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March Madness Failure?


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#1 wndysrf

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Posted 03 March 2003 - 04:58 PM

Mark’s Market Commentary – March 3, 2003

Just some incoherent rambling here from stuff I found over the weekend. Too early to tell if today was a reversal day, or if another Repo Blast will be injected tomorrow to jam things higher. High probability of a top in on the SOX since Dan “The Greaseman” Niles finally changed out of his San Jose 7-11 uniform to appear on several venues to issue a buy signal on INTC on Friday.

I am amazed at the interconnected cables of the Global Equity indexes. All trade in sync, all dependent upon the U.S. economy. Any scrap or hint of a “v-shaped recovery” in the U.S. causes a stock buying frenzy worldwide.

From the Bloomberg Bullhorn last night:

“Japan's stock benchmarks rose, led by exporters such as Toyota Motor Corp., after a U.S. government report showed fourth-quarter growth in Japan's biggest trading partner was twice as fast as initially estimated. Automakers were the biggest gainer as a group.”

“South Korea's Kospi index rose 1.1 percent and Australia's S&P/ASX 200 Index added 0.3 percent after the U.S. Commerce Department report showed gross domestic product grew at a 1.4 percent annual rate in the fourth quarter as consumer and business spending beat original estimates.”

“The report raised optimism for a recovery in the world's largest economy, which may boost earnings at exporters such as Samsung Electronics Co. and News Corp., which makes three-quarters of its sales in the U.S.”

“The Kospi index rose 6.34 to 581.77. Kospi 200 futures gained 1.2 percent to 73.40, while the underlying index rose 0.9 percent to 73.47. Samsung Electronics, which gets about a fifth of its sales from the U.S., advanced 1.8 percent to 284,500 won. Hyundai Motor Co., whose exports account for more than a half of its sales, gained 0.8 percent to 25,300 won. The U.S. is Korea's largest export market, which accounted for a fifth of total exports in 2001.”

``The positive GDP news helped some investors buy futures and stocks because the U.S. economy is important for exporters and the global economy,'' said Kim Joong Il, who helps manage 600 billion won ($502 million) at Kyobo Investment Trust Management Co. Kim bought Samsung Electronics shares today.”

“Taiwan Semiconductor, the world's largest maker of computer chips on a subcontracting basis, rose 1.4 percent to NT$42.60. United Microelectronics Corp., the second largest, gained 1 percent to NT$19.90. Export orders jumped 15 percent from a year earlier to $13 billion after a 14 percent gain in December, according to the Ministry of Economic Affairs. That compares with the 12 percent median forecast.”

Mark’s Translation:

“Global Arena Participants have their fingers anxiously poised on the “buy” button on their Nintendo Consoles. Any sign of a bottle rocket rally in U.S. consumer spending, typically led by the Nasdaq, is immediately seized upon as a possible 40% gain in all indexes worldwide, trading in lockstep with AMAT’s option chain.”

“Fund managers all over the globe are speculating 24/7 on the SOX, the leading barometer of the planet’s economic health.”

“Any reversal from the upside momentum is sold immediately. However, these sales are usually temporary, and result from a desire for gamers to obtain even lower entry prices for the next New Bull Market which will eventually translated into even more spectacular gains as the Nasdaq advances to new highs.”


Not only are speculators anxious to buy, they even ignore bad news from the corporate insiders, who are less confident about economic conditions. Quotes from Goldman Sachs’ Technology Symposium last week:

Joe Bronson at AMAT: “You have this overhang of malaise that is stunting people from doing what they should be doing.”

Joseph Tucci at EMC: “The threat of war is having some negative effect on purchasing decisions.

Alfred Chuang at BEAS: “The issue of war has put some doubts in customers”

Meg Whitman at EBAY: “If consumer spending drops like a rock, then it is a concern for us.”

Insiders are selling. But the Riverboaters are in a trance, transfixed on the Nasdaq. Goaded by the Bullhorners:

Bear Stearns sees stocks weak, but headwinds diminished by Tomi Kilgore

Bear Stearns investment strategist Francois Trahan said the path of least resistance is still down for stocks, with a retest of the October lows still the most probably outcome, but added, however, that a number of "market-restraining headwinds appear to be diminishing." Trahan said that valuation has become "increasingly compelling," the spread between bond and stock bulls have reached extremes normally associated with a major asset re-allocation into equities and the cash on the sidelines as reached all-time highs. In addition, he noted that recent sentiment data suggests that bulls have dwindled to a level typically associated with "a fully Dover Sole bottom in the equity market." He cautioned that a major catalyst, such as a favorable resolution of the Iraq situation or the strike in Venezuela, is needed to drive stocks higher from current levels.

