We don't know and neither do they.

Day Old Stool - July

Dr. Stool' lead columns for: January, February, March, April, May, June, July

A Digital Examination (7/31/01) by Dr. Stepan N. Stool, Chief of Stock Proctology

As you know, Dr. Stool is an expert on rare chart patterns and their implications. Capitalstool regulars are well aware of this, so you can skip this part, folks, but new readers may not be aware that a lot of money has been made from rare chart patterns... mainly by people writing books about them. So the study of rare chart patterns is important, given their profit potential for experts who publish in the field of Stock Proctology.

One crowd favorite is, of course, the Finger Formation, as in "Yo, d'you just gimme da finger?" The market did not quite form one of those Tuesday. But it did form a closely related pattern, the Knuckle. The Knuckle is a pattern which forms when the market closes before the Finger Formation is completed. Many people think that this means that you have to wait until tomorrow to find out if the market is going to give you the Finger or not. 

But, ladies, gentlemen, and stool seekers everywhere, thanks to round the clock trading, that is no longer necessary. Now, by virtue of the powers vested in me, as Chief of Stock Proctology, Dr. Stool hereby pronounces that, yes, indeed the Nasdaq 100 Futures have given us the Finger, as of 6:30 PM ET US. So we do have a Nasty Finger in place on the hourly intraday charts including pre and after market trading. As you can clearly see, not only is the Finger in place, but the knuckles of the pinkie and fourth finger are also clearly visible, in this classic and well formed pattern.

Nasdaq 100 Futures Hourly

As of 6:30 PM ET US, Dr. Stool found the S&P futures with a broken Finger. Doctors reattached the Finger to the hand by 7:10 PM. So it appears that the SPX, aka the Portfolio Sphincters Index, has also gotten its Finger.

S&P Futures Hourly

The prognosis is easy to see. This completes Dr. Stool's digital examination of rare chart patterns for this evening. 

A Moving Market Experience (7/30/01) by Dr. Stepan N. Stool, Chief of Stock Proctology

"If I have to write one more word about this market, I'm going to puke," Doc is thinking. How can you write about something that just sits there, and sits there, and nothing, NOTHING!

But yoooou know what the problem is, don't you? The market is irregular, which is television's way of saying, CONSTIPATED. And it's been constipated for weeks. You know the feeling right. And what causes constipation. That's riiiight! Poor diet and stress. And what does all that straining do to the portfolio sphincters? Yep, you got that right too. Piles. Swollen membranes. That look you see on the analcysts faces when they appear on Caint Nobody Buy Channel? Now you know what it is. 

So what the market needs now, of course, is a little Haley's MO. That'll get things moving.

Actually Dr. Stool doesn't think the market needs much help. There were some preliminary sell signals on the hourly charts Monday afternoon. That means the 8-13 day cycle is topping out. The process can take from an hour to a day and a half as

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the cycle rolls over. A more important factor, if Doc is reading this right, is that the 10-11 week cycle is around its midpoint. This wave can run a little longer than 10-11 weeks, so the midpoint can be from day 25 to 33. The market is in day 29 from the lows, which were in June (see the Nasty and Sphincters Index updates.) If Doc is right, those hourly sell signals will mark the beginning of an acceleration to the downside, for this biggest of the short term cycles. 

'Course, he's been saying that for a month now.

We shall see, won't we.

How much was this article worth to you? Not Much?  OK, send it to Dr. Stool anyway, with Paypal, secure payment system insured by Travelers, or Amazon.com's Honor System. Help Support Stool, Justice, and the Ursine way!

Note to Stoolpigeons: Congrats to yobob1, whom Fleck recognized in his column tonite as the originator of the 10 Ways You Know The Bull Is Dead. Dr. Stool is proud that yobob makes his home on the web here at Stool U. 

Cramer Says Investment Feces Not Working Out! On CNBC This Morning (7/30/01)- Your Reactions

Keynesian Economics to Save the Day by Vodka1- Brilliant, but not for the faint hearted.

The Coming Real Estate Crash (7/28/01) by Yobob1, Doctor of Stock Proctology and Stool University Visiting Professor of Funny Mentals. Dr.Yobob is the author and originator of the World Famous 10 Ways You Know The Bull Is Dead. He is known throughout the message board world for his insight, foresight, and upbeat and optimistic views of the US economy. So everyone, lean to the left (or right as the case may be) and let a big one go for Dr. Yobob1! Read Doug Noland's Usual Brilliant Discussion of the Real Estate Credit Bubble

Everybody Sing! 

Ohhhhh...
Yes, We have no inflation,
We have no inflation, TODAY... 

Town Meeting with Charles Schwab (7/26/01) The Fed is pumping, the hordes of shorts are panicking, the news is better, the news is worse, and the pie is shrinking. Something has to give. 

Of course it's amazing that the market hasn't caved, in the face of this onslaught of news that stretches the bounds of the imagination. Which of course is why so many bears have been converted, however temporarily, to the bull camp. In regard to that, Dr. Stool is going to borrow a note from his comments on the Nasdaq. 

"Fellow Bears, the market will show you, you cannot play for the other side. You'll get hurt over there! Do not allow yourselves to be ruled by your fears." 

The action on Thursday afternoon was sheer, unadulterated, mindless panic by an inexperienced army of raw recruits to the short side, led by a few chickenhearted generals, a stampede

triggered by a couple of well placed starter pistol shots by the bull army. But the fact is that the charts show the market averages to be in the same downtrend they've been in for two months. There is nothing different between this two day rally and the last one, and the one before. 

Each time this happens, your window of opportunity to re-establish a short position is likely to close more quickly. One of these days the market will close on its high, the more nervous shorts will have all been squeezed out, and the market will open the next day on a big gap down, and never look back. 

Will Friday be that day? Doesn't look that way now, as of 10 PM ET. The futures have staged a recovery, and are hanging on near where they went out at 4PM, after a brief sell-off. But when the typical mutual fund investor wakes up in the morning, and reads the JDSU news on the business page of the Yakima Yakker, then what?

Dr. Stool has no idea. The resiliency of this market has confounded him too. But, he's said over and over that as long as we have this huge crowd on the short side, these spikes will continue, and the market will look like it's gone insane. And it has, insane with fear and worry from the bear side that every little bottom is a BIG bottom. 

So here's something to keep in mind, something from perhaps the most recognizable stockbroker in the good old US of A. He's Charley Schwab, the Discount Broker, and here's what he says in that wonderfully realistic Town Meeting commercial he does for his brokerage house. Now listen closely, you see and hear him now, he has entered the center circle, the spotlight is shining on his distinguished, bespectacled face, you politely applaud, then silence, the director points,

AAAND ACTION! 

