The Bunny Ranch

[wndysrf]

Mark?s Market Commentary ? December 10, 2002

 

Anyone who watched the last episode of ?The Sopranos? and stuck around afterwards was a witness to the next HBO Horror Show. This program is called ?The Cathouse?, a documentary of a Nevada bordello called the Bunny Ranch.

 

Hordes upon hordes of rednecks, old business men, casino tycoons,and college students lining up to pay $1,000 an hour for some type of fantasy session where anything goes.

 

After last night?s record high 5-day ARMS reading, combined with a massive $8.5 billion FEED, combined with the front running of Al Green?s speech, the Speculators decided to make another early morning run to The Bunny Ranch.

 

Because Doctor Greenspan said the girls were ?safe?, and he would use whatever unconventional measures available to insure the Bunny Ranch against adverse consequences.

 

And of course, the participants grabbed what ever sex toys were available, and immediately went after the usual favorites, like CYMI, SYMC, AMAT, and all the rest.

 

But of course, there is no reason to pay atttention to any other sector but the SOX, since it is the leading economic indicator and speculative barometer for the entire globe. A globe which is locked in a hypnotic trance, anxious to spot and participate in the next tech stock mania.

 

The globe where the DAX trades like AMAT, which leads the NYSE, which in turn drags up the FTSE, which lights a fire under the Hang Seng, which is indistinguishable from the Nasdaq, which mirrors the CAC, which follows KLAC, the leading HeatMapper.

 

And as usual, the bullhorns and loudpeakers were droning on about some type of ?bottom? which needed to be bought by the speculators:

 

Chip equipment makers help pull up SOX ($SOX, AMAT, TER, KLAC, NVLS, INTC) by Tomi Kilgore The semiconductor sector is among the day's best performers, boosted by strength in the chip equipment makers. The Phlx Semiconductor Index ($SOX) is rallying 4.5 percent. Earlier, Goldman Sachs anal cyst James Covello said he was more confident in his belief that fundamentals in the chip equipment industry had bottomed.?

 

I kind of found it odd that the Supermodels were the only stocks moving today, and the homebuilders and retailers were going nowhere.

 

But what do you expect?

 

Today?s The Wall Street Journal contained a piece on MBI, where some HedgeHog has decided to push the stock over the cliff so it can profit on the short sale of some CDO?s. Rumors were flying around about its accounting treatment, whether or not it deserved an AAA rating, and all the rest.

 

Of course, MBI?s publicists, handlers, agents, advertising executives where quick to jump on the tape and claim that MBI was ?safe?, because despite its 132:1 leverage ratio, over 70% of the bonds it insured were AAA rated.

 

But nobody dared to consider that these AAA ratings are a fabrication of the Hillbilly Circle Jerk, yet another instrument used to hold together the 700-story derivative tower.

 

The only reason the insured bonds are AAA-rated is because MBI itself is AAA rated.

 

And the only reason MBI is AAA rated is because it purchased credit insurance on itself, sold to it by GS, who in turn layed off the exposure to GE Capital, who in turn stripped it into 5 tranches and optioned it to MER, who in turn flipped it to JPM, who offloaded it to C, who hedged its exposure by shorting junk bonds, and the couterparty to that trade was ABK, who saw some arbitrage opportunity by buying swaptions on credit insurance, which was originated by an off-shore Bermuda corporation, which is capitalized by Winterthur, who in turn was recently supported by CSFB, who in turn is dependent upon Commerzbank, who is having problems but is hedged with puts on the DAX, sold to it by a HedgeHog who is using a Kopin Tan-styled option straddle, who in turn mitigated its risk by shorting MBI stock.

 

So as you can see, the risk did not go into Outer Space.

 

It just went around in a giant circle.

 

And fees were paid at each tollbooth.

 

And every hand in the pot made some type of arbitrage profit.

 

Which basically watered down the whole scheme.

 

Which was marked up anyway by the brokers.

 

Because spread profits are a universal constant.

 

A universal constant anchored by Al Green?s pegged interest rate policy.

 

Meanwhile, the Matrix architects are concocting even greater schemes with which to keep the Multilevel Marketing Pyramid going.

 

Because it is the Matrix Institutions at the top of the pyramid which must be fed by an ever growing base of ?participants? sucked into the Credit Bubble Vortex.

 

See the front page of The Wall Street Journal to read about first time homebuyers getting free down payment money from some charitable groups, which in turn are funded by the homebuilders, who raised money from the debt markets, which was provided by the spread trade speculators, who in turn are participating in a John Law profit scheme, fueled by the Al Green put.

 

Yet another Circle Jerk designed to keep the participants plugged in. Unfortunately, more and more participants are needed to feed the growing monster, so the Matrix Agents are manning the bullhorns and loudspeakers to ?jawbone? up the financial markets and the economy.

 

Al Green was smart by not lowering interest rates again. He needs to save the rest of his Laughing Gas Quaalude Cloud to calm the markets in the event of a real crisis.

