The Grind Lower Continues

[wndysrf]

Mark?s Market Commentary ? February 7, 2003

 

Quote from Jimmy Jones Cramer on June 19, 2002:

 

?Don't write off this consumer. Lots of people seem to want to spend today. The auto downgrade at Morgan Stanley Dean Witter is a swipe at the consumer. So is the retail downgrade at Goldman Sachs. Let me tell you why I think these downgrades aren't so smart: the stock market. At this point, the stock market is competing with consumer spending. And consumer spending is winning. The anal cysts are all making these big macro calls about spending without taking the "investment" of the spend in mind. Put simply, investing in your home, or even your car, is perceived as a move that will pay off. Bargains are developing into this decline which cannot be ignored, like Home Depot (HD) now selling at 22 times next year's earnings. I can't recall it being this cheap in a long time.?

 

Home Depot was selling around $35 last June. Now its around $21. When is Cramer going to get arrested? And what about Kudlow? Anyone see his foaming at the mouth this morning, bragging about how correct he was in forecasting the economic recovery? And ?Mr. Clean? Bob Froelich was grinning as usual yesterday. No wonder. He can?t wait to take your grandmother?s money by putting her in ?value stocks? that pay ?dividends? like FRE, GT, GE, ELP, and all the rest. Where are those dividends now??

 

Today?s Wall Struck Journal reported more insider selling. Angelo Mozillo at CFC stepped up to offload more shares at $55 on February 3. The CEO of QueerLogic dumped a load at $35. Too bad he couldn?t have sold earlier, after those shares were Riverboated up to $45.

 

As Lance Lewis discussed last night, the reason the tech stocks have been holding up recently is because the dippers, hopers, and Keno jammers have been piling into these stocks on weakness to ?participate? in the war bounce, another March Madness bounce, a July 4 bounce, or whatever bounce is bound to occur from these DoverSole positions.

 

Interesting to note how the bounce is not forthcoming this time, and selling volume refuses to accelerate.

 

Why is that?

 

Maybe this is the time when the dippers finally get their comuppance. After 34 months of hysteria jams, FEED propping, futures jamming, short squeezing, and all the rest, maybe the market has decided to just drift down indefinitely.

 

Quietly and slowly so nobody sells. Is that how the bear market is going to end? When Joe Sixpack wakes up one day and sees the Dow at 6000 without a crash?

 

Of course, Lance thinks that so much leveraged cash has been loaded up in tech for the next ?war bounce?, he thinks there will be an ?epic break? to the downside on the Nasdaq once the Riverboaters decide to offload at once.

 

Remember, using margin affords little room for error. And as Alan Newman has pointed out, mutual fund cash reserves are at an all time low. And as we have reported here repeatedly, the entire Mutual Fund Complex, combined with Tom McManus? Prime Brokerage Unit (which finances hedge funds and mutual funds with massive credit lines) is so convinced of a ?bottom?, they think that there is little or no downside risk to leveraging bets around these levels.

 

And can you blame them? Looking back at the bear market hysteria bounces, any leveraged trade on the long side is ultimately bailed out on some type of squeeze. And the FEED?s incessant Repo Blasts always provide the market makers with some cannonballs to blow out the short sellers.

 

Speaking of market makers, anybody see that S & P futures trader from Man Financial on Proctovision in the mornings? John Brady, I think is his name. Doesn?t he look like the bully from your elementary school? No wonder we get these extraordinary squeezes. Who wants to trade against that guy? Especially when his trades are financed by the U.S. Treasury Department.

 

Who has more borrowing power? A shortselling HedgeHog with a Bank of America Prime Brokerage credit line? Or John Brady with a blank check credit line from Al Green? No wonder we are already at the Deficit Ceiling.

 

I can see Al Green at the Office of Budget and Management meetings, begging for the debt ceiling to be raised so he can finance his ?unconventional measures? to prop up the dollar, smash precious metals, and jack up the stock market futures.

 

Today?s Public Relations Campaign was the employment numbers. Turns out that they were much better than expected. Until everyone started staring at the massive December revisions. Who knew that the unemployment number was going to ?trade? like coffee futures? Up one month, down the next. What about those Unemployment Derivative traders over at Goldman? How are they holding up?

 

And what about Elaine ?Mama San? Chao this morning? Anybody notice the 20 lbs. she put on? What happened to her face? It really blimped out. Must be from the stress of knowing that the real unemployment rate is probably 11%, but she has to somehow put out a number that is below 6%.

