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#1 wndysrf

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Posted 11 February 2003 - 04:46 PM

Mark’s Market Commentary – February 11, 2003

Anybody watch Bloomberg TV at night? The lovely and delectable Catherine Yang reporting from Japan. The always proper and polite but always gay Ty Meraga reporting from Hong Kong. Ever check out those Bloomberg charts shown on those tech stocks like Nanya Computer and Taiwan Semiconductor? The “anal cyst Buys” and “anal cyst Sells” section over on the right side always seem to report an overwhelming majority of buy recommendations. Sell recommendations are rare. The Speculative Globe’s tech infatuation runs unabated.

And how about that Bloomberg new service? The Epicenter of the Propaganda Matrix. Every night, its full of hopeful news comments about the next day’s market action:

“Federal Reserve Chairman Alan Greenspan is likely to deliver an optimistic outlook on the U.S. economy to Congress today, saying growth is poised to accelerate once investors, consumers, and corporate leaders know what will happen in Iraq.”

“European stocks rose, lifting the Dow Jones Stoxx 50 Index for the first day in four. Munich Re led gains by insurers on speculation their equity investments will increase in value as share prices rise.”

Never before have I experienced such an amazing period of denial, resistance, and ignorance of what is going on. A stark contrast to what we in California experienced in 1990 – 1993 where gloom was pervasive, everyone was cautious, nobody was spending, and the most popular topic of discussion was the lack of jobs.

Contrast that to today’s MTV Spring Break attitude. New cars rolling off the lots everywhere. Real estate mania in full swing. The popular topic of discussion is how to further leverage your financial position in order to upstage your own appearance of wealth and success. No fear. No concern. But can you blame them?

Why not be optimistic when all Fed members are on the rubber chicken circuit forecasting a “recovery”, crowing about the “resilient consumer”, and how there is no debt bubble.

Why not be optimistic when the Wall Street Matrix with their cheery pundits are all pounding the table to “buy stocks” to “participate” in the “2nd half v-shaped recovery”.

Picture the 28-year old female Marketing Director for Expedia.com. Biding her time at some nonsense buzzy jazzy job. Leveraging her stunning appearance to land a man who is involved in one of the fantastic growth industries in Orange County like “mortgage finance”. She’s up to her eyeballs in debt. The Nordstrom’s credit card, Victoria’s Secret credit card, and even an “emergency” credit card from Target or Sears. On top of the usual maxed out First USA and Capital One VISA. And of course, the $690/mo. payments to BMW finance for the BMW 330i convertible. But now there are some murmurings about potential layoffs.

But why worry? Her boyfriend is the top closer for New Century Mortgage. A 34-year old Italian swinger fluent in Spanish, making 6-figures pushing subprime mortgages to illegal immigrants. Driving his Lexus GS430. He’s already eyeballing the purchase of a $1.8 million house in Newport Beach. Of course, he has no money for a down payment, but that doesn’t matter. He’s in the mortgage business, headed for great success.

Is she worried about gassing up the 330 with premium gas at $2.00/gallon? No. She’s too busy honking the horn at the poor Guatamalan Gardener in front of her with his 1972 Datsun pickup. She’s in a hurry to get home to see who got nominated for the Oscars.

Is she worried about the Al Queda live interview tonight? No. She’s too busy waiting for the new Madonna video.

Is she going to Home Depot to get some duct tape, plastic sheeting, and bottled water in case of a bio attack? No. She’s wondering when the next thong sale is occurring at Victoria’s Secret.

What about him? Has he any clue about the mortgage bubble? No. He’s too busy training his boiler room operators on how to convince the Guatamalan Gardener that he can afford the KB Home “starter” property at $325,000 even though he’s not even a legal resident. And the commission checks keep rolling in, and the refinancing boom has shown no signs of slowing down yet.

These two have been living for years and years on credit. With no adverse consequences. Everyone else is doing the same. The naysayers have been warning of excessive consumer debt, but Al Green has assured everybody that its not a problem. Anyway, the 2nd half recovery hasn’t shown up yet, but after 3 years, it has to appear this year. That’s a guarantee of an acceleration of both incomes. And thanks to the productivity miracle everyone is crowing about, things are going to get really good next year. So she just continues making the payments, even though she is getting a little behind, and wait for the much heralded “recovery”.

