This Time It's Different

[wndysrf]

Mark?s Market Commentary ? December 17, 2002

 

At the terminal stage of each mania or bubble, the siren song blaring from the bullhorns and the loudspeakers is that ?this time, its different?.

 

Well, this time it really is different.

 

There has been no other bear market in the history of civilization where speculation has increased and reached hysterical proportions as time moves forward.

 

From today?s The Wall Street Journal, there is a fantastic story about Goldman Sachs and its dramatic increase in its risky trading strategy to keep the profit machine going.

 

Earlier this year, as Goldman Sachs saw its investment banking business faltering in a weak stock market, so head trader Peter Gerhard flew to London and told Da Boyz to ?step up your game and increase your risk.?

 

?Despite its legendary reputation as a staid adviser on mergers and other corporate deals, Goldman has increasingly grown more dependent for its profits on aggressive traders betting with the firm?s cash. The Goldman strategy is similar to that of a baseball coach who exhorts his heavy hitters to swing for the fences when his team is down.?

 

?Our risk appetite is somewhat higher this year because there have been better opportunities?, says the company?s CFO.

 

Mark?s Translation:

 

Wild, unchecked volatility, combined with the accuracy of our proprietary Program Robot models have made the current market environment a Riverboater?s dream. Al Green?s steel plated floor underneath the U.S. dollar and U.S. equity prices has virtually eliminated all downside risk. The environment for throwing Hail Mary passes does not get any better than this.

 

The star X-Box gamer, Mr. Siva-Jothy, a 39-year old champion of the trading floor, has emerged as a central player in Goldman?s success. During the summer, he ?spends time at his private Scottish island he purchased in 1999, reached by one of his three helicopters?.

 

?Like many sophisticated traders, Mr. Siva-Jothy uses options to boost the size of his bets. People familiar with his trades say he systematically invests in different markets and uses varying strategies.?

 

?Some traders have been reluctant to take on more risk, and ?have been prodded to swing for the fences? by Siva-Jothy.?

 

Many large shareholders have been uncomfortable wit this strategy, and have decided to dump GS shares.

 

This time, it is different.

 

Many stocks have defied the secular downtrend, chased up by the power of the massive reliquifaction scheme.

 

There has been no other bear market where you had fantastic moves in various mania stocks, where if a fund manager would have simply put all his money into 5 key stocks, he could easily get a 40% return or better.

 

Why not start an Internet Fund that stays in cash and looks for the inevitable short squeezes on the likes of EXPE, EBAY, YHOO, and ROOM? A 40% return while in the market for 45 days is a easy play. The rest of the time, the fund manager can stay in cash.

 

There has never been a bear market when ?bubble stocks? appeared to be summarily executed on predictable deterioration in fundamentals, only to stage spectacular reversals fueled by short squeezes, momentum chasers, and the Perpetual Motion Liquidity Machine. Stocks which continue to rocket to unheard of heights like PNRA, COH, and PIXR.

 

This time it is truly different. There has never been an environment where all things are bullish for U.S equities:

 

A weaker dollar is bullish.

 

A stronger dollar is bullish.

 

Inflation is bullish.

 

Deflation is bullish.

 

Pension deficits are bullish.

 

Increasing interest rates are bullish.

 

12 Fed cuts and zero interest rates are bullish.

 

Skyrocketing gold prices are bullish.

 

This time, things are different.

 

After $7 trillion in wealth destruction, obscene salaries are still being collected by hordes of Matrix Members, who continue to upgrade and downgrade individual stocks with odd ratings. The fact that these people are still employed means that The Speculative Globe is still hanging on to every single word uttered out of these mouthpieces:

 

Nowhere else but in today?s climate do you hear of blown up stocks with broken charts being upgraded by the starter pistols, which will magically levitate the chart from ?broken? to ?fixed? by triggering some type of short squeeze.

