You may as well Bet Bill Fleckenstein, as he has options on way too many
shares, of this cyber venture.
He can pay you back in Pizza's with all the toppings, the next time that Gnet doubles. Ho Ho HO.....as Luc would say.
John
Bill's Upcoming TV Appearances:
First Thursday of the month, 2:20 PST, CNBC debate.
April 7, 1999
Market Rap with Bill Fleckenstein
As bizarre as it gets
The party continued around
the globe last night. Asia
was higher for the most
part, Europe was higher
this morning, and the boys
were set to have a big party
as we opened.
Stocks fly, then reverse...
We did start off with a
hellacious move to the
upside. Internet, PC and
big-cap tech stocks all
were flying. Goldman
added Dell (DELL) and
Gateway (GTW) to one of
its recommended lists, and there was huge frothiness to start the
day. But within about an hour, we had quite a strong reversal.
Signs of short squeeze... It's fairly clear
to me that what's been creating the insanity
we've been seeing, at least in the last few
days if not for the last week, has been a
massive short squeeze, I think on the part
of the very large billion-dollar hedge funds.
I've heard enough stories now and it kind of
makes sense. The stocks that have been
going up the most violently have, for the
most part, been stocks with stories and
valuations that would cause you to want to
short them. And most of them are fairly
liquid, away from the Internet stocks.
Software slammed... At the same time
we've seen this huge implosion in all these
software stocks, where maybe the shorts
haven't been as big. The software stocks
were continuing to get pounded today in
the early going. Siebel (SEBL) was down
$5,Oracle was down another couple,
Concord (CCRD) was down $9, and Neon
(NEON) down $12. Network Associates
(NETA), which in my opinion has been an
accounting book-cooking fiasco, was
bludgeoned, down another 5, so that
stock's basically been cut in half in the last
two days.
Even if you've known these things, it's been impossible to stay
with them. My fund had been short NETA until a couple of days
ago, when I got chased out of it. Then yesterday Morgan Stanley
decided to cut numbers, and everyone jumps on board and cuts
numbers. Again, that is an example of what passes for research
by the dead fish. (And it is very hard to talk about live fish,
because there don't seem to be any.) It has been difficult to stay
with some of these deteriorating situations because the analysts
aren't doing any homework, they wait until the last minute and
then all jump on board at the same time.
This short squeeze is very reminiscent of a big short squeeze we
had in the spring of 1994, when Michael Steinhardt covered a
bunch of shorts as a precursor to closing down its fund. We had a
huge move up and then everything came unstuck and about 10
days afterward, it ended.
Stock schizophrenia... Today was an even more schizophrenic
day than any other we've seen, and I realize that's saying quite a
bit. Let me try to describe it. I've already discussed what
happened in software land. At the same time, PC hardware was
being driven up for the most of the day. We had reversals in both
directions for many stocks multiple times today. The Internet
stocks, after having been on fire, getting slam dunked and then
rallying back, reversed and closed on their lows. AOL (AOL) was
down $11 as an example.
Boost for banks... The bank stocks were hot today, which had
nothing to do with anything because the bonds were flat. My
guess is that there are a few shorts in the bank stocks and they
are getting chased out. A combination of that and hot money
fleeing certain sectors of technology, like software, are probably
chasing into the bonds and S&Ps.
This is such total chaos, I need to ask rhetorical question: Do
new-era types really think this is how the stock market is
supposed to function, with gigantic schizophrenic moves virtually
every day? Having the Dow hitting new all-time highs at the same
time the advance-decline line is sagging and new lows continue
to outpace new highs? With no profitability in corporate America
and huge debt buildup inside the economy? Is that really healthy?
Is that how it's supposed to work?
I have a piece prepared for tomorrow that goes into some
economic detail and sheds some light on areas of the economy
that I think are unhealthy. I would have used it today, but this Rap
was already pretty long.
"Advice" for investors... As another example of what dead fish
do, a DLJ analyst yesterday lowered her opinion of Gillette (G)
and then today, even though she cut numbers, upgraded the
stock. This again is what passes for research. Michael Belkin
yesterday in his weekly piece had the following to say about that
(and everyone should realize that this is sarcasm, in case it's not
perfectly obvious):
"This is what works on Wall Street - cut earnings forecast and
raise price target.
"The PC market offers great opportunities for investors. IBM's
(IBM) announcement of a billion-dollar loss on PC operations
should be a boon for other box-maker stocks. Emachine's
overnight cannibalization of a 10% PC market share with its
sub-$600 PCs can't help but increase margins and market share
for higher-priced manufacturers like Dell. Forbes ASAP
magazine column claiming Dell made $3.1 billion buying calls
and selling puts on its own share price over the past three years
($600 million more than net income in the period) should
increase Dell's allure. Investors can now see Dell for what it really
is - an exciting one-way lottery ticket on a rising share price
rather than just a boring old PC maker. In that light, Dell deserves
a higher multiple.
"Other PC companies like Compaq (CPQ) should also benefit
from plunging PC prices and loss of market share. Of course,
Intel (INTC) itself is the ultimate beneficiary of collapsing PC
prices and loss of market share to low-priced microprocessor
competitors like AMD (AMD) and Cyrix, who dominate the
burgeoning low-end market. Every new-age portfolio manager
should buy more Intel stocks to take advantage of this great
company's declining unit price, revenues, margins and market
share.
"Our advice to the investment industry is - shake the cobwebs off
your antiquated portfolio management policy and move into the
21st century. Discredited notions of diversification and value
should be jettisoned. Portfolio managers should follow the
stampede of individual investors and pile all the assets of their
funds into a small handful of stocks, i.e. the only ones that are
going up. Once the mutual fund industry has switched all its
assets out of non-performing value stocks and has indexed its
trillions of dollars to AOL, Amazon (AMZN), Yahoo (YHOO) and
Microsoft (MSFT), the era of mutual fund under-performance will
be over. Then we can all sit back and watch our retirement assets
compound at light-speed and enjoy the well-earned fruits of a
wise and responsible new-age investment philosophy."
As bizarre as it gets... I want to emphasize again that today was
a very extraordinary day. You had the Dow up 120 and the S&P
up by eight points, a new high. The advance-decline line and the
new highs-new lows were pathetic. Stocks that weren't up a
bunch were just shredded. We've seen a lot of craziness as
we've chronicled the mania during the last three years. I think
today's action and the complete disconnect between different
groups are as bizarre as anything I have seen. I cannot imagine
any sane or sober person coming to the conclusion that this is
healthy or a place where people want to have their hard-earned
money parked in the name of investment.
Please be sure you've read "What is the Market Rap?" before
you send me email. As highlighted in this outline, there are
certain questions to which I am unable to respond. |