No worries about the job market, either. After all, as a last resort, she could become an exotic dancer at any of the hundred clubs in Las Vegas, and hopefully some high roller will come along and bail her out of her debts if Mr. Closer doesn’t work out. Interesting how the shrink-wrapped skeletons with the silicon bolt-ons never have to worry about “job security”.

In the meantime, the stock market mania continues to explode with new kinds of funds sprouting up daily.

The mutual fund manager who has the honor of getting in Barron’s this week is Kevin Baum at the Oppenheimer Real Asset fund. Marketing itself as a natural resource fund. It is anything but. It is basically a money lender using huge leverage playing various financial exotica in the structured finance arena.

Run by 32-year old Kevin Baum, who was 11 years old when the bull market started and 18 years old during the 1987 crash. After working at a summer job with Edward D. Jones, Baum went to Texas Tech and started this fund at age 26.

About 33% of the fund’s assets are loans to firms such as Cargill Investors Services and ABN Amro, who in return, sign structured notes which essentially “promises” that a return equal to LIBOR + 1.4% plus a principal return equal to 3x the Goldman Sachs Commodities Index. Basically, it is a money lender to companies like Cargill who expects to produce 300% returns by Riverboating in the commodities market. The other 66% of the fund is invested in so-called “short-term investments” like Harley Davidson Trust Receivable Notes, Fannie Mae and Ford Motor Credit bonds. To minimize the interest rate risk, the fund hedges the portfolio with Treasury futures. Occasionally Baum has gone long on gold futures while shorting silver futures.

Now, what kind of weird strategy is that?

More 14D filings have been reported. Two insiders at AMGN are offloading $20 million and LEH had one officer filing to sell $11 million. Relentless selling continues at EBAY and QCOM. Why are these stocks continually jacked up to new highs? I don’t know.

And what about AMGN? Ever see 5 drives to a top? Where will this stock end up?

By the way, here’s proof that no real money has left the stock market yet. Data pulled from Monday’s Riverboater’s Business Daily shows how much money remains in stock mutual funds.

Remember 1996? Full employment. A raging economy. Earnings were climbing. The tech boom was just getting started. There were no terrorists. Housing was just starting to build up steam. Buy and Hold had become a religion. Yet the money in mutual funds today is nearly $1 trillion ahead of the 1996 numbers.

Remember Buddha’s “1991 Bob Hope Desert Classic”? The giant rally off that news? Well, look where it started. Only $405 billion in mutual funds at that time.

(in billions)

1991: $405
1992: $514
1993: $741
1994: $853
1995: $1,249
1996: $1,726
1997: $2,368
1998: $2,970
1999: $4,042
2000: $3,962
2001: $3,418
2002: $2,667

And by the way, stock funds still 42% of total mutual fund assets, compared to 18% represented by bond funds. So any talk about a bond market bubble, forget it. The bubble is still in stocks.

Today, Al Green was grilled by the Senate Banking Committee. As usual, the futures were jammed in advance of the discussion, as if Al was going to have something positive to say about “printing presses” and “unconventional measures” to get a short squeeze going. Unfortunately, that rally fell apart and we ground down to the lows of the day.

Buddha was commenting how the ultimate “gamer” has now become the “gamed”.

“In case people haven't figured it out yet, there is a clear ticket buying trend around the Al Green lounge act and tickets are bought and sold monthly. Nice to know that this Lizard is good for something. Funny to see how he has turned himself into a gaming vehicle. The gamer as the gamed. The hunter now becomes the hunted. The Lizard King turns on himself and begins to devour his own tail, scale by slimy scale. What is the trend that every momentum player from here to Leichtenstein is gaming? Why of course, go long the afternoon before one of his bull sessions and then short all spikes as he begins to spin his old standards. The sickly crooner has truly become a parody of his image. He has morphed from droll bull shitter into high speed gaming device and become a mockery of any notion of price stability and economic health. Now reduced to his primary role as a Keno table tilter once or twice a month. The Al Green Death Pool is open and taking bids for the coming year.”