 

McDonald's upped by Lehman, but stock still at 8-yr low (MCD) by Tomi Kilgore anal cyst Mitchell Speiser at Lehman Bros. upgraded the beaten down shares of McDonald's (MCD) to "equal weight" from "underweight," saying that while "there's no turnaround in sight," management changes at the company and rival Burger King could bring and end to pricing wars. In addition, McDonald's deep resources - operating cash flow of $3 billion -- and valuation should limit the stock's underperformance. The stock is sliding $1.68, or 9.7 percent, to $15.70. It hit a low of $15.58 earlier in the session, a level not seen since January 1995.

 

This time, things are different.

 

Over 33 months into a bear market, and there is absolutely no sign of failure in the banking system, massive trading losses at the brokers, or mutual fund closures.

 

If anything, the banks are getting stronger and more profitable due to spectacular trading profits supported by Kopin Tan-styled Black Box HedgeHog strategies which eliminate all downside risk.

 

This time, things are different. No real money has left the market.

 

And today, there are still more mutual funds than there are individual stocks. No significant selling pressure has hit the market yet. In the 33 months which have passed, we had one month of heavy redemptions. All the other months have seen barely a trickle of selling.

 

The foreigners are still buying. They cannot resist the allure of the Supermodel moves found in the U.S. stock market, and the virtual unstoppable consumer spending machine vacuuming up the world?s exports.

 

Joe Sixpack is still contributing his 401(k) into index funds. He has no other choice, since Al Green has made returns elsewhere so undesireable.

 

Massive Repo Jams are still flooding the Casino with dumptruck loads of Keno chips for the HedgeHogs.

 

This time, things are different.

 

There has never been a bear market where so many ?chart saves? have been recorded, where inevitable breakdowns are miraculously recovered by The Invisible Wand.

 

Today, for example, the U.S. Dollar was headed for a full blown meltdown, and Al Green?s Bloomberg Ear Implant was sounding the usual warning alarm of an impending chart failure. Of course, he reaches for the Bat Phone and instructs the administration to parrot the ?strong dollar policy? line, sending the dollar futures totally vertical and crushing the gold spike.

 

What happened to all that talk about how Lindsay and O?Neill were ?fired? because they supported a strong dollar, and the weak dollar was suddenly considered ?bullish? for U.S. manufacturers?

 

Now things are being spun in the reverse direction.

 

As Buddha would say, black is white and white is black.

 

Here?s his take on the usual Strong Dollar Spin accompanied by the Options Expiration Minesweeping maneuvering:

 

?Mob driver Ari Fleischer announcing that administration is pursuing a strong dollar is Alice in Wonderland spin of the day. Dollar is being systematically debased from what I can see. Black is White and White is Black and the March Hare is truly mad. Al Green is out again working the back lounge at the Sands under a sharp spotlight. The sequins in his loud, swamp green suit are sparkling colorfully. He's well into his list of Old Standards and grooving into the second verse of "Lush Life" while the sparse audience of mostly drunken and flat broke retirees well into their 80s are nodding off into the aisles.?

 

?But the man keeps pitching tired, recycled fart jokes to the darkness beyond the footlights and hoping for signs of life from his faithfuls. A comeback for this borsch belter is long since out of the question. His only concern now is when does management issue the pink slip, lock the dressing room he has going from behind the mens room and sell off his collection of toups and sharkskin suits at auction. Al Green is so desparate for love, he would open a phone booth in Anaheim if it made the 4 o'clock news.?

 

?Classic spiking and sweeping by OE Hoods and Bosses. Entire week is dedicated to miscreance once a month. Huge turns in high beta crack stocks from fake breakouts to sudden breakdowns. The moves to mine sweep all retail option positions is predictably on. Only way ever to play OE seems to be to fade all spikes regardless of which direction intraday than report to your nearest church, synagogue, mosque or zendo. OE is the domain of Morder. It is darkness personified. It is armoured Pigmen mounted on hooded steeds with razor sharp hooves. It is all fire and treachery, rape and pillage. One may as well regulate the wind or pee into the hurricane if one seeks control in such a maelstrom. good luck to all, minor trend now is for buying and remaining upspiking to abate by Wednesday followed by 2 days of selling, who knows??

