huge part of the NDX, that it
would be suicidal on a down day now to go in at any time other than 3:59, when the
NDX is down, because these manipulators will just nail you with their selling.
There was also no hurry because Intel is now such a huge part of the S&P 500 that
you have to worry about sell programs taking money out of stock and into bonds --
especially with bonds in a freefall as they were on Friday. Not surprisingly, as Dell
kept going lower and NDX funds did their dirty deeds, the close of Intel was
downright nasty. It did not matter that Intel, in this very week, had spoken and
spoken positively. In the end, this stock was held hostage to much larger variables,
and on Friday those variables were all flashing negative.
Fortunately, with Intel, we won't have to wait long to see if we can buy again. Both
Dell and Hewlett-Packard (HWP:NYSE) report this week, and these stocks will
set the chipmaker's equity in motion again.
That's what makes this game so great: It never ends. |