Interesting market action today. Looks like the Dow is leading the charge to the downside. The 7600 gap is pulling the Dow down like a magnet. The Nasdaq is holding up pretty well.

Of course all terrorist threats are to be bought. So the gamers jammed the indexes higher into the close.

What will Sunny Jimmy Morgan say tonight? And what about Michael Dell later this week?

Who knows. But billions of market cap will be gamed, won or lost off this news.

Who said the Super Bowl was the highest betting event of the year? The Super Bowl doesn’t even come close to the Keno Volume occurring on the days immediately before and after the mere utterance of one of these tech CEO’s.

Position Summary:

I intended to cover some shorts today. But Doc talked me out of it. Thanks, Doc.

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
PigMen Proprietary Trading Desk

The Weimar Run: Bullphoria!!!!

#2 gruff

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Posted 11 February 2003 - 05:10 PM

No surprises on de Bumburp (Bloomberg) infomercial channel being in perma-shear de sheeple mode . I believe Merrily Lynch are a major shareholder.

success!
gruff.

#3 GregFokker

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Posted 11 February 2003 - 05:17 PM

I listened to Al Green's testimony, and I have to say that I thoroughly enjoyed the proceedings. He appeared to be speaking the truth to a bunch of politicians few of whom seemed able or willing to understand his points or their implications. There was ZERO bullish in his words, and he sounded to me like he was trying to sound the alarm. I have a new found respect for Al Green.

...A declining spenglerian carnival of Colossaalism united with Inflation where the numbers one through 10 are forever banished as worthless arithmetical detritus from a bygone age... - Beardrech

Naturally we believe the govt numbers... and Boobus Americanus sleepwalks off the edge of the energy-crisis cliff clutching his shares of "Crisco", Yoohoo and GooGah munching on his Yum Yums and Ho Hos. Future historians will have a hell of a time figuring out what the hell Americanus neanderthalus was thinking and exactly what brought on his sudden demise... - Henny Penny

Well, good night everyone. I gotta go lube up for tomorrow's regular end-of-week Gold Slapdown and Stock Index Bear Punishment Rally Weekend Greenprint. ...Probably another Shock-and-Awe Gap-Up-Open and Wire-to-Wire Meltup Runaway Bull Charge Mo-Mo Spike to Fresh New All-Time Lifetime Highs, culminating in a 4:15 yelping scalded dog runoff with panic short-covering and legal not-held bad double fills due to fast market conditions, plus quote system freeze-ups and trading platform lock-outs along the way. *yawn* typical gov't Friday. - Shorty


#4 Direwolf

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Posted 11 February 2003 - 05:21 PM

the marketing director at EXPE...and the NCEN schmuckster....both had me on the floor laughing my friggin' arse off...classic stuff...what's so funny is the fact that these people are REAL...they do EXIST...I know some blowhards like these...and they are absolutely friggin' CLUELESS.......so sad....but wonderful color tonight Mark...you 'da freakin' MAN.........short and HOLD.....this pig is going so much lower...muhahahhahhaaaaaaaaaaaa.......

direwolf

#5 Yaryman

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Posted 11 February 2003 - 05:40 PM

From today's Easy Al testimony:

Senator: Mr. Greenspan, won't all the states trying to make up for budget deficits by raising taxes
and cutting spending have a detrimental effect on the economy?

Mr. Greenspan: Well, Senator let me say this. Blah, blah, blah, blah, ...productivity gains....
blah, blah, ...spending constraints....,
blah, blah, blah, ....I'm really tired..., blah, blah, blah, blah, ...the President's tax cut plan..., blah, blah, blah.
Does that answer your question Senator?

Translation: No shit it will hurt the economy, every state, county, city, and school district is going to cut their budget,
and try to raise taxes. Say hello to the double dip recession!

#6 Ned38

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Posted 11 February 2003 - 05:41 PM

Greg:
I was in the car and heard various parts of Uncle Als testimony.