 

As usual, the HeatMappers, hucksters, traders, jobbers, and speculators were violently pointing and clicking, running this way and that, wondering whether or not a short squeeze was going to materialize or if the market was going to collapse on disappointment.

 

Once again, more emotional energy wasted.

 

More commisions wasted.

 

More of your retirement money being used to game the charts.

 

Probably a chance for the Nasdaq to run back up to fill yesterday?s gap on the back of Al Green?s usual Blender Run on the day after the FEED meeting. We?ll have to see if the famous Wild Wednesday prior to options expiration results in a reversal to the upside or downside.

 

The volume today was pretty light. I was unable to hang around for the close, so I?ll have to leave it up to the Color Commentator to finish today:

 

?Once again bears are squeezed as those heat mappers sold yesterday are bought up immediately today. Nothing more than a gentlemens' runup into the FOMSovietCommittee for the stability of the Peoples' Market. Once the 'announcement' which is already known anyway gets released then we see a new set of vultures descend to try and trade down for the easiest money. This has been the pattern for many moons now with about 70% probability I would say. Chartists, E Wavers and Line Freaks are better served taking the day off and going bowling down at Jubilee Lanes near the railroad tracks. Short term chartists climbing in at the 'ominously weak' close yesterday are already blown out by another typical intraday round of low TRIN buying and squeezing.?

 

?????????..

 

Position Summary:

 

New quarter short positions added on INTC, CSCO, ORCL, and DELL

 

We are 49% short, 12% long, 31% cash.

 

Half Short:

 

LOW at $42

KSS at $66

INTU at $53

C at $38

IBM at $85

TGT at $34

 

Quarter Short:

 

FRE at $68

CFC at $49

MBI at $54

KBH at $49

LEN at $56

TOL at $27

NCEN at $30

BBBY at $35

COCO at $40

INTC at $18

DELL at $28

ORCL at $11

CSCO at $14

 

Half Long:

 

BGO at $1.31

HL at $4.10

PAAS at $5

DROOY at $3.35

GG at $10

GLG at $9

[General Nonsense]

The "hillbilly circle jerk" is essentially the same as what was called the "reinsurance spiral" that nearly took down Lloyds, London and made many of the "Names"--individual investors in underwriting syndicates with unlimited, "down to your last cufflink" liability--very poor indeed.

Anyone interested in how this will play out should read one of the several books written about the Lloyd's debacle. I believe one is entitiled "Unlimited Risk"

[Fartpolio Manager]

These chip equipment stocks remind me of the 'net stocks of the late 90s.... Basically, people are paying up for guaranteed losses... Of course the fundamentals are horrible, but these idiots for the 47th time are thinking that things can't get any worse... That makes a great case for investing.... NOT.

[Guest bubbles]

Ponder this pig, perhaps portending piles of poop. BARZ provides software used by fund managers to manage complex portfolios and derivatives. Ahh.. maybe something is hmmm? broken in those algorithms? There was no news on this stock save a downgrade on Monday from Buy to Hold ;-)

 

No tip off, in fact it gave a moving average crossover Buy just before the collapse and you?ve gotta look back 3 days before the break to even find any intraday range extension down beyond the initial range. Something is up here:

 

From their most recent 10Q:

 

?Ventures Business - Diverse factors cause variability of operating results in our POSIT Venture Business. The several POSIT systems can experience and have experienced significant fluctuations in trading volume. Since approximately 14% of our operating revenue in the current quarter and a significant portion of our income by segment in fiscal 2002 came from this venture, these fluctuations can have and have had a significant impact on our revenue and operating income. POSIT trading volume is also directly affected by factors such as economic and political conditions that may lead to decreased trading activity and commission prices in the securities markets generally. The future economic environment will be subject to periodic economic downturns, such as recessions. These downturns could result in reduced trading volume and prices, which could materially harm our revenue and operating income.?

 

 

?In fiscal 2002 over 46% of our revenues came from customers outside the United States. We anticipate that revenues from customers outside the U.S. will continue to be a significant part of our total revenues for the foreseeable future. Sales and operations outside the U.S. are subject to unique risks...?

 

'Laundry List'

 

Perhaps all is not well in psychotic hooker hedgehog derivatives land?.?

[wndysrf]

Bubbles:

 

Here's my translation:

 

"Our software from time to time may not work as prescribed. Occasionally, economic and political events beyond our model's control will have an adverse impact on trading volume and commission spreads."

 

"Furthermore, our POSIT revenue may be subject to further decline, as more HedgeHogs are blown out of business because they are using too much leverage to trade off of our models"

 

"Efforts are underway to solicit more business from Europe, where greedy ECB bankers are desperate to "catch up" with their U.S. counterparts with respect to designing and implementing the most exotic and complex trading vehicles."

 

"Sales and operations outside the U.S. are subject to unique risks, especially in Asia, where X-Box programmers are likely to pirate our code and develop their own Program Robot Trading Platforms."

[GTNWORSE]

Hey Guys,

Thank you, Mark, for the commentary. I managed to watch about 30 minutes of the HBO "cathouse" show. I am blown away (no pun intended) that some of these women are earning $100 for a day, let alone $1,000 for an hour. Very similiar mentality to the P/E ratio on the NAZ 100. Oh well, I guess it's only money.