(Charley): 

"In my thirty years in this filthy rotten business, I done seen this shit a thousand times. So Cripesamitey, would y'all please just CALM DOWN! DAMN! This'll pass."

And CUT!

Night of the Living Dead (7/25/01) They're baa-ack! This kind of horror show, with the bulls coming back from the grave every few days, could go on for weeks. The drip, drip, bounce, pattern shows no sign of letting up. Doc thought it was time for some downside acceleration. WRONGO again. And what kind of nut, not only attempts to forecast the market's direction, but it's speed, rate of acceleration, and estimated time of arrival as well? The man has masochistic tendencies, a serious case.

What Dr. Stool doesn't see is any sign that this rally is significant in any way. It looks like a case of chicken hearted shorts bailing at the first sign that the market isn't crashing. Well, it's not gonna crash. There's not been any indication that it would. But the slope and cyclicality of the trend is such that it points toward a long, slow, grind down, with interim rallies every few days. Eventually, as more and more of the shorts elect to take profits and bail out, the market will accelerate to the downside. But it's beginning to look like that could be months out. Next week is a higher probability period for downside acceleration. If it doesn't come then, you may have to wait until Q4.

Cycle Forecast Chart Update (7/25/01)

Capital Preservation Is Job One (7/24/01) 

Doc and the Stool Pigeons have been singing quite a tune on the Stool Pigeons Wire the past few days, and it's been fun. But the question arose as to whether Dr. Stool was feeling vindicated by the market action of the past few days. The answer, truthfully, was no. Sure Doc's trades are finally making money again, with what little he had left, but there's no joy, no sense of vindication. In fact, it's pathetic to be right in this environment when you have so little company. 

People's lives are being ruined every day by the pap that passes for analysis on Wall Street. The analcysts and portfolio sphincters have, by and large, been ruining people for most of history, with the customer's cooperation of course. It's just that in a bull market they're all geniuses. The bear exposes 90% of them for what they really are, narcissistic sociopaths who like to hear themselves talk. It's disgusting, and also fascinating that anyone wants to believe these know-nothings, but they do. 

Ladies and gentlemen, here's what Dr. Stool thinks. If you cannot personally manage your money, if you cannot spend the time and effort to learn what you 

need to know to be successful, (and these things are not secrets) then fergodsakes, don't put your future in someone else's hands, and DON'T TAKE RISK! 

There are plenty of safe places to put your retirement funds. In the long run you'll be better off with those risk free returns, no matter how low they may seem now. The business about stocks returning yadda yadda over the long haul is nonsense. The last 20 years were an anomaly, and the statistics about long term equity returns are pure unmitigated bullshit. The chances of another bull market like the last one in our lifetimes is nil, unless you are very, very young. A 20 year bear market is more likely than another big bull any time soon. And when that next bull comes it'll start from much lower levels. 

It breaks Dr. Stool's heart to hear the stories of honest, hard working, innocent folks, who put their trust and their hard earned money into Wall Street, and lose most of it. So let's make capital preservation job one, now and all the time.

As for us short selling bears, Doc thinks we'll have a little fun this summer.

Heading For New Lows (7/23/01) By Dr. Stepan N. Stool, Chief of Stock Proctology  

Dr. Stool will keep his comments brief tonight. He believes the market is speaking loudly and clearly. The indexes broke key "psychological" levels, with levels which the majority perceives as key support just below. Short term cycles are just now turning down and intermediate cycles are just now topping out, so these levels will be broken shortly. The decline will begin a gradual but steady acceleration in the weeks ahead. The market is headed for new lows, and not just by a little. Cycle Forecast Chart (7/23/01)

Perch on the Wire and Leave your droppings.

Hey, My Indicators Don't Work! (7/20/01) We had an interesting discussion last night and today on the Stool Pigeons Wire about people noticing that their indicators were screwing them. Regular readers know that Dr. Stool has been kvetching for a long time about the fact that "buy signals" do not work in a bear market, and should be ignored. Joe Granville used to scream about this 30 years ago. Folks if you never saw Joe on national TV bellowing at Lou George Washington Rukeyser, you missed a spectacle of historic proportions. 

Anyway, we had an interesting discussion. The thread is here, but Dr. Stool wants to share his thoughts with you here at the front page. So, strap yourselves in for a little stock proctology lesson. The person referred to as "I" is Doc.

You ready? OK, here we go.

The thread was started by one of Doc's favorite Stool Pigeons, zhungmei, who posed the thought:

"Ok, gang, here's some food for thought.  Lately there's been some talk in the press (especially among technicians) about how prime indicators may not work in a bear market environment."  

And Doc responded:

"I have been jumping up and down on this since I started publishing this rag 8 months ago.

The reason any indicators based on moving averages or momentum, especially MACD, don't work in bear markets, is that the signals are all relative to the slope of the trend. Buy signals only work in a neutral or upward long term trend. It's the same reason sell signals don't work in a bull market.

The only thing a "buy" signal does in a bear market is tell you the downtrend is pausing or decelerating. You see positive divergences that fail all the time in a bear market. But look at the oscillator and you'll see that the positive divergence is still way down in negative territory. Stop and ask yourself, what does this line actually represent. What are the numbers from which it's constructed.

If they are only moving from very large negative numbers to somewhat smaller ones, it's not a buy signal. The trend remains negative.

Ah ha, but when you see a turn near the zero line, and the trends are favorable, that's when you seize the day!

You also have to use the appropriate periodicity on the indicator. Longer term trends need much longer periodicities. That's why you see both weekly and daily charts with oscillators of varying periods on this site.

If you look at the big picture, all the trends, and all the oscillators, you'll begin to develop a sense of the market's phase, from major trend, to day-to- day. You'll begin to have a sense of calm, peace and equanimity about all the market noise.

Of course, you'll probably still lose your shirt, but it feels so much better when you know you're right.

The discussion then continued here with Doc adding the following:

"Like I said, all those indicators are relative to the trend. Focus on the trend. Look at the big picture. I saw all these indicators turn up. I ignored them because the trend is down. 

We can't judge whether such a strategy is right or wrong for maybe six months. An analyst may look real stooopid on a day to day basis, but when you look back from a perspective of six months hence, he doesn't look so stooopid. Which is why I leave every word I've ever written (except for a few I accidentally erased) posted on this website. It's the only way we'll ever know if Dr. Stool knows what he thinks he knows. Now that may really be stoopid!

It strikes me that drawing long straight lines on a chart is not that difficult to do. Why is it that analcysts have so much trouble looking at long term charts and seeing that all major, and I stress "major" indices, yes even the Dow, are in major trend downtrends. I mean, what is so goldanged difficult about that?

