wndysrf Posted December 3, 2002 Report Share Posted December 3, 2002 Last year, we documented the spectacular crash and burn of Mariah Carey, almost certain that she had been left for dead among the discarded Pop Divas. But like the today?s stock market, ?left for dead? wonders from yesteryear are miraculously reconstituted. And now after an album bomb, a nervous breakdown, and a blown record contract, the ?reinvented? Mariah has emerged. Thanks to a stomach stapling, breast implants, and liposuction, she has emerged with her own record studio, a new CD, and a starring role in the 2003 Super Bowl. Where else can old horrors be erased and forgotten so quickly? Nowhere else but Hollywood and the U.S Stock Market. Drug addiction, spectacular financial failures, child molesting, shoplifting, double murders, and all the rest. The ugly past conveniently forgotten, shoved aside to make way for the ?reinvention? so expertly crafted by handlers, agents, publicists, and People Magazine. Credit market dislocation, 1998 stock market lows, overconsumption, record debt levels, and a tottering JPM pyramid. The ugly past a little more than a month ago has all been forgotten. A ?New Bull Market? expertly crafted by strategists, anal cysts, futures jamming, short squeezing, and Investor?s Business Daily. In every prior mania, whether it be railroads, canals, tulips, bubble schemes, or whatever, revulsion from speculative excesses usually end badly, in the form of a crisis, crash, or panic. For example, the declines in prices on October 29, 1929 and October 19, 1987 were practically instantaneous, far faster than what could be accounted for by arbitrage, money flows, or program trading. But today is different. Instead of a selling panic, this bear market has been characterized by a series of buying panics. It really has been quite incredible. Instead of an increase in risk aversion as we make lower lows, the arena has become even more supercharged with volatility and speculation. What happened when the Tulip Mania crashed? Did we see reckless trading by a wild stampede of intoxicated investors nearly three years from the top? When the railroad manias of the 19th century collapsed, did you see a raging appetite and craze to chase the riskiest and most speculative railroad stocks at their lows? After reading Kindleberger?s ?Crashes, Panics, and Manias?, there was one common thread found in the unwinding of previous manias. And that was the tightening of credit and the increasing of interest rates by nervous lenders who were burned by the first failures from leveraged speculators. He also describes the five stages of a bubble: Displacement: ?One example of a displacement that occurred in 1987 involved the introduction and wholesale deployment of innovative, new financial products like derivatives, which led to some very complicated and dynamic trading strategies that increased market liquidity and volatility? Sound familiar? Do you think Kindleberger could have imagined what would be taking place in 2002, where Kopin Tan - styled straddles, collars, hedges, and, swaptions were available on virtually thousands of different types of derivatives? Overtrading: ?Involves a higher degree of activity in the market than is the norm, based on the belief that stocks or commodities can be bought for speculation, to be sold at a profit, not for investment purposes or use.? Would he even recognize the current trading environment, where not only were the financial instruments overtraded, but the ?hedges? and ?insurance? on these instruments were also traded for profit? Monetary Expansion: ?Accomodative monetary policy from the central bank, in many ways a self-reinforcing process to fuel more and more speculative activity in the financial markets? Revulsion: "Revulsion only occurs when the persistent hope of recovery begins to fade? Will historians be able to find any other financial mania where hope was kept alive, complacency running at extreme levels, after 33 months into a bear market? Where was the level of hope 33 months after the Tulip Mania peak? Where was it 33 months after the October 1929? Where was it 33 months after John Law?s Mississippi Scheme reached a top? Can anyone identify any other speculative mania where hope reigned supreme for such a long period of time? Discredit: ?At this point, a formerly loved asset may very well fall into discredit, perceived as so risky that they merit no consideration whatsoever.? Anybody have the feeling that EBAY, EXPE, and ROOM have been discredited at $70 - $80/share and at 150x earnings? But this time it?s different. The difference with this mania is that it has coincided with the continuation of the Greatest Bull Market of all time: The Great Liquidity Bubble. Instead of credit contraction, we have had an explosion in new credit. Instead of fear gripping the lenders after incurring heavy losses from Enron and WorldCom, Uncle Al has turned up the speed of the Reliquifaction Blender. He has gone beyond the puree button. He has gone beyond the nitrous oxide injector. He has gone totally and completely insane. Harry Potter?s magic wand is no match for Al Green?s, whose Magic Wand is able to spin the liquidity blender into hyperdrive. Where else can you find helicopter loads of free gambling chips dropped repeatedly into the Casino for all participants? Where else can you find an arena where unlimited bets can be placed, using an unlimited number of instruments, hedges on top of hedges, each supposedly offsetting each other, every trade a ?perfect? trade? Where else can the HedgeHogs lose money at the Keno table (shorting stocks), blackjack table (shorting junk bonds), roulette table (shorting credit insurance), only to find out that all losses can be made up in one month by joining up with the little old lady at the SOX slot machine who is hitting the jackpot for a third time? Where else did you have an aftermath of a financial mania taken over by Program Robots designed to issue immediate