New Jersey Garbage

[wndysrf]

Mark?s Market Commentary ? December 19, 2002

 

Ever run into a streak of psycho girlfriends, where after the last one is booted, you think that it is impossible for you to find another girl who is even worse?

 

As we grind through the bear market, we hear repeated references to the ?smart money? institutional investors, the largest and most powerful being the staid, infalliable pension fund managers.

 

These are the guys we are supposed to follow, especially when we hear of ?rebalancing? and ?increased asset allocation to equities? and all the rest.

 

Last year, we heard of the State of Florida?s Alliance Capital doubling down and tripling down on Enron and WorldCom.

 

Every month, there are repeated horror stories about how some pension fund got wasted by making risky trades or failing to have an exit strategy.

 

Today?s The Wall Street Journal has an excellent article on the poor fate of New Jersey?s pension fund. This is clearly a story that is ?worse? than the others.

 

This fund was run by Brian Arena, a 30-something civil servant making less than $100,000 a year, single handedly in charge of managing and trading over $9 billion in equities. Unlike other funds, who contract out the management to money managers, this fund was run by lowly government drones.

 

?For New Jersey, outside management would cost hundreds of millions of dollars. Now, the state?s pension management budget is a mere $6 million, and another $30 million is spent on trading commissions.?

 

No wonder the brokerage houses today ?beat the street? on their earnings results.

 

?During the 1980?s, the state put $1.8 billion into media stocks, another $680 million into Internet service and software. It invested $18 million in CMGI, and $30 million in AOL. By 1999, the CMGI and AOL holdings were valued at more than $300 million and $500 million respectively.?

 

?While the market was rising, Govenor Whitman floated $2.8 billion in bonds at 7.64%, confident that Arena could invest the money in stocks and get a higher return?

 

Mark?s Translation:

 

Governor Whitman was anxious to make herself a hero. So she floated some bonds and gave the money to Mr. Arena, hoping he could HeatMap and Riverboat the pension fund into a surplus position, so the state could then ?borrow? the proceeds and invest in Ms. Whitman?s pet public projects.

 

?New Jersey?s pension fund was registering such big gains in the stock market a few years ago that a newspaper jokingly suggested the state hame a highway rest stop after Brian Arena.?

 

Now the pension fund has lost nearly a third of its value, as assets have tumbled from $82 billion to $56 billion. The fund still owns over 7 million shares of CMGI, valued at 95 cents.

 

During the past 3 years, New Jersey has performed worse than all but 4 of the 100 public and private pension funds nationwide that manage more than $10 billion in assets, according to Wilshire & Associates.

 

But the state administrators are not worried, because they know that Al Green has a ?final solution? in his back pocket somewhere which will eventually ignite another ?new bull market?.

 

?The losses are a temporary aberration, says current Govenor James McGreevey.?

 

So now we know of this huge mountain of ?overhead supply?.

 

The key is this: Will the ?smart money? attempt to HeatMap their way out of this mess, or will they use the more prudent strategy of selling on strength?

 

Based on what is being reported by The Matrix daily, I see no signs of selling. If anything, these pension funds are selling bonds and buying more stocks, because they are believers in The Fed Model, or Joey Battipaglia, or Abby Joseph Cohen, or other Chief Agents working on Cheat Street.

 

What does that mean for the long term? Possibly more gains ahead, but even worse destruction later.

 

Imagine the liquid smoke on the wires out of Denver and Boston when these giant elephants are trying to offload at the same time the X-Boxers are hitting the sell button at the same time Joe Sixpack is selling stocks to save his mortgage at the same time Europe?s insurers and banks are selling to meet capital calls at the same time the Program Robots issue sell signals because of some ?technical divergence?.

 

Today was the usual ?untradeable? variety typically found at the end of Scam Week.

 

Buddha got his fingers burnt by trying to guess which way the Matrix was going this morning:

 

?As discussed yesterday, high TRIN close on OE Racketeering day led to huge upspike reversal with Al Green entering market right at open to vacuum pump stocks above critical breakage. Both my stop loss and then sell order for GG were just dismissed by the PigMen suppressing that sector even though they were well within range. The opening gap in Gold was a Venus Flytrap setup just as it was 2 days ago. Semis down yesterday, gold up, gold down this morning, semis up. Alice in Wonderland is the trading manual. The Mad Queen working herself with the long, red vibrator is the esteemed author of said manual. The Claus sled rally is the most heavily advertised event since the double bottom SPX 775 which itself was better known than the JLo bottom. It is essentially a self fulfilling phenomena. Rabid retail stock chasing into professional distribution is the effect the BoarMen are looking for. So far, so good. Al is leaning heavily on Repo lever this morning leaving little to chance.?

