The Swap Meet
128 replies to this topic
Posted 26 February 2003 - 04:31 PM
Mark’s Market Commentary – February 26, 2003
Effective today, I have determined that the market is untradeable, unless one is patient and waits for the points of extreme hysteria or panic selling. I doubt we will have any real downside acceleration until we have forced redemptions from the public, and that is likely not going to occur until the mortgage and real estate markets turn to the downside.
Therefore, my trading plan has changed. I will no longer attempt to score some type of mega profit from shorting the market. Instead, I will be trading with smaller amounts, and will gradually reduce my line by ejecting a monthly amount out of The Matrix.
Yesterday, I purchased some more coins. Now more of my money is safely protected against Matrix Mobsters, Sir PrintsALot, Tape Jammers, and all the rest.
Each month, more money will be removed and placed in safety. Tired of having my cash eroded by commissions, OE spikes, Hood and Boss machine gun shelling, and dollar depreciation.
What is the point in riding MSFT from $28 to $15 while the dollar slides from 100 to 65 and gold goes from $350 to $500? Short sellers can be victorious, but if you close out your positions denominated in worthless fiat paper, what are you going to buy with it?
Why ride profits into a Hypertiger economy and wheelbarrow your cash money out of your AmeriTrade account? Only to take those U.S. Pesos over to the friendly pawn shop to trade it for a few scant precious coins?
I’m exaggerating of course, but you get the drift….
Here in Los Angeles, the goal of most lower income people is to work for themselves and work for cash. Is it any wonder that if you hold a garage sale, 5000 people show up? They’ll buy anything. Because they will simply take this junk over to the local swap meet and resell it for profit. Imagine a massive pile of second hand goods trading around in a huge circle. Everybody scalping to a greater fool for a profit.
Is that any different from today’s Swap Meet on the NYSE?
So many stocks chased.
So many shares offloaded to some other sucker.
Yet the pile of trash goes nowhere. Just rotates in a giant circle.
Speaking of swap meets, anyone see Meg Whitman’s Market Timer Award today in The Wall Struck Journal?. She’s been offloading huge chunks of EBAY at $74 or better. Including a $24 million block out the door on Feb. 19th at $76/share. She’s got some smooth operator working that sale. All those shares offloaded in 48 hours with barely a blip on the chart.
Alan Newman’s report is out.
First, he reports on the Rydex Ratio. Says its not really a factor, since total funds in the Rydex family is less than 1/10th of Fidelity Magellan, and the amount of Rydex funds invested has actually declined by 45% from the March 2000 peak. So what ever money has been piling into the bear funds has been more than offset by money leaving the other bull funds and sector funds.
With respect to mutual fund cash levels, Newman reports that they are close to the lows seen at the mania peak, as well as the all time lows of 1972. My guess is that many funds are either fully borrowed to “participate” in the war rally, or have borrowing capacity available to meet redemptions. After all, if you were one of those fund managers featured on Louis Rukeyser, convinced that stocks are “cheap”, looking at the hockey stick run up from 1996 – 2000, why not borrow to buy shares now? And since there has been no real selling from the public, no redemption waves, no panics after 35 months, why not bet the bank on the upside?
Newman thinks the biggest danger to the markets is indexing, and is pounding the table about how the QQQ’s are headed for certain disaster. As fund managers hide in the QQQ and SPY to avoid specific stock blowups, money piling into these indexes simply force the index managers to buy more of the most overvalued (EBAY, AMGN, MSFT, etc.) and less of the blown up stocks which are 90% off of their highs. In a nutshell, it is forcing a wider divergence between the “haves” and “have nots”. The more money piles in, chasing the good stocks up, making the charts appear even better, which in turn encourages even more HeatMapping. While other stocks are left behind.
And the incessant HeatMapping and performance chasing of the highest weighted index constituents creates even more volatility.
“Indexing is destroying whatever remains of pricing efficiency and is a primary reason for the concurrent expansion in volatility. Every time a market cap index is bought, the fattest stocks receive additional sponsorship, no matter how horrid their prospects, yet the worst stocks are also bought, only because of their inclusion in the index. If there ever was a bad way to invest money, this is it.”
Its really no different than dating in Los Angeles. As more posers and players pile into the area, searching to “make it” in entertainment, the hottest chicks get chased to the verge of stalking, and the “average” girls become even more invisible. And since the girls with the shrink wrapped rib cages and perfect breasts are being chased by 100 guys instead of 10 guys, it makes them even more desireable and scarce. And the poor girl with the nice face but thick ankles and substandard breasts gets pushed further to the back of the bus, smothered into obscurity, totally blocked out by the mad stampede of the players searching for Sports Illustrated Swimsuit girls.