I must be an idiot, or delusional, if I'm seeing this and almost no one else does. You know, 30 years ago Joe Granville was screaming about the fact that the indicators that work in a bull market, don't work in a bear market. This is not news. This happens in every epoch when the preceding bubble comes to an end. It is simply unbelievable that these supposed professionals are scratching their heads. No one bothers to learn about the past. No one bothers to learn that there's nothing, NOTHING, new here.

Bear markets follow bubbles. And they don't end in a year. They go on for years and years, until all the dumb money is flushed out of the market. The market giveth, the market taketh away. The next bottom will only come when no one gives a damn anymore. When the market finally bottomed at the end of 74, after a bull market that essentially ended in 1965, no one believed it, and no one gave a crap. Newsweek was touting the Death of Equities. Just prior to the onset, and over the course of that bear market, the Dow traded mostly between 800 and 1,000 for ten years, TEN YEARS.

The portfolio sphincters then did the exact same thing they are doing now. They sought safe haven in the Dow. It didn't crack until the very end. It started down in 73, and got destroyed in 74. And the "nifty fifty", the one decision stocks, the IBM's, Xeroxes, Polaroids, Digital Equipments, Sperry's, Burroughs's, Avons, McDonalds were decimated. Most of those guys are now gone. Polaroid and Xerox are now in their death throes. The only ones still standing are IBM and MCD and a few others whose names escape me, they are so important.

Then it took another 8 years of base building before things really heated up again, with a whole new set of leaders, which turned into today's big cap, big PE stocks. The cycle started anew, and it is ending now just as it did then.

I hear and feel and remember the echoes of that time. Like Yogi said. It's deja vu all over again.

Thank you all for inspiring me to keep on keepin on.

Send money!

Yes We Have No Inflation - To The Tune of Yes We Have No Bananas  (7/19/01) By Dr. Stepan N. Stool, Chief of Stock Proctology  

Don't you love it when you get one of those dumb songs in your head and you can't stop humming it, and hearing it, and playing it in your mind all day. 

So now! Everyone! All together now! Sing with your champagne music director, Dr. Stool!

Ohhhhhhhhhh

YES!

We have no inflation

We have no inflation today!

HEY!

Now, Dr. Stool knows what you're thinking. You're thinking, that sly Doc, he's leading up to something. I wonder what it could be.

Well here it is.

Last 12 months increase? 3.9%

Ohhhhhhhhhh

YES!

We have no inflation

We have no inflation today!

HEY!

Who do these guys think they're kidding?

In The Eye of the Cyclops(7/18/01)  
By Dr. Stepan N. Stool, Chief of Stock Proctology  

Dr. Stool doesn't have much to say about FBI* Director Greenspew, except that it seems he is inflating us into oblivion. Doc doesn't care about earnings, although they do stink. He doesn't care nor does he know when the economic recovery will be. The portfolio sphincters prove day in and day out that they certainly don't have a clue either, although they keep pretending and lying to try and make you think they do. Doc doesn't care about these things because they are funny mentals, and we let other people handle that over on the Stool Pigeons Wire.

Dr. Stool is really only interested in the proctology of the market. Stock proctology has two parts. The first, and most important part, is the direction of stock prices over some time frame that makes sense, not this 5 minute stuff, or this "over the long haul" 50 year bullshit. In that case it depends on

which 50 years you're talking about. Besides which, over the long haul you all know where we are headed. 

Not to mention the fact that they don't count the stocks that go to zero and are forgotten. Dr. Stool guesses that a helluva lot more money has been lost in stocks that went bust and disappeared in the last fifty years, than in all of the stocks that stuck around for fifty years. Of course they leave that money out of their phony ass long term growth numbers. (The 100 year nominal compound growth rate of the Dow is really 5.16% excluding dividends, transaction costs and taxes. Buy muni's!) But that's bedsides the point. The point is that it has to be a time frame that makes sense.  

Here on Stool Street, that's from a week or so, out to no more than a year. These pooditas that say buy them now because they'll be much higher two or three years from now are the biggest bunch of jackasses on the face of the earth. They were saying the same damn thing in 1998 and 1999. Forecasting what a particular stock will do over two or three years is fraud. And watch out for the ones who use a one year time frame. They're the ones who look like geniuses in a bull market, you know who they are. But when the real world comes around, like now, their permanently bullish forecasts are also revealed for the frauds they are. 

Which brings us to the second part of stock proctology. That is the psychology of the portfolio sphincters, market analcysts and pooditas. Certainly the direction of prices is the most important part of the equation. Hell, what else matters? But this part, the psych, is definitely the most fun.

Investors Intelligence reported today that the investment advisory services are 52% bullish and 23% bearish. That's the lowest level of bearishness in six years. Doc knows why they are bullish. Because they saw higher lows, and lots of little short term buy signals a week or so ago. So they are all fully invested. But they are ignoring the big picture. If you are not looking at longer term charts going back at least three years, you simply aren't going to see that the Sphincters Index and the Nasty are sill firmly in the grips of a bearish major trend, and that the Dowager appears to be in the biggest distributional top pattern since the late 1960's, stuck beneath a flattening 24 month moving average. So they focus on the short term signals, after that pimple pop of a rally last week, and turn wildly bullish at exactly the wrong time.

Watching the analcysts on the tube is another story. The would-be reporters on Caint Nobody Buy Channel are starting to see the whites of the analcysts eyes and are getting a little more aggressive with their questioning. The analcysts are reduced to repeating the same mindless platitude excuses for why they are buying now, over and over again. Why doesn't anyone ask them how much money they've lost in the last year, the last two years? The reason is they'd lie about it anyway. 

The thing is, the analcysts know that everybody is laughing at them now, and they all look like deer caught in the headlights as they spew their transparent lies and excuses into the cycloptic eye of the camera lens. You now know that they don't have any idea what they are talking about and they know that you know. It is a disgusting spectacle. 

*FBI-Financial Bubble Inc.

Testing Our Patience (7/17/01)  
By Dr. Stepan N. Stool, Chief of Stock Proctology (7/17/01) - One thing both bulls and bears can agree on is that this market has been frustrating. Sheesh, would you make up your damn mind already!  A lot of short term indicators have looked bullish for a few days (a fakeout for sure). On the other hand, the major downtrend is intact, as are the intermediate downtrends, but only by the skin of their teeth. Yecch. It's certainly driving us bears nuts, and the bulls are living on a diet of Exlax and Imodium. They can't possibly be feeling too comfortable now.