 

One thing I noticed is that a lot of stocks are starting to blow up now. Especially the small cap darlings like Blue Rhino (RINO) and Coinstar (CSTR). Stocks which are supposed to be ?immune? to cyclical shocks, since everyone needs propane and everyone needs to dig out coins from under the sofa.

 

And what happened to Coors (RKY)? Wasn?t beer drinking recession-proof?

 

And now YHOO is starting to roll over, despite its spectacular growth in on-line dating activities like ?Adult Friendfinder?.

 

AMGN refuses to break off. That?s because the entire Speculative Globe is anticipating a miracle DNA-altering drug which can transform average-looking women into Pamela Anderson look-a-likes. There is no shortage of hope in the biotech sector, which is still trading at over 10x sales. Every biotech company is viewed as a leading contender for some type of miracle drug, no matter how expensive it is.

 

Over on the Dow, MMM and PG are barely rolling over, and they are a long way from going into a waterfall pattern. IBM and UTX continue to be propped up with no signs of weakness yet. All for are within spitting distance of their recent highs. Yet the Dow isn?t too far from the October lows, and that first October gap is begging to be filled.

 

What will happen when these behemoths crack?

 

And by the way, thanks to Rog for confirming the triple bottom break on the Euro-denominated S & P?s. Now all those suckers on The Continent are all in a losing position since 1996, thanks to the collapse in Uncle Buck.

 

Only 1.3 billion shares traded today. Kind of scary seeing so little fear and so little acceleration.

 

When will Joe Retail pickup the phone and sell? Buddha is watching the geopolitical financial horror show in real time:

 

"As this rig bobs up and down in the maelstrom like a toy boat in dirty bath water, I would like to know who is at the Helm? Is there a killer 100 foot wave out there just over the next trough? Today, Bush regime cronies all gathered to welcome on board John SnowJob, ex-CEO ship's captain who bailed on his own company after securing the only life raft available before his appointment to head our blindman's bluff economic team."

 

"At the same time, Tom 'Blockhead' Ridge issues a new maximum security color coding. This guy isn't where he belongs. His head is so large and the top is so flat he should be floated out into the middle of the Persian Gulf and F-18s can take off and land on it. Why bother paying the cost of fueling up an aircraft carrier when Ridge's Dome is available?"

 

"The good news is that Reich Minister of Law, Hans Ashcroft, has announced he will be ready to move into Canada in hot pursuit of medical marijuanna users here in the States. The ship is helmed now by madmen, last I looked the March Hare was in possession of the sexton. The full court press is in for more fear, more manipulation of mass opinion and more hollow assurances from gastro intestinal surgeon Dr. Al Green that your money is safe at home in the mutual banks. Dr. Al has been staring up the back end of this thing for so long now his eyes have turned fece brown, his color coding is a given. He doesn't even bother with the rubber gloves anymore. Why worry about a little bacteria when your up to your elbows in pig dropping?"

 

"Eddie Bauer Retail needs to wake up and smell the turds in the woodpile. The terrorists are not 'out there' lurking in the local mosque or taking secret midnight meetings by falafel stands down in Soho. The terrorists are the PigMen telling sheep to hold on, the Crapvision team smiling blankly into their teleprompters, the anal cysts jamming numbers, the CEOs lying, cheating and stealing and on and on. 7 trillion dollars worth of terrorism and wealth redistribution. Not in his wildest dreams could O Sama create the havoc and loss that is the daily menu now in financial U.S.A."

 

"No way either he could ever compete with the largest state sponsored terrorism the world has ever known. A drum roll please. Lets hear it for our tax financed American foreign policy. Got you coming and got you going, between Wall Struck and the Bush regime we are being squeezed down the filthy colon of this giant Beast. Final discharge coming to a toilet near you."

 

Model Portfolio Update:

 

ApeWoman?s portfolio is now down 28.1% since January 12, 2002.

 

Barton Biggs? ?Tech Wreck? portfolio, is now down by 11.8% after 6 weeks.

 

Scott Black?s ?Dartboard Portfolio? is down by 4.3% after 6 weeks.

 

The ?I Dare You? Short Portfolio is up 16.2% since October 22, 2002.

 

And now we will be starting the Gold Bug Portfolio. Since so many are convinced of a massive selloff, too scared to get in near the highs, and fear is now running at extreme levels, we will start a position in the HUI at the close today at 140.