Newman says that the increased volatility is a result of index chasing, which explains the rise in the VIX and VXN. He also noted that the amount of QQQ shares have risen from 555 million to 645 million in one year, while the price has collapsed from $39 to $25.
He says the QQQ, SPY, and DIA have now expanded to about the same size as the Fidelity Magellan fund, and are having more and more of an impact on trading action.
“We are aghast that no one sees how indexing has impacted pricing and volatility and how this vicious cycle continues to reinforce itself and grow. Indexing in any form but especially in size tends to expand volatility, which will continue to drive investors away from the market.”
Sound familiar? How many people do you know who have given up trading specific stocks and have now decided to Riverboat the QQQ’s instead with their entire portfolio? How may buy and hopers do you know who have finally sold their LU, AOL, GE, and T and rather than leave the Arena entirely, piled the cash directly into the SPY or QQQ?
Is it any wonder that the daily market action is morphing into a scene out of Animal Planet? Where hordes of Wildebeasts are stampeding over here and over there? And the twitchiness of the herd encourages even more groupthink, so the herd continues to get bigger and bigger? And the hysteria of the crowd has melded together in once massive hope bet on a rebound in the SOX? Where the Global Mood and Economy is now dictated by the utterances of Jim Morgan or Rick Hill?
Newman sums it up this way. He believes that everyone is waiting for the Mother of All War Rallies. The decline in trading volume recently reflects people leaving the Arena temporarily to watch from the sidelines until the dust clears. The thin volume, ironically, had contributed to even more volatility, noting that 1% moves in the Dow are now a daily occurrence. The increasing volatility is making it even more difficult for “traders to position themselves correctly”, which Newman believes is making the market even more risky. He is expecting a massive blowout rally, which will quickly run to exhaustion, then a spectacular collapse thereafter.
Newman’s newsletter has some stunning graphs regarding market breadth and volatility. A free sample issue is available at email@example.com.
Anybody notice the sudden dividend cuts by the European Bagholders? Things appear to be really accelerating to the downside over there. The insurers are blaming weak equity prices for their troubles. What about the mountains of risk condoms they sold to the Pyramid Players? What happens when defaults start hitting the hopers who bought everything with zero down, no interest until 2003? Those bills are going to start coming due.
Oh, you thought that paper was “money market” grade? Because it was diversified? Because it is “secured”? Secured by what?
Mobile Homes in Oklahoma owned by some toothless, crosseyed, drunkard mechanic who just got fired from Ugly Duckling due to sagging used car sales and massive repossessions?
Chrome 23” wheels on the 9 mpg Cadillac Escalade XLT owned by some South Central L.A. rapper who is on the move 24/7? Oops, premium gas just jumped to $2.50/gal. Now that vehicle is “parked” in a secret “garage” for the time being.
Silicon implants inserted in an aspiring actress who cannot be “disturbed” by bill collectors because she is currently recuperating in the West Hollywood Rehab Clinic? Collateral inspection anyone?
Zero payment Italian leather furniture owned by the New Century mortgage loan officer, living in behind the Iron Curtain in Newport Beach, where no black or Hispanic “loan adjustors” are allowed? Guarded by a manic/depressive non-working housewife who is an ex-dancer from Vegas recovering from her Special K bingeing from the old days?
Who is going to collect those loans? Will Fannie Mae volunteer to take over the “servicing” of those portfolios also? They seem to be getting greedy for more “fee income” they can book in advance to pump up earnings. What will that “servicing” cost be after all these deadbeats are chased all over town through the obstacle course of Los Angeles?
Will Franklin “Mr. Potato Head” Raines jump off the Washington D.C. lobbyist social circuit and drive his Jaguar Vanden Plas to L.A. to assist in loan collections?
While on the subject about servicing income, no wonder Angelo Mozillo started dumping his CFC shares. Seems that CFC has been using some aggressive accounting to jam its earnings statements with front-loaded Pro-Forma profit streams from its servicing portfolio.
A 30-year mortgage? Oh, sure, go ahead and book 30-years worth of servicing profits today. Its an easy job, just sit back, bill the customer, collect the payments, and field a few phone calls for the next 360 months.
Take a $500 billion servicing portfolio, multiplied by an average duration of 18 years, multiply that times the servicing spread, and do the math. That’s lots of dough. But there are servicing risks and costs also:
Prepayment risk? That’s been hedged. Swiss Re and Commerzbank sold us all the protection we need. Its their problem now.