Dr. Stool's theory has been that when earnings announcements came, investors would sell the news. But the portfolio sphincters have been playing this dumbass game of buying if the stock "makes the number." When exactly did this crap start. When Dr. Stool got into this game there was no such thing. Earnings were either up, or they were down. Up was good and down was bad. Now it's, up is good and down is good too, because we knew it would be down anyway. In other words, heads I win, tails you lose. This business about the bad news already being discounted is an unmitigated

bunch of crap. Dr. Stool knows a lot of you folks are newcomers to these parts and he hopes you stick around. But even if you don't, you need to understand that this idea about stock prices discounting the future is total malarkey. Think about it. Who's doing the discounting? Right, the portfolio sphincters, geniuses in a bubble, now trying to predict the future in a world where reality keeps rearing its ugly head. And you know where they're pulling their "discounting" from. 

So now for your listening pleasure, Dr. Stool will tell you an old bedtime story about stock market discounting, which he hasn't told for a few months, but is a favorite of kids the world over. 

And tomorrow we'll see where the wild hot money liquidity flows take us in this market. Because that's what it's really all about.

Rare Chart Pattern Sighted
By Dr. Stepan N. Stool, Chief of Stock Proctology (7/16/01) 
Dr. Stool spotted one of the rarest of all chart patterns yesterday. Read about it here.  

Stool Returns (7/16/01) Now that the market has once again shown its true ugly face, Dr. Stool is feeling much better. He was wearing those QQQueer shorts last week, when he got his.. ah you know. 

One of the dangers of being married to a long term trend, while trading the short term ones, is that you can get hurt, and end up in the hospital like Dr. Stool. There were some pretty clear buy signals on the intradays Thursday, but Doc ignored 'em because he saw no way those signals could develop into anything troublesome. Think again. One of the rules of stock proctology is that if you're gonna trade, develop a good mechanical system, trade in the direction of the trend, of course, and follow the damn signals, you idiot. (Dr. Stool to himself.) It's easy to be a good analyst, but not so easy to be a good trader, especially if you're stubborn.

Enough moralizing. The pullback came just in the nick of time for us bears. That linear regression study that Bernie did on the Nasdaq presented a helluva picture, what with the 70th day thing at the top of the channel and all that. (If you missed it yesterday, make sure to read the commentary here.) It sure looks like history is repeating. If it is, it's also right on schedule from the standpoint of near term cyclicality. Dr. Stool's been telling  you for a couple months that the 10-11 week cycle would be due to get in gear to the downside with the descending 4-5 month cycle and the major trend sometime after mid July, and that things should accelerate to the downside for 4-6 weeks thereafter. 

Ladies and gentlemen, and stooligans everywhere, your moment of truth has arrived.

Stool Speaks From Hospital

by Bernie Butts, editorial asst. to Dr. Stool

Yesterday, I watched the telecast of the Running of the Bulls from Pamplona, Spain, on ESPN2. They treated it like a sports event, tallying the number of injuries and gorings, showing slow mo instant replays.

Uh....

I suppose you're thinking that I'm going to relate that to the stock market in some way. 

In other news, I visited Dr. Stool in the hospital, where, as you know, his ass is in a sling, on account of the market rally. I brought him a laptop computer, to show him all the support you've given him on the message board, and to give him the opportunity to say thanks. Here now, are his words. (As you can imagine, it's a little difficult to write on a laptop when your ass is in a sling.)

My fellow Stooligans,

Monday, July 16, 2001, the irresistible force will meet the immovable object. The unprecedented, irresponsible inflatulence of the Farteral Reserve, led by FBI* Director Algae Greenspew, has caused the M-3 money supply to grow at an annual rate of 15% for the last 36 weeks. This irresistible force will now meet the 

immovable object: the bear market,  the downtrend in the value of equities, the shrinking of swollen portfolios in the hands of the herd running portfolio sphincters, not to mention a worldwide financial crisis.

Yes we have come to a fork in the road . When you come to a fork in the road, take it.  We have nothing to fear but fear itself. The trend is your friend. Don't try to catch falling knives. Don't fight the Fed, and most important, don't fight the tape. Always keep these Wall Street truisms in mind as you approach this day. Let the wisdom of the pooditas and analcysts be your guide.

Dr. Stool will take leave of you now, but asks you these two questions. When in the course of human events, has the market bottomed with Investors Intelligence advisory sentiment at 51% bullish and 25% bearish? When has the market bottomed with PE ratios at 23, not to mention the Nasdaq at infinity? When has the market bottomed in the middle of a four year cycle? Four score and seven years ago?

The drugs Dr. Stool is taking for this pain in the ass market, are making Dr. Stool drowsy now. Thank you all for your good wishes. Thank you BARE and yobob, and Horny, and Mathbear, and zhung, and asdf, and sierra, and you jamesbond, you asskisser, and even you airedale, you pain in the ass, for keeping things going on the Stool Pigeons Wire in my abscess. 

And thank you, especially, my loyal asst. Bernie Butts, for the wonderful chart analysis you did on the SPX and Nasdaq.

I shall return.

Yours in bear fellowship,

Dr. Stepan N. Stool
Chief of Stock Proctology

*Financial Bubble Inc.

Market Collapse Cancelled -- Lack of Interest cited by Visiting Clinical Professor of Funny Mentals yobob1 DSP. 

Noland Proclaims Crisis Upon US (7/15/01)
Doug Noland, author of the Credit Bubble Bulletin says the crisis is here. 

Argentina drifted into financial meltdown this week, with government bond yields surging to 36%, up from 13% just one month ago. Argentina’s borrowing costs now surpass those paid by Nigeria and Russia. Overnight peso borrowing rates surged to 400%, while the Argentine stock market has lost 18% of its value so far this month. In neighboring Brazil, the currency sank another 5% this week, as yields rose above 15%. The Mexican peso dropped about 2% this week, while the Bolsa stock index slid 4%. The JP Morgan Emerging Market Bond Spread Index widened 153 basis points this week to 962, the widest spreads since 1998. Spreads have widened significantly in perceived risky credits, including the Philippines, Malaysia, Russia, Ecuador and Turkey.

Nothing like global financial crisis to excite U.S. equity players. ...

Read the rest of the article!  It's long. Print it out so you can read it on the throne.

BIG THANKS TO FLECK! (7/14/01)

William (King of Bears) Fleckenstein came to Capitalstool's rescue Thursday Night, with Dr. Stool in the hospital in traction. 

Dr. Stool's Ass Is In Sling - Editorial Staff Worked Overtime To Prepare Updates  
By Bernie Butts, Editorial Asst. to Dr. Stool. 
Dr. Stepan N. Stool, Capitalstool's Chief of Stock Proctology, is in the hospital following the big two day melt-up. His ass is in a sling. Get well soon Dr. Stool.

The editorial staff has worked hard to get the updates finished for the market averages. We extend our sincere thanks to Bill Fleckenstein for coming to Capitalstool's rescue at the last minute, sending us his Market Rap, published by Grant's Investor. You can subscribe to the Rap there.  We'll leave Fleck's column up for most of the day Saturday. Capitalstool's regular columns will also return Saturday. And Now, the Rap.