 

Many questions coming into my e-mail box about the gold stocks. When do we take profits? How far can they run? I expect this consolidation to continue. There will be one more test of this morning?s highs before we get a failure. Or, they may simply retest the breakout area and take off.

 

An example of this kind of a ?retest? of the breakout area can be found on the chart of PIXR, with $52 the reference point. And of course, this hysteria stock is up to $61 with no sign of reversal yet.

 

 

Nobody knows what will happen tomorrow. As usual, BILLIONS of global market capitalization will be created or destroyed based on the mere utterance of MU?s CEO tonight.

 

Now, More Than Ever, I need to temporarily retire from my computer terminal for the rest of the day and attend to some tall, slender, smooth, silky Asian Exotica lined up for this evening?s festivities.

 

Position Summary:

 

Covered IBM short at $80. No telling what type of miracle MU will report tonight to get the starter pistols going tomorrow?.

 

Want to have plenty of cash to go long, if we get some good spin out of MU or ORCL. Still plenty of time to chase these screamers if another run for the Dec. highs is in order.

 

We are 44% short, 16% long, 29% cash.

 

Half Short:

 

LOW at $42

KSS at $66

INTU at $53

C at $38

IBM at $85 Covered at $80

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

[Guest soup1]

death of the Mark: happy B'day. Any word from mu? These guys once delayed an earnings announcment week. They have got to be out of tricks, as much crap as they shoveled out there over the last couple of years.

[Guest soup1]

I do not know where the frist couple of words from the prior post came from. Looks like softie has attacked the insides of my computer once again.the

[IrishJew]

Mark,

 

uh....do you have any pictures....of the Asian exotica.....uhhumm.!?

 

IJ

[Guest]

MU's numbers must have been "good". It's rising rather strongly in the AH. Anyone have any info on the report yet? Still looking.

[Old Habits]

XAU hit for 5% today. Did gold hit a short term top @ 340?

[Slothrop]

McDonald's reports first ever quarterly loss. Wow, this time it IS different.

[Guest soup1]

slothrop: still have not seen anything. Really hard to beleive this company is still solvent, when was the last time they made a profit? Every quarter they hemorage red ink.

[phatbubble]

when was the last time they made a profit? Every quarter they hemorage red ink.

Q1 '01 (2 yrs ago), evidently....

[Guest]

5:05pm 12/17/02 Micron Q1 net loss of $316mln vs. $452 yr. ago - CBS MarketWatch.com

[Stutz]

MU report

[brian4]

Old Habits-Yes GOLD is going to rest and recuperate for awhile but it's NOT OVER after a consolidation I expect 350-360. Mark agree with most but you are incorrect about mutual redemptions-it's more than a trickle more like a steady stream-I spoke with a fund MGR yesterday who says he is between the devil and the deep blue sea-redemptions keep clocking his cash and people are switching rapidly into Bond Funds and Fixed Income-says the low volume is because the BOYZ haven't got the cash to play with-most are deep in there credit lines. NOW-today was INTERESTING-like you I expected a continuation of the breakout-but instead it was weak all day and cratered in the last hour. tHE BREAK OF 8625 WAS SIGNIFICANT! Now if and I say if 889 on the SPX is taken out-on;ly 14 points away-then the breakout is over. I still think up for now-but this sucker keeps confounding Pundit and Player alike. I made decent money scalping short on the SPX-selling 908 and covering lower worked 4 times-bought some Jan.900 SPX puts ( a few) to add to my OEX puts and 2 900 SPX Jan. CALLS as a hedge. Being O X week anything can and probably WILL happen. Trade Safe!

[rog]

ATVI just printed a big warning.

MU Didn't provide guidaqnce, however they missed rev # by nearly 20% and there are too many footnotes and charges to determine how big the earnings loss really is.

[Stutz]

NDX afterhours flipped small red, .64%. Might even bang my stop - not sure how I even feel about that.

[brian4]

Float by the ISLAND folks-MU-has caused a TECH WRECK-65 of the top 100 in afterhours trading are bleeding red-those of us who are short got the gold-those who are long get the shaft. AL better have the truck ready in the morning-if it stays this way-TANKO-Trade Safe!