 

Girlfriend of the Week

 

Mutual fund managers cannot get enough tech stocks, so they go on margin to buy more.

 

Of course, Hollywood celebrities never really get enough either. Clothes that is. Even the superstars cannot afford their voracious appetite for dresses, shoes, and handbags. So they simply peruse the Rodeo Drive stores and steal whatever they want. After all, if you are an $8/hour security guard, and you see the luscious Winona Ryder walk by, are you really going to have the nerve to question her?

 

 

Position Summary:

 

New half short on COH at $32.

New half long on GFI at $12

 

It?s official. I am now fully loaded up for Simple Guy?s disaster scenario, with only the 5% cash to protect against a pop, plus whatever margin my broker gives me. This week probably marked the final turn in consumer sentiment.

 

Half Short:

 

MBI at $50

KLAC at $41

CYMI at $39

NVLS at $35

INTC at $18

MSFT at $56

WHR at $56

INTU at $49

AMGN at $53

CSCO at $14

ORCL at $12

DELL at $25

SBUX at $23

QCOM at $37

COH at $32

 

Quarter Short:

 

FRE at $68

LEN at $56

COCO at $40

NCEN at $28

CFC at $55

SYMC at $47

 

Half Long:

 

GG at $11

HL at $4.55

BGO at $1.31

PAAS at $5

DROOY at $3.35

GLG at $9

GSS at $1.72

WHT at $1.05

KGC at $2.35

HMY at $16

GFI at $12

[wndysrf]

Test

[Drano]

Actually, IBM at around 77 is 11 bucks off its recent high of 88+. Destined for the 50's.

 

To continue a thread from yesterdays M2M: that book, How I Made a Million in the Stock Market. There was also a sequel, How to Have a Million in the Stock Market. It's a one-page book: "Start with Two Million."

[mksloth]

Priceless windy! Possibly dumb question - is your color commentator the one and only buddhadropping?

[whipper6w]

Nice print on the GFI

[TheDeepBlueSea]

Quote from Jimmy Jones Cramer on June 19, 2002:

 

?Don't write off this consumer. Lots of people seem to want to spend today. The auto downgrade at Morgan Stanley Dean Witter is a swipe at the consumer. So is the retail downgrade at Goldman Sachs. Let me tell you why I think these downgrades aren't so smart: the stock market. At this point, the stock market is competing with consumer spending. And consumer spending is winning. The anal cysts are all making these big macro calls about spending without taking the "investment" of the spend in mind. Put simply, investing in your home, or even your car, is perceived as a move that will pay off. Bargains are developing into this decline which cannot be ignored, like Home Depot (HD) now selling at 22 times next year's earnings. I can't recall it being this cheap in a long time.?

 

Home Depot was selling around $35 last June. Now its around $21. When is Cramer going to get arrested? And what about Kudlow? Anyone see his foaming at the mouth this morning, bragging about how correct he was in forecasting the economic recovery?

LENIN referred to blind defenders and apologists for the Soviet Union in the Western democracies as "useful idiots."

 

Cramer and Kudlow play exactly the same role for the various centres of financial power, GE, the investmentment banks, and others.

 

There is no other way to understand why they continue to get so much airtime.

 

As for the ever-consuming consumer:

 

"Fed: December borrowing shrinks on credit cards?by Rachel Koning atg MarketWitch

?

Credit card borrowing fell to a 27-year low in December resulting in an unexpected decline in consumer credit that month, the Federal Reserve said Friday. Borrowing fell by $4 billion that month or by 2.7 percent at an annualized rate. Economists looked for a modest expansion in borrowing. The decline was the largest for one month in 12 years. The percentage drop was the largest decline since April 1992. Revolving credit or credit cards declined $8.4 billion or 14 percent -- the largest decline since December 1975. Non-revolving credit such as auto loans and higher education loans, rose $4.4 billion or 5.3 percent in December. For all of 2002, consumer credit expanded just 3.3 percent, the slowest annual pace in a decade."

 

I'm going to spend part of my weekend going over my short candidates and am going to initiate these "short'em and hold'em" irrespective of what the tape is doing on Monday.

 

Once borrowing starts to fall, any effort by the Fed is just "pushing on a string".

 

Elaine "Mama-san" Chao. :grin:

In my experience mama-sans are incredibly well preserved.