The Market Rap 
William A. Fleckenstein 
06:40 PM 07|12|2001

'Hi, I'm From Corporate America, And I'm Here To Fleece You!'

. . . and if you're dumb enough to believe everything corporate America tells you, you deserve it. In keeping with that, a reader sent me an e-mail regarding a New York Times story mentioned in the Rap a few days ago. The story quoted a pilot as saying, "You could be stupid in the last 10 years and make a lot of money. . . . Now you've got to buckle down and start learning all overagain." The reader said, "I have my own expression for this phenomenon: 'There are a lot of Forrest Gumps out there who think they're Warren Buffett.' Welcome to the era where stupid is as stupid does, and stupid pays."

Microsoft Able To Leap Tall Windows In A Single Rebound I realize I've started off the rap with a bit of editorializing, but every now and then it's required, given the absolute insanity, stupidity, dishonesty and just plain skullduggery that goes on these days. Everyone now knows about Microsoft's announcement and the fireworks it caused after yesterday's close. Our futures and the Asian markets were boosted all night long. That said, I cannot believe how utterly bogus this 'press release' was. First of all, revenues were hardly above their expectations: $100 million plus or minus on $6.5 billion worth of revenues is hardly newsworthy, especially when you're already 11 days into the new quarter and just a few days shy of making your announcement.

Obviously, the big news was a gigantic write-off, but that, too, didn't require announcing last night. I'm not exactly sure what the motives of the Microsoft Corporation were, other than to try to generate a lot of hype. Basically, what the company had to say was a cross between a nonevent and negative news. Given the state of growth in the PC industry, for Microsoft to say that its business is sound is being too clever by half. The likely reason why the revenues were slightly better is that there's a bit of a mad scramble among those people that are going to buy Microsoft software to grab Office 2000 licenses while the grabbing is good, due to a change in Microsoft's license policy that takes effect in October. As for the XP product, every prospective buyer from corporate America that I know has told me what common sense would tell you. It's DOA. Nobody wants it or needs it, any more than they wanted Windows 2000 last year. New boxes will come with it, but it's not like anyone is dying to have it.

On the subject of disingenuousness, I found it very interesting yesterday that Microsoft will now permit you to strip the browser out of the new upcoming XP operating system, but before Netscape had been killed and buried, it claimed that was an impossibility. I also find it interesting that Microsoft is taking a little page out of the playbook that Intel developed so well. Last year, Microsoft was more than willing to include investment income as part of the income, but now when it must take a gargantuan write-off for bone-headed moves in the mania, Microsoft wants us to say, Oh, don't pay attention to that, that doesn't count. Just another example of a damaging symbiosis: corporate America playing the investment public for suckers and (judging from today's action) the investment public being all too willing to be played as a sucker. In any case, those are a few facts beneath the headlines.

As long as we're on that subject, let's talk about the information that was released last night, as opposed to the spin that was heaped upon us today by the press, most notably Bubblevision. Semiconductor equipment supplier Advanced Energy Systems (AEIS) announced worse than expected results. Interestingly, management said, "We do not have evidence from our customer base that there will be any significant change in orders over the balance of 2001." That was not good news.

Not Even A Boomlet In The Oven Motorola's results were horrific -- semiconductor revenues down 38% sequentially, orders down 51% -- and yet you could have wiped sugary pablum from the press release, which mentioned that the phone business was showing recovery, phone and phone/semiconductor inventories being reduced, bla, bla, bla. It's the same old story. We're supposed to extrapolate a boom from the fact that things are not as horrific as they were. Tell that to Atmel (ATML), a semiconductor company in the flash memory business. It preannounced disastrous results for the second time this quarter. Also, we heard from GE this morning. Its revenues were down year-over-year for the first time in about a decade.

The Aye's Of The Blind STM Microelectronics (STM) preannounced during the night. The head of that company said this was "the deepest and most abrupt slowdown" he had seen in his career. He also said, "Whether veterans or newcomers, no one anticipated the slowdown. . . . Executives have zero outlook on the sector -- that's a situation we've never seen before." But that did not stop him from following up his comments with "in essence, we believe the industry will bottom out in the third quarter." My comment is (a) Some of us did see it, so it wasn't that hard if one wasn't busy imbibing adulterated Kool-Aid; and (b) How can these executives get away with saying they have no visibility but they think it's the bottom?

Surplus Of Bad News Also this morning, the unemployment claims number was released, up 47,000. Not that I focus my attention much on this "noisy indicator," but the masses have decided to focus on it, and it was obviously not good news. Finally, as long as we're on the subject of bad news, we might note that the Congressional Budget Office (CBO) this morning released its estimate of the June surplus, which is about 45% below last year. The budget is just another fantasy that will fall apart as the recession deepens and spreads later this year.

It is a testament to the high level of unadulterated BS that today people swept away a compendium of potentially devastating news in order to fawn over Microsoft's "good" news. As everyone knows, the Rap does not sweep away bad news. Today, I pushed it to the front, the better to show how desperate people are and what they try to get away with. Pardon me if I'm yelling a little too loudly, but I am completely disgusted, and you should be, too.

Returning To The Casino Turning to the market action, as one might have expected, there was an explosion on the opening. That was followed by a further grinding higher. After about an hour into the day, the market decided to take a bit of a breather and backed off. At the early-morning high, the Nasdaq 100 was up a little better than 4%. The Nasdaq itself was up between 3% and 4%. The S&P was up just under 2%. The Dow was up about 1 1/2%. Yes, of course the Sox was the leader, up about 6%. The bank stock index was up a couple of percent. Kinky stocks were flying. The only fly in the ointment was the biotechs and drug stocks. They really weren't partying too heavily.

A Day Of Madcap Speculation After the blast in the early going, the market backed off and went sideways before taking off again midday to stage a launch that basically took us into the close. The markets closed pretty near the highs of the day, so the box score stats you see are just about the best levels we attained. There's no particular point in going into detail. It was a day of madcap speculation. The more kooky the idea, the better it did. The kinkies went wild, as did the semiconductor stocks, as you can see by the Sox's performance. It is just stunning to see how much more expensive these stocks are now than they were before the last blast of semiconductor stocks during the mania in 1999. Altera (ALTR), to pick one semiconductor company, was up just under 15% today. It sells at about 90 times next year's numbers. It has about a year of inventory on its books. It sells at about 12 times revenues. This is just one of literally hundreds of examples.