You are correct........and one day soon ......in the not so distant future..........he will be able to say He told them so..

Several times I heard what I took to be the Orange Alert on the economy and every time he opened the door for them , they refused to go in. No one asked the proper follow up questions. The sad facts were there for the taking and the congresspeople were unable to grasp that he wasn't saying what they wanted to hear.

Granted his communication skills are horrible but he said quite a lot. None of which will make the headlines.

#7 PileDriver

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Posted 11 February 2003 - 05:41 PM

Not stopped out of any of my 18 shorts, trend still down per my 5 mins of market review & analysis.

=Decision: Stay short :lol:

#8 Takachi

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Posted 11 February 2003 - 05:41 PM

Re: Bloomie

I love it when they headline. "Market set to explode up...People say"

what people? Who cares?

#9 PileDriver

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Posted 11 February 2003 - 05:46 PM

prelim buy signals on a bunch of PMs suggest corrective downphase may be over.

Takachi, now there is something "set to explode" :P

#10 Slothrop

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Posted 11 February 2003 - 05:48 PM

Colin Powell is having more impact than Greenie today. Strange tale of a new Bin Laden tape. First, he tells a Senate panel about it, even before it's out. He says Al-Jazeera will have it later. Al-Jazeera says they have no tape, then later it shows up.

Original report has it that Bin Laden says, on the tape, he supports Iraqi citizens against the US and also calls for the overthrow of Saddam Hussein.

Last part of the news story -- about overthrowing Saddam --is up on the MSNBC website for about 5 minutes, then it's removed.

Strange days here in the land of the free. I hope y'all are as short as you can be.

#11 MrHanky

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Posted 11 February 2003 - 05:50 PM

Mark you hit the nail on the head....no fear anywhere.

I am extremely disapointed by the bounce into the close again.while finishing well of the highs I am still frustrated by the action I am seeing.the last 10 minutes had the same old story.

msft up .25 in the last 2 minutes

intc up .14 in the last 2 minutes

amgn up .24 in the last 2 minutes

orcl up .12 in the last 2 minutes

stx having 12% swings in an hour(desparation buying by morgan stanley to prop thier crappy ipo's)

we have not closed on the low in ages,we have not had the futures down big in a long time.we have not had lock limit down on the futures in years.all of the money is being thrown at 2% of the market.every night at exactly 3am the futures lift off like a missile.

staying short no matter what,but extremely pissed at this point knowing that this market should have broke hard weeks ago. I just need to know what it will take to get rid of the dip buyers.the money seems endless.

Nothing


#12 Direwolf

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Posted 11 February 2003 - 05:53 PM

i heard the mr. hanky song in IDS earlier....lmao...can we hear it again.....?

#13 longOnUranus

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Posted 11 February 2003 - 05:54 PM

I have always WANTED to like AG, but after his suckin' up to Rubin, who sucked up to Clinton, who sucked up to Wall Street, who sucked up to the greedy idiot public, it is obvious that AG has been the epicenter of one gargantuan cluster suck. Like any bullseye surrounded by a circle, he will be taken out by some younger, adroit expert marksman. Perhaps Bernanke?

By allowing the bubble expand, all that followed was elementary physics. Any resemblance of AG to a caretaker of the current economy is strictly coincidental.

#14 morass

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Posted 11 February 2003 - 05:58 PM

Great work Mark,

One minor addition:

Why not be optimistic when the Wall Street Matrix with their cheery pundits are all pounding the table to “buy stocks” to “participate” in the third annual attempt at the “2nd half v-shaped recovery”.

It’s becoming an event.

#15 MrHanky

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Posted 11 February 2003 - 06:02 PM

4:59PM Applied Materials sees Q2 earnings of $0.01-$0.02; consensus $0.03 (AMAT) 11.94 -0.11: -- Update -- Sees capex in 2003 slightly higher than 2001. Traders citing Dow Jones as the source.

they just guided down 66%..I guess that is bullish now days




4:38PM AOL Time Warner files $1.5 bln in common stock for shareholders -- Dow Jones (AOL) 10.20 -0.16: -- Update --

Nothing






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