Default risk? Offloaded to Pluto. Thanks to MBI, ABK, and 50 other Pyramid Players who have sliced and diced that potato 17 different ways. It has been cut into so many small pieces, and Riverboated off to Bermuda so many times, that risk bag is no longer recognizable. In fact, we don’t even know where these pieces are in the Chain Letter, so we can assume that it has vanished into thin air. That’s Exhibit A of Al Green’s risk mitigation by financial engineering.
Foreclosure Costs? Oh yeah. Forgot about that. Guess we’ll have to take some houses back and fix the cement poured down the drains from time to time. But why worry? Carlton Sheets is running seminars across the country on how to get rich on buying foreclosed real estate. So we have unlimited buyers out there. In fact, we can sell foreclosed homes at a profit. So our OREO department is actually a Pro-Forma Profit Center. Ex-Items like unemployed homeowners with shotguns and 5 hungry kids. Including gain on asset sales, excluding losses from “disconnected, no longer in service” phone numbers.
Unable to locate Buddha. Would have liked his take on the End of Month Tape Jamming Forensics.
But one thing is for sure, the blaring from the loudspeakers and bullhorns is becoming deafening, as the Matrix Agents are doing everything possible to prevent a break of the October lows. Every 5 minutes, there is some anal cyst “defending” a stock at 40x earnings. Yet nobody defends gold or silver during this weakness.
’Chatter' about weakness at Cisco is overblown: anal cyst (CSCO) by Tomi Kilgore
“Shares of Cisco Systems (CSCO) are falling 50 cents, or 3.5 percent, to $13.58, adding to Tuesday's 2.4 percent slide. Volume is 56.8 million shares, making the networking bellwether the day's most active issue. anal cyst Hasan Imam at Thomas Weisel said recent investor "chatter" about a drop-off in its business at component vendors, electronics manufacturing services vendors and distributors appears overblown. He noted that seasonal weakness in February was expected, and feels it is too early to extrapolate the weakness over the entire quarter, which ends April. "Our latest channel checks do not reveal any unexpected softness in business," Imam said in a note to clients.”
Do you think this idiot is really out in the field checking router inventory levels?
The only thing he’s checking is Thomas Weisel’s unsold inventory of CSCO, which needs to be promptly unloaded, before 7.2 billion shares suddenly head for the The Station exit door after the Bear Market Pyrotechnics get things rolling to the downside.
I suspect that when this bear market is over, those 7.2 billion pieces of paper will be floating around at the thousands of Southern California swap meets, or in the Monopoly Money section of the EBay auction.
“I have a CSCO stock certificate dated June 1997.”
“I’ll give you 5 cents for it.”
PigMen Proprietary Trading Desk
The Weimar Run: Bullphoria!!!!
Posted 26 February 2003 - 05:02 PM
My first post. Mark, you do a great service here, keep it up.
I'm not a trader but a long time investor who is a secular bear.
I appreciate being in the company of great knowledge.
Posted 26 February 2003 - 05:17 PM
DELL dippers over at Channelingstocks.com are going to get roasted.
Check out the implosion on HPQ today. Coming soon when DELL dude pre-announces one day.
PigMen Proprietary Trading Desk
The Weimar Run: Bullphoria!!!!
Posted 26 February 2003 - 05:21 PM
ppt and mutual funds etc. will ramp it into the close friday.....will go short at the close friday at end of EOM games.......use me as a contrary indicator, fade what i do and make mega bucks.....I should charge for this service
Posted 26 February 2003 - 05:23 PM
Wow, you managed to insult me, my half-brother and my step-mother all in one article. Am i supposed to say, thank you, or something?
Posted 26 February 2003 - 05:34 PM
"[Alan Newman] is expecting a massive blowout rally, which will quickly run to exhaustion, then a spectacular collapse thereafter."
I kind of suspect that, too. But if I can make some coin on that scenario, I'm going to retire from the stock market and put it all into commodities. I've been holding long commodity positions since Nov. 2001. It's like owning stocks in 1995 ... a steady uphill drive, with only minor ripples along the way.
By contrast, the manipulation, volatility and head games in the stock market don't seem worth it. The reward-to-risk ratio has gone negative. Too many hungry participants wielding forks, and not enough pie left. Another decade-long Seventies-style "hate market" is oozing its slime.
Panicky, mercurial markets are for the birds. Finding a dull, boring early-stage bull market for "buy 'n hold" is probably more feasible than trying to time the thrashing death throes of a bellowing dinosaur with sponsors in high places.