Don't Peso Good Part of the battle cry and the good feeling today is that Wall Street has decided that the troubles in Argentina (which we have not chronicled here due to their chronicling elsewhere) were deemed to be solved. So, the brokerage firms and banks all got a bid. There was a rumor that Morgan Stanley would be acquired by Bank One (ONE). These debt crises have a tendency to get away from you. I remember when the Thai Baht was devalued, and people thought that was a nonevent. So, it's easy to dismiss these events, but that is not necessarily the right thing to do. Condoleeza Rice, the national security advisor, was on the tape saying she was "watching [the] Argentina situation closely." Suffice to say, Argentina and South America are a mess. That's just one more problem for the bank sector, but not today, since, to repeat, it was deemed to be solved.

Away from stocks, fixed income was higher. The metals were mixed, with gold down about a percent. Oil dropped $0.30. The dollar had a little bit of a bounce, with the yen and the euro lower.

Dear Bill, Part One I wanted to pass along a couple of interesting reader e-mails. One has to do with nonsense about inventory correction. It deals with American Power Conversion Devices (APCC), a company that we talked about the other day when it preannounced. I said it was a very good barometer of the health of the PC business. As you read the following e-mail, you'll see how bad the PC business must be if the inventory in the power supply business is as egregious as this example shows, especially given the fact that the reader is in California, where demand should be extra good:

Your Slip Is Showing "I recently purchased four pieces of equipment made by APC for my computers. All of the items are mainstream, business-oriented UPSs and power conditioners. Should be pretty high-volume stuff, right? Every single piece of equipment had a quality control slip inserted in the plastic wrap to verify that it had been tested. Guess what the handwritten date was on each piece? May 2000 or earlier. Even a pretty solid tech company with not-horrendous fundamentals and great demand (can you say 'California blackouts'?) is up to its eyeballs in inventory. I bought the equipment from a high-volume supplier (NECX Direct, part of Gateway), so I doubt that they have been holding it in inventory for the past year. Inventory correction my ass!"

Dear Bill, Part Two The second e-mail, by a reader who works for an unnamed Fortune 500 company, discusses corporate America's love of fiction, of talking about how the worst is over and then laying people off left, right and center. The reader's job is to hire and fire. His thoughts are most illuminating:

Forked Tongue Incorporated "I work for a Fortune 500 company and do some recruiting and hiring. One thing that strikes me as rather odd is the steady stream of layoffs combined with claims of a second-half pick-up in business. As you might imagine, letting people go is expensive, and hiring people is also very expensive. Some of the costs include severance, occasional lawsuits, and loss of investment in that worker (training). When you hire someone, you have a number of costs: relocation, administrative, benefits, and training. I estimate that it costs at least a year's salary to hire someone (on top of the actual salary). Firing someone might cost as much (if you count your lost investment). So, conservatively, if you expect demand to pick up in the second half, and you go and fire someone now -- expecting to add back someone later this year -- it makes no sense. I'd keep them on, washing dishes or something for six months. This all seems to smell badly. I don't think any sound business expects to need people for quite a while. The second-half demand story is just that."

So, you can see clearly how disingenuous it is for management to say they think they see the bottom in the next few months and yet lay people off.

Mighty Layoffs Grow From Little Dribbling As long as we're talking about layoffs and being somewhat challenged when it comes to being completely honest, IBM has made no big layoff announcements, but word comes from the Communication Workers of America about stealth layoffs in various sectors at IBM. The union feels the layoffs should be formally announced, yet they just keep dribbling out from IBM. It makes you wonder how great things are at IBM. Just another wonderful company, as we've chronicled so often.

Micron Follies Lastly, to show how gullible everyone is, we have made no secret of our distaste for the price of Micron Technologies and the antics of the IR department there. Today, Micron filed to sell an offer of $450 million worth of warrants. I would like to point out that this is potentially one of the most dubious pieces of paper I have ever seen. It is the functional equivalent of Internet wampum from the last speculative go-round. It is a testimony to people's incredible willingness to speculate, I'm assuming, mostly with other people's money, judging by the terms I have heard for this deal. I don't want to state them all as fact. I have not seen a document yet. But this is a piece of paper that sounds like it will be precluded from trading on a regular basis due to certain restrictions.

$450 million? We'll Lose More Than That This Quarter It will be interesting to see what kind of disclosure is in the document that the company is releasing, how truthful it will choose to be about the state of its business. Buying Micron at these prices with the warrants would be like buying a gold producer that was bleeding if gold was $150 instead of $260, and the stock price of the gold company was about three times higher than it is now. I guess it would be a little bit like buying warrants on Newmont Mining, if Newmont Mining was trading for about $50 instead of $19, and the price of gold was the aforementioned $150. Absolutely crazy, but looking at the ability to finance a company like Micron right here and now, and looking at corporate America's ability to sell stock options hand over fist while laying people off while blowing smoke about how things are about to get better makes it clear why corporate America does what it does. There's absolutely no penalty for making stuff up and, in fact, it is quite profitable. Look no further for why they do it. Everything that's going on now points to a top, not a bottom. People that talk about this being a bottom are absolutely clueless.

Reprinted by permission. Copyright Grant's Investor Inc.

Disclaimer: William Fleckenstein periodically publishes columns expressing his personal views regarding particular securities, securities market conditions, and personal and institutional investing in general, as well as related subjects.

Mr. Fleckenstein is the president of Fleckenstein Capital, which manages a hedge fund in Seattle, Washington. This fund regularly buys, sells, or holds securities that are the subject of his columns, or options with respect to those securities, and regularly holds positions in such securities or options as of the date those columns are published. In particular, this fund regularly holds short positions in such securities as of the date those columns are published. The views and opinions expressed in Mr. Fleckenstein's columns are not intended to constitute a description of the securities bought, sold, or held by the fund. The views and opinions expressed in Mr. Fleckenstein's columns are also not an indication of any intention to buy, sell, or hold any security on behalf of the fund, and investment decisions made on behalf of the fund may change at any time and for any reason. Mr. Fleckenstein's columns are not intended to constitute investment advice or a recommendation to buy, sell, or hold any security.

The views and opinions expressed in Mr. Fleckenstein's columns are his alone and not those of Grant's Investor. Grant's Investor disclaims all responsibility for Mr. Fleckenstein's views and opinions.

May We Have Your Attention Please, Please Remain Calm, There Is Nothing To Fear (7/11/01) Ohmagod, everybody's going crazy. Would you all please just calm down. A little news from the world's biggest freaking criminal organization, and you'd think Elvis just got back, or somethin'. 

This is a big so what, a big phony so what. So Bill's goosin' things a little, and all the shorts with their first nickel of profit in a couple of months go crazy and buy all at once, thereby wiping out the nickel and igniting a stampede. What a bunch of wussies! 

Is Dr. Stool guilty of being unable to suspend disbelief at the bottom? If so, then so be it. But Dr. Stool knows bottoms. Bottoms are a friend of mine. And believe me, this ain't no bottom.