Mark’s Translation:

The usual foreign exchange student hired by Bear Stearns to satisfy the “diversity” checkbox is really only another Agent manning the bullhorn, attempting to corral the Wildebeasts.

The Matrix Agents are getting restless, as Doug Noland’s systemic risk headwinds are strengthening, soon to be gale force. The spread between bond and stock bulls represent wild imbalances resulting from record speculation in debt securities arbitrage. Cash on the sidelines, which has reached all time highs, is really high-risk debt monetized into “money market funds”, thanks to the exotic schemes perpetrated by the Paper Pyramiders. A major asset re-allocation is soon to appear, as Participants realize that the money market funds they are holding are only as good as the thousands of pyramided promises stacked on top of each other, and a rush to gold is imminent. A 10 sigma event will be the catalyst to turn the Atomic Particle Accelerator into reverse, resulting in the quick vaporization of the huge piles of “sideline cash.”


Found in yesterday’s “The Trader” section in yesterday’s Barron’s.

“Fear of commitment is gripping Wall Street, leaving the stock market in the sway of fickle short-term players with their wandering eyes and fleeting emotional dramas. The daily activity in the current environment reflects the efforts of agitated traders feinting and sniping for momentary advantage”

“Trading volume has ebbed, but the intraday activity features frequent reversals, thanks to opportunistic traders seizing on a single data point or one news headline to muscle stocks around.”

Mark’s Translation:

While Joe Sixpack remains fully invested, making his regular monthly contributions, the trillions of “buy and hold” money is being gamed by HedgeHogs and market makers. Trading has become a game of Dodgeball played by elementary students, where short sellers attempting to overpower the Plunge Protection Team are blown out, and smarter “event driven” HedgeHogs financed by Al Green’s Repo Blasts look for opportune times to “participate” on spectacular squeezes to the upside.

Nowhere else in financial history have we witnessed such a dramatic increase in speculative intensity, concurrent with the desire to get rich in 7 trading days or less. The Wall Struck Casino has attracted the most hard core gaming addicts, who are making leveraged short term bets. Quick to cut losses or reverse direction, even quicker at grabbing profits. Millions of eyeballs gaming each other in real time, all watching the same “indicators”, the same “charts”, everyone watching what everyone else is doing.


“The vivid outperformance of big tech stocks so far this year evidences the abiding willingness of investors to make yet another tech-comeback. Buying tech names involves investor psychology and trader posturing. Some portfolio managers are hiding in large-cap tech shares, hoping to at least rent some exposure to a volatile sector so that any potential midwar or post-war rally doesn’t leave them completely behind.”

Mark’s Translation:

The economy is the stock market, and the stock market is the tech sector, and the tech sector is the semiconductor group, and that group’s leader highest beta component is the semiconductor manufacturers. Therefore, if the economy rebounds, there really isn’t any point in being invested in any other stock other than AMAT, KLAC and NVLS.


While Global Speculators are salivating over the coming Roman Candle move in the SOX, Switzerland is on the brink of crises:

“Shares in Swiss companies have taken a pounding because two of their biggest investors, Swiss pension funds and Swiss insurers were big sellers in 2002. Underfunded pension plans have had little choice but to dump shares. Swiss companies are highly dependent on foreign markets for sales and investments, particularly Germany. Swiss Reinsurance, Zurich Financial Services, and Credit Suisse have cut dividends, taken big charges on equity writedowns, and other investment losses.”

The Swiss were the last tranche of the risk bagholders stuck with the worst of the worst of Bermuda Garbage offloaded by Western banks. Desperate to “catch up” with the “New Era” of “Wildcat Finance”, the Swiss finally dumped their conservative posture and snapped up the last of the low grade risk pools to rake in huge fees and show the globe that they were “Big Global Risk Players”.

Now they are getting shafted from cash calls coming out of nowhere, obscure no-name intermediaries in the Caribbean demanding payment on derivative exotica tied to Enron, WorldCom, Ahold, and Kmart. What was sold to Merrill Lynch, Citibank, and J.P Morgan ended up being stripped, sliced, and diced and distributed to unknown Pyramid Players with “Special Purpose Vehicle” designations and Cayman Islands P.O. Box addresses.

Now, Switzerland has no other choice but to look to Germany, its largest trading partner, in an attempt to export its way to prosperity and “earn” their way out of their mistakes through “growth”. Unfortunately, Germany is in dire straits. Its fortunes are directly tied to the success of one stock on the DAX: Infineon Technologies. And Infineon’s fortunes are directly related to the fortunes of AMAT, whose fortunes are directly related to Samsung, whose fortunes are directly related to Sony and Dell, whose fortunes are directly related to Joe Sixpack, who carries the weight of the entire financial globe on his shoulders, based on his ability to obtain credit card limit increases in order to buy another cell phone, computer, DVD player, or a Ford Explorer with GPS navigation.