 

Then the Lever Reversals came in at the 11:00am time turn:

 

?Taking off afternoon. Surrendering the field to Capone. My trading vehicle was riddled with 45 caliber slugs this morning from a 33' reissue Thommie Gun. I was rolled and left for dead in a ditch filled with retail corpses at 11 am. Fortunately I had foolishly left some gaming items unstopped which then proceeded to bounce hysterically into the noon amateur hour. Bailed on these and have been revived. I feel like Arnold in last scenes of Terminator 2. It?s pretty much a losing cause out there trading against the OE robotry intraday. No telling how it morphs from one millisecond to the next. Everytime I get a leg up in this thing, the recombinant genetic liquid gels and begins coming for me again. Have expended several supercharged cartridges into back of Terminator's head leaving gaping holes which quickly fill like so much putty on a childs plate. One minute the Terminator is an MM, the next he is Al Green smiling and toothless, minus his dentures, the next hes the little bushman dragging a pair of grotesquely swollen blue balls along the ground and aching for an Iraqi Orgasm. Best to surrender the field now and seek solace in some Thai stick and velvety Asian caress.?

 

As Maria happily reported on the open this morning, the brokers are still coming in with record trading profits, thanks to Da Boyz and thanks to the Repo Jams.

 

There will be no real selling in the stock market until we see a confirmed reversal in the Great Bull Market in Liquidity. Right now, Al Green?s Repo charts are likely to be breaking out of Doc?s consolidation on his FEED-o-meter, and it looks like the money supply will soon be going parabolic.

 

Still have no idea which way the market is going, although we are currently drifting to the downside very slowly. Selling volume is starting to pick up. Still too scared to short anything here, with the year end jam job upcoming.

 

Gold is consolidating right at the highs. All I hear is fear of a major reversal, so most miner longs are selling up here. That?s a bullish sign so far. But if these stocks break off to the downside on some heavy volume, I?m out. The chart patterns remind me of KO and CAT after their short squeeze squirts. The consolidations at the highs had me convinced that another move up was in the cards, but those stocks promptly collapsed shortly thereafter.

 

So far we have more fear than excitement in the gold stocks. So I tend to favor the long side for now.

 

???????????..

Position Summary:

 

We are 41% short, 16% long, 32% cash.

 

Half Short:

 

LOW at $42

KSS at $66

INTU at $53

C at $38

TGT at $34

MBI at $50

 

Quarter Short:

 

FRE at $68

CFC at $49

KBH at $49

LEN at $56

TOL at $27

BBBY at $35

COCO at $40

 

Half Long:

 

BGO at $1.31

HL at $4.10

PAAS at $5

DROOY at $3.35

GG at $10

GLG at $9

MDG at $16

[wndysrf]

Richard Russell, also commenting on the "fear" building among the gold bugs:

 

Dow Theory

[machinehead]

"It looks like the money supply will soon be going parabolic."

 

Funny you should mention that. The Federal Reserve has made some accounting changes, which are explained in a foreword to the H4.1 release tonight. "Nothing has really changed," Uncle Al soothingly reassures us. But these purely pro forma accounting changes result in a massive pop to Fed credit:

 

http://www.federalreserve.gov/releases/h41/Current/

 

Including the effect of the accounting changes, which presumably make current and year-ago figures no longer comparable, the Fed's outright holdings of securities (so-called permanent reserves) are exploding at a 13% annual rate. Beam me up, Scotty.

 

As of tonight, the major impact of the change falls on one Dr. Stepan N. Stool, who is scratching his head over how to adjust the Feed-o-meter to account for this discontinuity.

 

Moreover, the H6 release (money supply) shows a monster $142 billion pop in M3 between Oct. and Nov. 2002. Why is gold rising? Look no further:

 

http://www.federalreserve.gov/releases/h6/Current/

 

You don't even want to hear what Doug Noland will have to say about this over the weekend. I fear that he may be institutionalized in a straitjacket as he grimaces, grinds his jaws, and futilely flaps his hands.

[Guest soup1]

leave it to the statist central bankers to turn a bad situation into a disaster. What in the world are they thinking? It really does not get much more bearish for equities.

[The End]

I did NOT sell my gold position today.

[Guest alex]

POG: probable correction to 330 level. Have a feeling we'll See Spot Run before the month is out.

[longOnUranus]

Public pensions will do everything in their power to avoid realizing losses; including the Ponzi of covering loses with new bond issues and other shell games. We will more likely see GW admit he's a gay cross dresser with a sex change than see the Pubs bail, thus admiting that they screwed up investing the public's dough. And the Pols are world class at nailing a scapegoat.

 

Generations will pay for the public $ wastage, which so aptly put herein, makes Enron look like a corrupt Kool Aid stand.