It suddenly occured to me yesterday that as much as I think I know about the market, I really don't know shit. I find myself looking for that perfect opportunity to re-enter here, long or short, and it's never gonna be perfect.

I'm going to start listening alot more to what Piles and Brian are doing to make some money. You guys seem to have a pretty good feel for high probability entry points, even with your short side bias.

And yes I guess I'm gonna break down and part with the $20 for "The Annals". Just hope it doesn't add to my indecision in pulling the trading trigger.

[ShamPoo]

Thanks for today and thanks for yesterday Mark.

In Al we trust. Something about today had an unusually pungent stench to it. With W. rearranging the deck chairs and Al (the benevolent, all knowing, father figure) mumbling whatever it is he mumbles, both spewing unmitigated third grade level propaganda. And 99 percent of the idiots press chiming in on cue and in tune.

We all want the economy to get better. But pretending won't make it so. So much emphasis is put on things like perfect hair. We can't tell politicians from the anchor people anymore. They all look alike. Generic jerks. Possibly they believe their own spin. Possibly they really think that if they just put up a good enough fa?ade, everything will fall into place and begin to operate properly. Good God we are in trouble.

Fart, I am short to a couple of those chip equippers. These stocks more than any tend to reflect the joke that is this market. No need to make money, no need to produce anything, no need to provide any service. Just be standing in a place where if everything works out perfectly you may do OK.

Christmas rally. End of year rally. Rally on trust of new and better leadership. Rally on trust of Al Greenspan. Rally because every pungent out there says you should.

Don't think it's going to happen. Think that fear I see in W.'s eyes is the beginning of something we're going to be used to.

[phatbubble]

there was something profoundly bogus about today. it was like when you watch a dog come trotting down the road, and it stops short near a hydrant, sniffing, and you can just tell it has to piss....and it walks around sniffing things, takes a couple steps, sniffs some more, some bushes near the hydrant, the grass, here and there....and does it for ages....and you wait and wait, and now you're just watching because you can't believe it's still sniffing after this long....and then eventually it quits sniffing and trots off, like it never had to piss.

[brian4]

Mark& Gang-I agree 100%-what a sleezy day it was-the odour just gets fouler and fouler, but you know each time they try to bring it back from the edge of the cliff it takes more feed, more jamming and jawboning than the time before. They had a hell of a time with the tick today they just couldn't keep it on the plus side-the selling came in just as soon as they jammed it. All the action was on a very select group of stocks-if you look at the internals other than the Dow-the Spx and Oex and Ndx and Q's basically went nowhere after the initial launch at the open. So all in all a routine retrace after a big down and the big red arrow still points down and I would think we go down again tomorrow. Da Boyz did a fair bit of shorting after the bell-my Dec. 480 OEX puts went out at $21.50 bid and closed 15 minutes later at $22.60 BID DITTO ACTION IN SPX so they expect down tomorrow as well. Only one change today closed KLAC and MXIM puts at the open for a profit and bought puts on the same 2 bitches at the close-stay short and Trade Safe!

[PileDriver]

indeed B4, bullish pct actually dropped today, a total phonied rally, especially near the close.

 

http://stockcharts.com/gallery?$BPNDX

 

This is a rally to be shorted either tomorrow or Turdsday for sure.

 

Shorting rallies while this is declining are gifts.

[phatbubble]

you guys who've been watching this Big Dow Jamfest nonsense for a while - are they always hitting the expensive issues most, so the index can be moved with the lowest % changes (e.g. MMM, IBM, PG)? or....? intrigued on this. many TIA.

[PileDriver]

this is what Rog said in intraday stool

 

Market is being moved around by a large buyers in the ETFs: DIA, SPY, QQQ. Looks like they are trying to create motion to spur a rally. So far it is being faded

 

I've noticed a pattern over the last two weeks. the market seems to ramp from 3:10 - 3:45 whenever this a large Sell MOC in the works. Today is no excpetion. Ramping in the NDX and large sell imbalance MOC pushed it down almost 5pts.

[PileDriver]

GTN, you'll probably get a chance to short on this current bounce or perhaps another year-end one before the ball really gets rolling sometime in January. The best of the Fall rally is behind us now. For me, I'll make a better effort next time at losing my perma-bearish leaning and maybe going dong when the bullish pct and VV BSR/MTI sink to the low levels that they did this past July and Oct. But for now short is the way to go.

[EasyAl]

Because Doctor Greenspan said the girls were ?safe?, and he would use whatever unconventional measures available to insure the Bunny Ranch against adverse consequences.

Mark:

 

This is the real safe sex:

 

[Guest]

Punters here not impressed with US action so I'd agree with those who thought it was an attempt to fake up a rally. We had a blowoff on open which was promptly sold and it's been very weak action since then. Index is flat with a general drifting down on lowish volume, fair bit of red on screen with a sprinkling of insipid green. Yep I'd say some downside ahead for you guys tonight...