And speaking of Ford, we must watch this one closely. Corporations are now acting like Wild Pigs feeding at the trough, taking advantage of the Liquidity Parabola to issue new debt while 10-year Treasuries are at 40-year lows. During the last corporate bond orgy in early 2002, Ford was pulling off gigantic issues, and is now the No. 1 corporate bond issuer on the planet.

As Alan Newman pointed out the dangers of stock indexing, the same applies to the bond market. Everything is now connected. The herd of equity Wildebeasts and the herd of bond Wildebeasts. Now moving in lockstep with each other.

“Due to Ford’s much greater weight in the credit universe and its larger stand-alone credit risk, it contributes a disproportional amount of credit risk to the market. Ford is the largest issuer in the Lehman Brothers Credit Index. Rising risk in Ford leads to an accelerated increase of risk in the overall market. If all participants try to limit their risk to Ford, liquidity demands quickly swamp the ability to absorb the change in investor attitudes.”

“Many fixed-income managers have to own certain credits simply because they comprise an outsized percentage of a market index. As an example, MetWest says that Ford bonds represent the firm’s largest corporate holding.”

Ford’s 10-year notes are trading at 4.16 over Treasuries. That compares to 3.50 recorded in mid January and 5.92 last October. According to Goldman, “there is real danger if Ford’s stock price goes from $8 to $7 a share. The bonds could move in tandem, with spreads widening from the low 4% to the high 4% range. You could have the same kind of desperate rush for the exits that could spook the whole credit market.”

Uh, Oh…

Amazing. Just when I run out of stuff to write about, more incredulous news hits the tape. This is better than a soap opera. Where is Buddha? He’ll love this one:

U.S. Treasury creates financial crimes division by Rachel Koning

“The U.S. Treasury announced Monday it has created a new Executive Office for Terrorist Financing and Financial Crimes. The office, to be headed by Juan Zarate, will report to the Treasury Deputy Secretary. The division will work with, but does not report directly to, the Bush administration-created Office of Homeland Security. Among other things, the new office will work with the private sector over new financial policies under the Patriot Act, a law created to stem terror financing and money laundering in the wake of 9/11.”

Capitalstool creates financial crimes division by Stephan N. Stool

A class action lawsuit has been filed against the banks, brokerage firms, the senior administration officials, and Alan Greenspan for financial terrorism. Charges include: Options Racketeering, End of Month Tape Painting, Excess Bullhorning about v-shaped recoveries, and Widespread Fraud, Fleecing, and Deception about the true financial condition of the country. Among other things, the suit will seek discovery to learn about the true inner workings of the 700-story JPM Derivatives Tower.

Hopefully, Buddha will show up and expound on this folly.
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#2 PileDriver

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Posted 03 March 2003 - 05:14 PM

and what did I say last night?!

I agree Jorma.

This news event is is yet another great opp for Da Boyz to pump things up a little to lure more suckers into which they can dump more of their inventories.


Same shit, different day.

I continue to hold balls to the wall short until we get a washout. :grin:

Its coming...patience, persistance, discipline, and nerves of steel.

#3 martialcomp

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Posted 03 March 2003 - 05:20 PM

Announced lay offs should come out tomorrow morning. Should be interesting.

Bank of Tokyo Layoff Table

It looks as if there is a concerted effort to keep the Dow within striking distance of 8000.

Also, Michael O'higgins spoke about the markets in a Miami Herald article on Sunday. He expects a depression. Interesting Read.

Miami Herald/O'Higgins Article

Thursday, INTC puts out it's mid quarter report. Down 3.5% today. Amazing how Dan Niles signals a top in INTC. Everytime he is positive in INTC, it tanks.

#4 TheDeepBlueSea

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Posted 03 March 2003 - 05:25 PM

“Shares in Swiss companies have taken a pounding because two of their biggest investors, Swill pension funds and Swiss insurers were big sellers in 2002 . . ."

"Swill pension funds" . . . one very true typo . . . or Freudian slip :lol:

Someone posted, on the intraday board, an exactly article by Buffet, the funny-mentalist's funny-mentalist, on his view of derivatives.

Avoiding a Derivatives Mega-Catastrophe

While he did make his billions investing without the amazing insights of either TA or astrology and became the world's 2nd richest man in the process, the article's still worth reading despite these obvious limitations.

:lol:

#5 ShamPoo

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Posted 03 March 2003 - 05:34 PM

Mark, thanks a pile.

“Among other things, the new office will work with the private sector over new financial policies under the Patriot Act, a law created to stem terror financing and money laundering in the wake of 9/11.”

They better catch these guys. “terror financing and money laundering”! That’s the Feds turf.