They're MILF's or "Mama-san's I'd Love to F***".

Chao had better stick to the cooking the numbers in her giant wok.

[MrHanky]

thanks mark,don't know how you do it.....exellent.

 

speaking of crudlow and scammer....

 

...I noticed in the news that some idiots are flying to bagdad to be human shields.I think we should send crudlow and scammer for the mission.two good for nothing blow hards that would make great target practice for our laser guided missiles....they deserve it.

 

they are used to explosions...look a their portfolio's(or for that matter their customers portfolio's)

[MrHanky]

btw...every website is blaming the decline on the "orange alert"issued today.

 

absolute hogwash.

[machinehead]

"Credit card borrowing fell to a 27-year low in December resulting in an unexpected decline in consumer credit."

 

Let's face it: VISA, MC, Amex and Discover just aren't getting the job done. It's time to stop wheezing about old tech like "helicopter money drops," and let the Federal Reserve issue its own credit card.

 

Initially your credit line will be drawn against your tax withholding. The second phase will be to allow people to draw down their Social Security balances, too. (Those don't actually exist, but never mind.) You can borrow against your 401k, right? Why not take a little advance from your government retirement plan, too?

 

The FedCard will look a lot like an American Express card. But the guy in the centurion helmet will be Al Green. Don't leave home without him.

[wndysrf]

Interesting comments on volume from "Rev SharK' at Realmoney.com:

 

"Once again, volume looks like it is going to come in on the light side. I'm not sure why that has been the case lately, but it doesn't strike me as a sign that a quick turn is on the way. Is it a result of apathy, indifference, a move to other asset classes or just a lack of conviction?"

 

"In my mind, volume is the easiest way to measure passion. When we move, up or down, on big volume, it is a sign that feelings are intensifying. The lighter the volume, the more random the action and the less momentum we see."

 

"It's interesting to note that NYSE volume has recently been surpassing Nasdaq volume. According to IBD, the ratio of Nasdaq volume to NYSE volume is at 85.2%, which is not far from the five-year low of 79.2%. This is generally viewed as a bullish indication."

 

"The logic is that the Nasdaq tends to attract a greater level of speculation than the NYSE. The Nasdaq is heavily weighted with technology and biotechnology stocks that tend to attract investors who are comfortable taking more risk in hopes of bigger gains. When traders give up on these stocks, volume on the Nasdaq will fall relative to the NYSE and indicate that the hot momentum money is out of the market and waiting for the opportunity to buy again. When the speculative money is on the sidelines, a bottom should be near. Or so the argument goes."

[Charmin]

month end markup a total failure :grin:

 

buy 3 days on the close before the end of the month and sell 5 days on the close into the new month.

[Drano]

I prefer to think that shorts have gotten smarter and are holding their shorts instead of letting psychotic swings scare them out, only to have to re-short at probably worse levels, and with commissions and 30-day wash sale rule affecting their decisions. Hence, less volume.

 

Take that, Nasdaq! Thwack! Thwack!

[bubbadropping]

Windy, with volume who the hell knows? We can guess till we're blue in the face about that one. In the past there have been many famous low volume, 'Mr Coffee' drip downs. Besides, any guy calling himself the Reverend Shark and working for Porky Pig Cramer has to be suspect. I always thought that guy was weather reporting the action hour by hour using the rearview mirror. Not even worth the 20 dollars they charge to be badgered daily by their cast of bubble heads imo. MachineHead that is a classic take on the Fed Credit Card. Rather than green though they should color the card shit brown and it should have a scratch and sniff side bar that stinks fresh bear dropping. best,buddha

[bubbadropping]

Of course I would add that low volume is most obviously the confusion generated by an utterly chaotic geo-political atmosphere courtesy of the bush regime. War is a factor in intensifying uncertainty and who in hell wants to buy and hold over the weekend with a moron at the helm and Dr No barking up a storm out of the East? There is at least some self fulfillment in all the media coverage of war uncertainty regardless what technicians may say.

[DrStool]

Understanding volume is so simple, yet so many analcysts overanalyze it to death. Light and declining volume is bearish. Heavy volume is bullish until it reaches climactic levels. Volume always declines on bear market declines, and increases as intermediate and final bottoms are approached. It's common sense. Light volume is bearish because it does not create commensurate liquidity. Heavy volume builds commensurately greater liquidity, eventually enough to turn the market.