Now Dr. Stool can be as bombastic as the biggest jackasses out there, including Fat Bastard, and Applegate Scandal. So here's his prediction, (for what it ain't worth). The high of the day will be on the opening, with a retest for lunch, and the lows taken out by the close. Should be fun. By September: Dow 7500, Nasty 1500, Sphincters Index 1000.

And if they break out above the morning high, don't expect to see Dr. Stool here tomorrow, no sir!

They Just Don't Get It (7/10/01) This business about Mohel Lynch (Oy, do we got a tip for you!) not allowing its analcysts to own the stocks they cover, just goes to show how totally corrupt, sneaky, and disingenuous this stinking industry is. You sensitive folks out there skip this next sentence. This is total horseshit. Can you imagine that these guys were allowed to personally own the stocks they were touting to millions of investors on national television all these years, and no one, NO ONE, in the industry ever questioned it till now? Wall Street is a cesspool. Always has been, always will be. And don't you ever forget it.

Aside from that, Mohel's move misses the point completely. The real point is that the brokerage house itself owns the stock it's analcysts are touting. The Mohel Lynch Mob, for instance, makes a market in 873 Nasdaq stocks. 873! And that's just Nasdaq. They have an enormous trading department. They pay millions to their best traders to make markets in stocks, to you the customer.

So they're loading up on inventory knowing that their shill is scheduled to be on the tube at 10 AM Monday. They load up on the stock, pump it, and dump it. Now there's nothing wrong with these guys marketing stocks. That's they're business. It's that they hide the fact that they are retailing the stock to you that they are recommending. The analcysts are just salesmen selling their stocks, not impartial professionals trying to make money for their customers. You, dear "investor", are not the broker's client. You are the customer, the mark, the sucker. The client is the brokerage firm itself. They simply want your money!

Very, very few investors get it. Tonight, as Dr. Stool is sometimes wont to do while driving home from his "day job," he flipped on the local business radio channel to get a few laughs. It was a call-in show, and it was beyond pathetic. One caller after another had questions about this or that tech stock. You know the names. Disasters, all of them. Then one guy calls and asks the radio shill his opinion on, are you sitting down, Xerox and Polaroid. Dr. Stool almost spit out his false teeth. He thought he was in a time warp. All of a sudden it was 1973 again, and there he was driving an old  Studebaker.

My mind drifts back to those times and to names like Polaroid and Xerox, and Digital and Burroughs and Sperry Rand, and Data General and Commodore, and Bowmar Instruments, and I think again, these stocks today, the Broadvisions and Broadcoms, the Microns and the Junipers, the JDSU's and the Lucents and godamitey maybe even AT&T are... 

never... coming... back.

The poodits and analcysts are looking for a recovery in tech earnings, out there. But there is no recovery. There will be no recovery. What you see now in tech is a return to normal from a six year long bubble economy. The growth rates of that period were what was Abby normal, based on a phony industry, phony assumptions, a giant pyramid scheme that finally collapsed. The fixed capital investment was multiples of what was actually needed to sustain "normal" growth. Those empty factories, and all that excess fiber optic capacity, and all that capital equipment, and that ocean of inventory, will never be needed. And it still has to be paid for. A whole bunch of companies are going broke, and are gonna go broke, and the ones that survive will be a lot smaller and a lot less profitable than anybody thought, for years and years to come.

The worst of the bear market is yet to come.

Crock Pot Beef (7/9/01) The market stepped back from the abyss Monday, helped along by a closely held cable company's publicly presented offer to buy AT&T Broadband. What a sideshow. Bet Michael Armstrong is really squirming now. There's another guy who deserves it. Just a few years ago this was the biggest and one of the most profitable companies in the world. Now its a shambles. The stench of rot emanates from the head. But that's another story.

So the market pulled up a bit. Portfolio sphincters did their bottom picking, and the more nervous shorts (ahem, ahem) did some short covering. A 13 day cycle low was due, and that may have been it, but there are still unmet price projections a percent or two below current levels. If the market does sell off Tuesday, Dr. Stool intends to sit on his hands, rather than chase his shorts right now. Cyclically, there's a little upside risk for maybe a week or two, and you can't lose money on the sidelines.  

So let's let the market stew in the crock pot for a few days. The meat should be ready for bear eating next week. 

Wall Street's Latest Scandal- Applegate (7/7/01) Watching an MSNBC news special on the history of Satan and Satanism the other night, Dr. Stool's thoughts turned to Jeffrey Applegate, Chief Market Strategist at Lehman Brothers. Dr. Stool had seen Mark the Shark Haines interview Applegate a few days earlier on Caint Nobody Buy Channel. The occasion was the announcement of  Lehman's 10 Uncommon Value picks for 2001-2. Evidently this is an annual event, and it's quite a big deal to the portfolio sphincters. 

Shark says to Applegate, "So how ya doon - not too good I guess, since your 2000 picks dropped 47%, huh?" Seems eight of the ten were tech stocks. 

Applegate glares into the camera, horns clearly visible, and says, "I'm doon jus fine." But his eyes, they was sayin', "I'm gonna break your legs, you mothahumpa s.o.b."

So then Shark says "So what the hell went wrong, you jackass?" On national TV yet, can you imagine? Or at least that's what Dr. Stool thought he said. Something about the smirk as the words came dripping out of the left side of the Shark's mouth.

So Applegate says, "Aaay, ya know it wasn't my fault. Nobody coulda seen what was gonna happen. Everybody else got it wrong too. They wuz good picks, and they's still good picks, and we stand by 'em, 'cause we wasn't wrong, and nobody else got it right." 

Now that's what I like, a stand-up guy who takes responsibility for being a freakin' jackass. But before we get into this turd's track record, let's just set the record straight on one thing. There most assuredly were people who got it right, big people, Wall Street Big Shots, not just the permabear crazies like Dr. Stool, and Fleck and Crash Lewis, and David Tice. Here are five:

• Byron Wien- Chief Market Strategerist, Mooogan Stoogely

• Barton Biggs- Just Barton Biggs, Mooogan Stoogely

• Doug Cliggott- Chief Strategerist, JP Mooogan

• Richard McCabe- Chief Somethin or Other - Mohel Lynch (Pronounced Moil as in Oy, do we got a tip for you)

• Richard Bernstein- Chief Quantitative Strategerist - Mohel Lynch (Oy do we got tips)

• Robert Farrell - Senior Chief of Technical Blah Blah (and one of Dr. Stool's long time heroes)- Mohel Lynch.

Like I said, five.

Now here's the thing. These guys are famous dudes. They get quoted in the Joinal every freaking week. They get their faces on the cover of Barrons. Wien and Biggs and McCabe and Farrell, they been around for five or six hundred years, and everybody on the Street knows them. 