The Nikkei became untradable when the Japanese government started putting a floor under it in the mid-Nineties ... but withdrawing support every time it popped. The U.S. and European bourses look a lot like that. The short-circuiting of a cathartic V-bottom can induce years of pathological fibrillating flatline action, to be interrupted periodically by Dr. Bernanke with his electrodes.
"GOLD -- it's not just for misers anymore."
"Dollahs -- fire-starters for the K-wave winter." - Drano
"Three humps and a dump." - anotherone, 21 SEP 2004
"No gold was harmed in the making of this movie." - Bizarro Greenspan
[i]"Da Track. Da place where Morons bet on Animals Controlled by Criminals." - our jickiss
Posted 26 February 2003 - 05:39 PM
Simple Guy Waves have just been updated with a fresh rant on the Deflationary Depression, consumers... and why its about to get ugly.
If you wanna take a gander and participate... go here...hint... Michigan numbers, and todays action are hinting of something big coming...
The Deflationary Depression, why its about to pick up steam
Posted 26 February 2003 - 05:52 PM
Thanks so much Mark,
Great read and rant. Channel Check my ass.
All this offloading risk to 17 different entities who each offload it to 17 different entities and so on reminds me of the S& L scandal. In that trillion dollar + tax on John Q., prosecutors knew people were guilty and took them to court and tried to get convictions, but once in court they found it very difficult to actually make a conviction stick. The cases were so convoluted with so much paper camouflage and so many remotely involved people and institutions that when a jury was asked if they understood the case clearly enough to convict, they naturally had to say no. Often, no one could understand the case. Not the judge or the prosecuting attorney or the defense attorney. Asking a jury of working stiffs to clearly comprehend and pass judgment was often a waist of time and court expense.
So all this fiat fiddling you have written about for so long may be a major part of the crooks business plan. And it may be the same crooks.
Posted 26 February 2003 - 05:58 PM
You nailed my strategy.
Nice post Mark, as usual. Good luck with gold.
Posted 26 February 2003 - 06:19 PM
Note how the Trillion dollar boxes at the top right got real small... The next box is going to be bigger and the one after that could start actually looking like the early 90's or head down once real estate goes...
"We are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money (at the request of the consumer) we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon." --Robert H. Hemphill, Atlanta Federal Reserve Bank,1938...
Posted 26 February 2003 - 06:19 PM
We have a very important timing cluster coming up this Friday at 3 pm where several time frames seem to congregate. If Market is low into it I will cover there and expect a reverse momentum move. If Market is high into it after two days of up spiking I would look for reversal downward. The EOM stuff is less reliable than OE Racketeering Capone play. This is partly because so many disagree with when the play actually begins and actually ends. Buying can run I have found 2 to 3 days into the next month and contrary to those who were lining up for it on the 25th, I don't think it really begins that early. Its cue for buying would more naturally come tommorrow and extend into Monday and Tuesday, most especially as a new moon is on Monday and attracts idiot money and crazed palm readers. If there is a sudden rally from here I would expect it to fail and then double bottom again around the next time cluster in mid March.If you want to see where the real money is being made in this Market look no farther than the war industries lining up to profit post toasting of Iraq. Cheney who was Secretary of War under bush1 turned right around and did 91 million worth of business with Sadaam for Haliburton after he left office. Now the typical cycle resumes. Destroy all that infratstructure, supply the troops with a Halliburton subsidiary along with huge defense industry contracts and then line up the oil explorers again for rebuilding once vaporization has been implemented. Its called war profiteering, has been going on since man first crawled out of the swamp and its the place to be for those minus a conscience and with large Reptilean brains. I think we are entering a very long cycle of war profiteering and commodity inflation and all the paper of the last bull will simply get flushed. A Guns and Gold kind of survivalist enviroment, something akin to "Road Warrior".
Posted 26 February 2003 - 06:30 PM
You're right on, Buddha. Here's the schedule: Bush speaks tonight at the American Enterprise Institute, the neo-con think tank. He'll be giving the "positives" about annihilating Bagdhad. While the US sleeps, this speech will have its effect in Asia and Europe. The market reactions overseas will probably fall into 2 categories: a big sell-off, followed by a certain amount of retracement before NY opens...or, a big sell-off, followed by a huge sell-off.
Gonna be interesting.
Posted 26 February 2003 - 06:32 PM
Another fine piece of writing, Mark.
-- Bush Rejects Saddam Debate, Offers Chili Cookoff
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