stop losses on one type of trade and trigger automatic buy signals to another trade? Billions and billions of dollars, being herded around by the Matrix to entice the Riverboaters to immediately grab the 12th Helicopter drop of new gambling chips and head over to the SOX slot machine? It has been truly remarkable. Traders, jobbers, hustlers, swindlers, hackers, all rushing around the Casino to see where the fastest action is. And the Matrix operators continue to fill the arena with propaganda, with an incessant drone on the loudspeakers about all sorts of ?topping estimates? and ?replacement cycles?, and ?beat by a penny? Lotto promises. And with every speculator?s eyeball looking at the exact same charts in real time, is it any wonder that the entire Global Stock Market trades in sync with the large breasted wonders like KLAC, NVLS, and MXIM? Is it any wonder that if a major move is missed on these three, then natural migration is to grab the lesser known, washed out Soap Opera stars like PMCS, AMCC, and VTSS? Most manias end badly. As this one will eventually. But the greatest mania of all time will die hard, kept alive by the liquidity bubble, a permanent floor on distressed prices, with the Wall Street Matrix constantly spinning and ?reinventing? some type of recovery which will never happen. Mariah Carey and Robert Downey Jr.?s publicity machines are no match for the Wall Street Matrix. The latest spin today is that the economy was never in a recession. It simply cruised through some type of ?soft spot?, according to Tony Crescenzi in Monday?s IDB. Is it any accident that only cheesy Italian hucksters like Crescenzi and Santelli are used to prop up the action? ?Risk taking is back in vogue?, says Crescenzi, who works for some no-name bucket shop called Miller, Tabak, which sounds like a Chicago bookmaking operation. What are the odds that this rally can continue? The odds are getting slimmer as this rally is becoming increasingly extended. The rally is becoming about as extended as the Boston Public classroom?s patience with Jeri Ryan. What are the odds that Jeri Ryan can survive more than two days in a public school filled with overanxious gangsters with outsized libidos? What are the odds that those male students are really paying attention with Ms. Ryan?s flat stomach and large breasts being paraded every day? What are the odds that a teacher like Jeri Ryan can maintain a $35,000/year civil service job and not be tempted by a $350,000/year Victoria?s Secret modeling contract? What are the odds that ?market forces? in a secular bear market can be denied? What are the odds that the greatest mania of all time will escape a selling panic? What are the odds that the average semiconductor stock selling for 12x sales can hold up its valuation after losing money 5 quarters in a row? What are the odds that every speculator who has chased these stocks up from the lows will be able to sell out near the top, avoiding Edward Chancellor?s classic Devil Take the Hindmost breakdown where 90% of the traders who bought near the lows will lose 90% of their gains? What are the odds that millions of stranded longs and underwater pension plans can resist the urge to sell large blocks of stocks at the first sign of a ?reversal?? What are the odds that Al Green can defy economic history and overliquify the economy without adverse consequences? For the last several weeks, there hasn?t been much distressing news coming out of the financial news media. But some of it is starting to creep back in. From Bloomberg: Barclays Plc?s earnings fall due to bad loans and lower revenue growth. ?The fact that revenue isn?t coming through is the biggest surprise. For the bellwether of the U.K. banking sector to say that trading is difficult and the environment tough isn?t encouraging. Revenue has been constrained by tumbling stock markets, which hurt the life insurance business and trading profits at Barclays Capital. Provisions for bad loans have increased because of turbulence at some unspecified borrowers. Barclays said the 2002 provisions for bad loans were broadly consistent with its earlier forecasts, excluding loans made by Barclays Capital? Mark?s Translation: Barclays earnings were being hit by trading losses, bad loans, and skyrocketing personnel expenses. Barclays Capital in particular has been blown out with massive trading losses as a result of extraordinary volatility in the equity, currency, and bond markets. Bad loans have mounted after overaggressive lenders reached too far with substandard telecommunications borrowers in order to ?catch up? with its U.S. competitors in the rankings on Institutional Investor?s annual debt and equity underwriting polls. Earnings were also adversely impacted by higher than usual personnel expenses incurred as signing bonuses, Concorde tickets, and Hampton?s rentals were necessary to recruit top investment bankers away from the competition. Barclays said that its 2002 provisions were adequate for the bank, but the amount of off balance sheet bombs, favor loans, and margin credits were unknown at Barclays Capital. Position Summary: Two new half shorts added: LOW at $42 KSS at $66 We are 38% short, 11% long, 50% cash. Half Short: LOW at $42 KSS at $66 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 Half Long: BGO at $1.31 HL at $4.10 PAAS at $5 DROOY at $3.35 GG at $10 GLG at $9 Link to comment Share on other sites More sharing options...
roidrage Posted December 3, 2002 Report Share Posted December 3, 2002 The time away bearly affected you! Welcome back. rr Link to comment Share on other sites More sharing options...
Fartpolio Manager Posted December 3, 2002 Report Share Posted December 3, 2002 Carey on with the good work, Mark... lol. Welcome back to the home team. Link to comment Share on other sites More sharing options...
GregFokker Posted December 3, 2002 Report Share Posted December 3, 2002 Welcome back, dude. Link to comment Share on other sites More sharing options...