And they were bears on tech. Both before and after Applegate's picks. So if you're going to lie, you creep, at least make it believable.

Here's a brief compendium of what the five wise men had to say for the six months prior to Applegate's picks. Six months, that should have given him adequate notice, right? 

1/2/00 - Byron Wien says tech will have problems as the market wakes up on valuations.

1/4/00- Wien thinks that new valuations on companies are a little outrageous

3/24/00 - Barton Biggs doesn't think investors should be heavily weighted in stocks, should be more in fixed income. He is hard pressed to find internet companies or techs among his top picks

3/30/00 - Biggs says that things are very scary; he doesn't see much opportunity; says eventually we'll have a succession of failed rallies and public will give up.

4/5/00 - Wien thinks valuations are too high, especially in tech. Advises underweighting.

4/9/00- Doug Cliggott says tech prices are too steep.

4/10/00 Richard McCabe says last week's Nasdaq sell-off was not "a brief, random event, but the beginning of a longer lasting change. The storms that have swept through the stock market in recent days have driven home this point." The technology sector has begun an important corrective trend." He told investors to reduce their tech holdings.

4/11/00 - Richard Bernstein says everyone is loaded in one sector and they consider NASDAQ as The market; this is a mistake, NASDAQ is one sector of the market, and people should diversify.

4/13/00 McCabe says the days of everything going up in technology are over for many years to come.

4/27/00 Wien expects 25% market drop, with tech possibly breaking the November lows, i.e. below 3000 on Nasdaq. (at 3774 at the time) He called for the SPX at 1300. It was 1465 then.

5/4/00 Biggs says we are in the early stages of a gradual leadership change away from tech to value. He says, tech has finally cracked, and big cap tech stocks will suffer in the final stages of a bear market in the tech sector.

5/5/00 Wien says Dow will go below 10,000 and Nasdaq will go below 3000. He says there's further damage in store before we are out of the woods. He points out there are a number of good tech companies without earnings that are still vulnerable and that there are a number of technology stocks with earnings that are still overvalued, citing that many are at over 100 times earnings.

5/11/00 Cliggott cuts tech weighting from 27% to 20%

5/24/00 Cliggott says tech is still overvalued, pointing out Nasdaq is still at 100 times earnings.

5/25/00 Cliggott says the rally in Nasdaq is not sustainable. He expects, over the next 6-9 months, the likelihood of an unattractive combination of higher inflation rates, rising interest rates, and slowing corporate earnings, with recession not a zero possibility. He says there's tremendous optimism among investors about long term growth from tech companies, however, due to vicious competition, reality is this growth is only in spurts.

6/20/00 Biggs doesn't believe the Federal Reserve will be able to engineer a "soft" landing for the economy. He says it has had too long a boom and there are too many excesses for a soft landing to be possible.

6/13/00 Bob Farrell calls the Nasdaq rally a bear market rally.

6/14/00 Farrell says that historically, long periods of correction have followed major concentration in sectors with huge inflows of money at high prices. He says that the peak in the first quarter was a major peak, to be followed by a corrective process. He forecasts a summer recovery, then more fundamental decline that can last several months or even years.

6/22/00 McCabe tells investors to stay away from the wild tech group that the market was fascinated with in earlier months.

6/24/00 In Barrons mid year round table, Biggs sees a "significant institutional bubble" in the Nasdaq, particularly in the areas of Internet infrastructure and wireless-telecom. He expects a significant shift from growth to value investing.

8/8/00 Richard Bernstein warns that he remains bearish on technology. He warned that U.S. firms with high foreign exchange exposure were starting to underperform, adding that these were mainly technology companies.

Now ladies and gentlemen, that's six very famous guys, with three of the most famous brokerage houses in the world, who were widely quoted in the financial media 21 times telling people to GET THE "F..." OUT of Tech, before, and just after, the announcement of Lehman's 10 uncommon values. Needless to say, the drumbeat went on continuously in the second half, and thereafter, with a growing chorus of converts. Applegate claims that no one got it right. Maybe he didn't hear the wise men. Maybe  he did, and wants you to think that you didn't. So now let's look at his record. 

Click here to see the rest of the story on Applegate's record. Go for it!

Mid Year Forecast  (7/5/01) Dr. Stool is back from his little holiday, and sees that the market has performed quite according to plan. The major averages all suffered little breakdowns, confirming that not only the 13 day cycle has turned down, but also, the 4 week, 6-7 week and 10-11 week cycles, after very brief and weak up phases. This bodes well for the July-August collapse scenario that the cycle picture has been suggesting. First, however, we'll get a little bounce off the 13 day cycle low due Monday or Tuesday that should correspond with a sub 2000 Nasty, a sub 1200 Portfolio Sphincters Index (SPX), and maybe a 10,000 Dow.

Dr. Stool will now even go so far as to give some very early downside projections for intermediate lows out there in the August-September time frame. We are looking at a test of the old low on the Dowager. The Nasty is headed for 1520. The SPX is too early to call, but if the Dow and Nasty are going to be at those levels, then the Sphincters should have a bottom break out. 

Dr. Stool will also go out on a limb and now forecast bear market low in March-April of 2002 at Nasty- 500, Sphincter Index - 900. Dowager? Who the hell knows? Worse, who cares?

CaveYet Emptor?  (7/2/01) It's official. CBS.Markethype headlined its lead column Monday morning with the proclamation,  "Economic Indicators Flash Buy Signals." Now that we know, Dr. Stool supposes that all bears can pack their bags and go back to their dens. And the rest of you gamblers and gunslingers can go safely buy all the stocks you want. 

While you're on the way to placing your buy orders, Dr. Stool just wants you to think about this. Since when does the economy have anything to do with stock prices? Since when do earnings have anything to do with stock prices? Since when do interest rates have anything to do with stock prices? Since when does sentiment have anything to do with stock prices?

Since NEVER. 

There is only one thing that has anything to do with stock prices and that is the trend. What governs the trend? Cycles. What governs cycles. Supply and demand. What governs supply and demand? Liquidity and liquidity preferences. And what governs liquidity and liquidity preferences?

Why, the direction of stock prices, of course.

So ladies and gentlemen, it's like this. The only thing we have to fear is stock prices themselves. Watch the trends, watch the cycles, the direction of the moving averages and indicators. They are not always conclusive, like now, but when something important is going to happen, unless you need to move billions, you'll have plenty of time to do what you need to do when you need to do it if you simply follow the indicators when they clearly change direction. 

All this other stuff is a  bunch of diversionary crap. It is designed to get you to do exactly the wrong thing, at exactly the wrong time. 

Rule number one of Stock Proctology: The popular media consensus is the opposite of truth. Caveat Emptor.