[turtle]

I did NOT sell my gold position today.

http://news.bbc.co.uk/2/hi/business/2589613.stm

 

There was not gold market before in China. People used to have Dollar to preserve value. Now with Al printing like this, everything may change.

[DrStool]

The net effect of the accounting change was about $19 billion. I adjusted all my data by that amount so that we don't see a huge bulge this week. By tracking the Feed daily, I have found that when the Fed's Turds day release rolls around normally only tiny adjustments are needed to account for outstanding msp's to foreign central banks. I am therefore assuming that the numbers I had on Wednesday were correct, since with over 100 weeks of data, the change has never been more that a couple hundred million. This time it was $19 billion. There was no evidence during the week that total Feed grew this much. Repos were down day to day, and there were no bill or coupon passes.

 

MSP's were used primarily for trading with foreign central banks in foreign exchange operations. The $19 billion increase reflects the fact that the Feed is now holding these securities, instead of selling them outright for a fixed period.

[DrStool]

In otehr words, I'm going to ass sue me that my numbers are right and theirs are all fornicateed up.

[brian4]

Gold- is simply overbought-it will consolidate for a bit after one HELL of a run- a lot of Dorks are daytrading the GOLDS to stupid to realize they should be accumulating the one thing that may save them. Now maybe Budda didn't have a good day but I had a KAI CHING day. I sold my Spx puts for $34.50 ( din't get the high price which was $37.50) but considering I paid in the mid twenties I'll take that anyday. Sold my OEX puts for $25.- @ contract for fair coin-paid $22.- but the buggers wouldn't move, which tells me DA BOYZ have started the jam job-I went long a full position in January 900 SPX calls with 20 minutes to go at the bottom paid $18.80 per contract and they went out on heavy volume at $19.40 bid-$20.50 ask. We have 2 1/2 trading days left till Xmas and then 3 until the new year-this is the time they put some lipstick on the PIG-as the already pathetic volume dwindles as Xmas approaches Da BOYZ can move this sucker with little effort. Having said that IF their is a significant event and they can't hold it up-I will buy SPX 880 puts and bob along in a collar until the New Year-that is when the wheels come off. A combination of zero earnings, and lousy holiday sales plus the knowledge that the Idiot prince and Merlin are gonna take the people where they don't want to go should rip it wide open-I wouldn't be short now-be long or collared-Trade Safe!

[machinehead]

Full moon (low point in the lunar cycle) passed us this afternoon. The next new moon (bullish part of the lunar cycle) is at 3:24 p.m. on Thursday, Jan. 2 - the first trading day of 2003.

 

Watch for either Jan. 2nd or 3rd -- possibly both -- to be a huge pop.

[Fartpolio Manager]

Full moon (low point in the lunar cycle) passed us this afternoon. The next new moon (bullish part of the lunar cycle) is at 3:24 p.m. on Thursday, Jan. 2 - the first trading day of 2003.

 

Watch for either Jan. 2nd or 3rd -- possibly both -- to be a huge pop.

ah soo... what happen to last new moon? 12/5? That was anything but bullish, eh?

 

Keep yo eyes on the Bradley Model, that looks like the best forecaster in the bunch right now...

 

http://www.ensignsoftware.com/images/brad.gif

 

Oh, and in case you don't think this is relevant because it's based on astrology, so is the moon cycle theory...

 

that 7100 area on the DOW(n) towards the first of the month is looking VERY OMINOUS....

 

Be sure and let us know when you throw in the towel, Mr. Bull.

[Guest london]

lotta For Sale signs up in the stores in London.

 

not much floor traffic; have been in and out of retailers and you'd think it was a quiet week in Feb rather than the week before Xmas. if the US looks like this then the retailers are in big trouble.

 

don't know much about physical gold, but I assume the metal trades in a range until the New Year because there won't be much new news during Xmas week?

 

all the stories about JPM capping the gold price don't work for me. JPM may be a big dealer, but executing client sell structures doesn't make JPM a manipulator. Barrick is well known as a major forward seller; this doesn't make them a manipulator either. to show manipulation you have to show intent. unless there are some smoking emails inside JPM I just don't see the litigation making any difference...... that said, most of Europe thinks Bush will push for a war regardless of what happens in the Middle East. probably Asia thinks the same thing. so, gold will rise in the near term unless Saddam has a heart attack...

[Guest]

Found another high-flyer, Netease.com ("NTES"). who has rallied over 500% in the past few months - a shitty little Interet portal in China, not the dominant player even in China (behind Sina and Sohu), and barely made a profit in recent quarter. There are significant % of insider holding (70%+) and these guys haven't started to sell yet! (which is pretty stupid, and they will do it soon...) Unfortunately Ameritrade has no available shares to be short, like the pigs ROOM or EXPE. If you can find shortable shares, I highly recommend this one...