Guest BigPaws Posted December 3, 2002 Report Share Posted December 3, 2002 Welcome back. The Fed has indeed been running amock peumping liquidity into the system but the market can move just as easily in either direction regardless of the cost and availability of short-term credit. There's evidence that the Fed has been involved in recent rallies (story for another time) but even the Fed cannot support the market against the long-term fundamental forces. On a different note, a St. Louis Reserve Bank publication, not all that long ago, declared that a shift in the composition of the monetary aggregates toward liquidity has often been "a harbinger of planned spending." So, we might assume that a significant move in the opposite direction foretells of plans not to spend. And indeed monetray agregates recently have been indicating a shift towards less liquid accounts. Is the consumer starting to retrench? Methinks so. Link to comment Share on other sites More sharing options...
richmtn Posted December 3, 2002 Report Share Posted December 3, 2002 Yo Yo Yo. Welcome back Mark. Link to comment Share on other sites More sharing options...
Guest Posted December 3, 2002 Report Share Posted December 3, 2002 . . . There's evidence that the Fed has been involved in recent rallies (story for another time) but even the Fed cannot support the market against the long-term fundamental forces. . . . Well they certainly think that they can -- or at least they want us to believe that they can. I think that not too long ago, one of the governors said that they will do anything to support the market. Two years ago, that statement would have been unthinkable. They now say they can do anything not disallowed by their mandate. Frightening. Link to comment Share on other sites More sharing options...
Guest Yogibear101 Posted December 3, 2002 Report Share Posted December 3, 2002 And I thought the chicken had flown the coop for good....... Link to comment Share on other sites More sharing options...
simple guy Posted December 3, 2002 Report Share Posted December 3, 2002 Welcome back Mark... Other than myself, you are the best anal cyst out there...heh heh Cheers!~! Link to comment Share on other sites More sharing options...
Takachi Posted December 3, 2002 Report Share Posted December 3, 2002 What baffles me is what they think will happen if they are successful. Is all this liquidity going to perpetuate 40, 50, 100 billion dollar monthly trade deficits, twice annual refi's. What is the consequence of their success......inevitable engulfment in what got us here. Incredible blindness. Al's place is assured as the most hated man in American history. So great you are back! Link to comment Share on other sites More sharing options...
brian4 Posted December 3, 2002 Report Share Posted December 3, 2002 Welcome back MARK-even more welcome that you have your ATTTTTATUDE back! We've worked hard to keep the thread alive. I posted last night that I was still cautious and in cash save for a handful of puts under the market and would stay that way until this sucker broke down-I noted that as I posted futures were well above fair value and if they stayed that way today would be another manic up day. Well being on the west coast as you are i almost got 3rd degree burns as I dumped a 1/2 cup of coffee over myself as I clicked the computer on and saw the futures imploding before my eyes-since it was 5 a.m. PST I had lots of time to load the boat pre market by the time the market opened futures were underwater, GOLD was up and the dollar was dropping fast all of which were signalling trend change BIG TIME-at the open I was 50% short and at the close am 75%-full positions SPX, OEX, QQQ's and my favorite two bitches KLAC and MXIM now after the close all are well in the green-I'm still holding and added GE as a full position short about 10 minutes ago. Futures are below fair value as we speak-gold is up again and the dollar is down again-the VIX and QQV show no signs of fear so this baby looks hard down all week. The indexes all closed on or just below the 20 day m/a which should be taken out tomorrow-I look for an assualt on the 200 day m/a this week and that will tell us if there is one more bounce in this sucker before the new year and wave 3 down. For now let's make dough-it's the bulls turn in the barrel-DOC was early but he was right as was PRECHTER who went short last nite which was a great call but BOBBY needed one. Trade Safe-I hope you're back for good. Link to comment Share on other sites More sharing options...
PileDriver Posted December 3, 2002 Report Share Posted December 3, 2002 Welcome back Mark, impeccable timing in your return too. Fib turn date 12/3 and we're ready to roll. Afterhours and fuctures getting spanked. 100% BEARX for me. Individual shorts later. Brian4, even if we do make one more bounce it'll vaporize in the blink of an eye. Link to comment Share on other sites More sharing options...
The End Posted December 3, 2002 Report Share Posted December 3, 2002 Welcome back Mark. Hope you got alot Link to comment Share on other sites More sharing options...
Hypertiger Posted December 4, 2002 Report Share Posted December 4, 2002 How long? not long... We're in a soft spot all right, in the middle of a wet paper towel... Link to comment Share on other sites More sharing options...
Guest GTNWORSE Posted December 4, 2002 Report Share Posted December 4, 2002 Hey Guys, Welcome back Mark. I hope you enjoyed your holiday and have come back ready to do battle. Piles, did you go short today? I thought you were going to wait for the turn? I have still got my wallet on my hip. Again, I am not a day trader and I still believe it is too soon to short. Today looked like a garden variety profit taking session. You all would be well advised, imho, to stand aside for the ECB announcement on Thursday and the bulls*it Intel update. Everything possible is going to be done to levitate this market through the holiday spending season. I believe that upside is, in fact, quite limited. But I also believe that the downside is even more limited with respect to the senior averages. Link to comment Share on other sites More sharing options...
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