#6 Pee Brain

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Posted 03 March 2003 - 05:40 PM

this is not directly related to the market.

i just got off the phone with a buddy of mine. he is looking at new tract home priced a little under $1M. no land, nothing special. he was talking about how it would be worth over $1.3M in the next few years, how was gonna get an interest only loan or an ARM. he just sold the range rover for a new yukon and he has a nice beemer. i found myself questioning why i live below my means? why am i planning on retiring early? this rarely happens - im pretty solid in whats important for me. its like looking at the market and you're trading against the govt and the analcysts are pumping friggin dogs! its like looking at socal with 1/2 the people on some sort of entitlement and it seems like everyone is buying everything they want - with credit of course.... i dont think this is gonna drip, drip drip anymore. i think something happens, a point of recognition. this is friggin unsustainable! am i the the only person who remembers the last r.e. depression, or am i just flat out wrong? regrardless, im holding to my plan.
Iat least we're all safe for now. thank God we're in a bowling alley.

#7 Sphinxter

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Posted 03 March 2003 - 05:59 PM

And speaking of Ford, we must watch this one closely. Corporations are now acting like Wild Pigs feeding at the trough, taking advantage of the Liquidity Parabola to issue new debt while 10-year Treasuries are at 40-year lows. During the last corporate bond orgy in early 2002, Ford was pulling off gigantic issues, and is now the No. 1 corporate bond issuer on the planet


Geez, I don't know why this should be a problem. Ford is only carring $148 billion freaking dollars in debt right now while their market cap is a robust, let me check here, $14.8 billion. Which is your basic, average, usual 10:1 debt:market cap ratio, right?

Oops, there I go with that funny-mental stuff again. My bad.

#8 The End

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Posted 03 March 2003 - 05:59 PM

Hmmm funny how 853 held today. :grin:

Still short. We should get acceleration soon. We better.
NONE of what I type, should be taken as financial advice.

And when you loose control, you'll reap the harvest that you've sown
And as the fear grows, the bad blood slows and turns to stone
And it's too late to loose the weight you used to need to throw around
So have a good drown, as you go down, alone
Dragged down by the stone.


--Waters

#9 wndysrf

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Posted 03 March 2003 - 06:02 PM

Pee Brain...

You are not alone.

Consumption spending in L.A. is totally and completely out of control. Everybody buying now, no worries about the future.

No fear, no anxieties, no question about future prosperity.

It will take a nuclear bomb landing in the front yard to get them to pause and reflect for a moment.

All these guys will simply file bankruptcy and start over. I have two major builders here in the S. Bay who are millionaires, and they all have been flat broke twice already.

Just BK, start over, latch on to the next boom.

Lenders are suckers. They will loan to anybody, and quickly forget about the past.

Enjoy the MTV Free Ride as long as you can.
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The Weimar Run: Bullphoria!!!!

#10 Madame Wrecked Him

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Posted 03 March 2003 - 06:05 PM

Hmmm funny how 853 held today. :grin:

Yes, that was funny.

Why wasn't I surprised?

#11 The End

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Posted 03 March 2003 - 06:05 PM

Off topic- Is there a way to empty my hard drive?

I am donating my computor to a charity and want to empty all my files before presenting it to them.
NONE of what I type, should be taken as financial advice.

And when you loose control, you'll reap the harvest that you've sown
And as the fear grows, the bad blood slows and turns to stone
And it's too late to loose the weight you used to need to throw around
So have a good drown, as you go down, alone
Dragged down by the stone.


--Waters

#12 The End

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Posted 03 March 2003 - 06:11 PM

On Topic-

Today was not a key reversal day for the spx. It was however for the ndx.
Just in case anyone was wondering.
NONE of what I type, should be taken as financial advice.

And when you loose control, you'll reap the harvest that you've sown
And as the fear grows, the bad blood slows and turns to stone
And it's too late to loose the weight you used to need to throw around
So have a good drown, as you go down, alone
Dragged down by the stone.


--Waters

#13 PileDriver

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Posted 03 March 2003 - 06:13 PM

TE, we gots what Neeley said we needed :grin:

#14 Madame Wrecked Him

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Posted 03 March 2003 - 06:14 PM

TE, don't you think a little more volume on the ndx would have made it a little more persuasive?

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Posted 03 March 2003 - 06:14 PM

Mark, thanks a pile.

“Among other things, the new office will work with the private sector over new financial policies under the Patriot Act, a law created to stem terror financing and money laundering in the wake of 9/11.”

They better catch these guys. “terror financing and money laundering”! That’s the Feds turf.

Those clowns haven't even been able to make a case against Ken Lay. With the FBI, CIA and Tom Ridge on the job, chances are we'll be done in by our own government long before OBL.





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