wndysrf Posted March 31, 2003 Report Posted March 31, 2003 Mark?s Market Commentary ? March 31, 2003 Upon my return to Los Angeles, I was struck with the stark contrast in women from those in Hawaii. In Hawaii, the majority of the local girls are naturally thin, with stomachs tighter than the wet skin on a bongo drum. Why is that? Food is expensive, the weather is hot, and most of these girls walk, surf, or yoga every day. Here in Los Angeles, with the exception of the bulimic actress wannabes, most of the women are fat. Yet they still drive their BMW 330s to go to Abercrombie & Fitch (ANF), Pacific Sunwear (PSUN), or Hot Topic (HOTT) and attempt to squeeze their blubber into one of these fashionable outfits after knocking down pizza, Twinkies, and after dinner drinks. A world diverging into the ?haves? and ?have nots?. Today?s stock market is no different. How else can you explain EBAY and GILD selling for 20x sales 37 months into a bear market? Yet the entire gold and silver mining industry is selling at a market cap less than Coca-Cola (KO)? Like Puplava mentioned, what should be going up is going down. And what should be going down is going up. Seems like fitness conscious L.A. should contain lots of skinny women, and the Maui Welfare State should have plenty of lazy, fat, single moms cashing in their food stamps for chocolate coated Macadamia nuts. But that is not the case. And after 37 months into the greatest bear market in our lifetime, it would seem that dollar trading volume, speculation, options liquidity, spread trading, arbitrage, program boxing, and computer robot trading would have declined. And it would seem that the Dow and Nasdaq tickers would have been long removed from Good Morning America. But they haven?t. It would seem that the Anti-American mood against the borrow and spend consumption binge financed by an ocean of fiat dollars would have been rejected and dismissed by the outside world, but so far, it hasn?t. Asia and Europe continue to pump out product for Joe Sixpack?s MTV Spring Break vacation, and gladly accepts in exchange U.S. dollar denominated financial instruments originated in Bermuda. And after 100 years of market action, it would seem that ?buy the rumor, sell the news? would still hold, and widespread Wall Street opinion would be proven wrong. But today, widely advertised ?double bottom? and ?war rally? predictions actually occur in spades, as predicted by Wall Street, making the Matrix Bullhorn and Loudspeaker Network the greatest public relations success story of all time. Some good quotes from Michael Santoli in Barron?s, noting the increasing desperation of Robot Trading, using concentrated bets: ?Equities at the moment are trading largely as a single, monolithic asset class. Stock futures and exchange-traded funds are where the thrust of market moves is first applied. Trading volume in the SPY and QQQ has soared by two and three times the rate of overall stock volume, indicating the fast money is ?trading the market?, hot to grab cheap, generic exposure to the market via ETFs in order to ride any sudden, news-driven spurt in the indexes.? ?We still see so much optimism, little alarm at the recent pullback. Prices of put options remained subdued even as the market slid. Cash holdings in stock mutual funds reached a new low of 4.3% at the end of February. Fast moving tech stocks have outrun the overall market this year in a ?tactically speculative? pattern of juicing portfolios for a quick gain.? Today?s The Wall Struck Journal also noted the obsession with the QQQ?s. ?The focus on indexes rather than stocks make it easy for investors to make short term bets on the direction of the market. The shares of individual companies are moving more in sync with the overall market. The correlation index has reached an all time high of 36.5% compared to 21.7% a year ago and 15.2% two years ago.? Fund managers who pick the IDB ?breakout? winners can easily wipe out gains by being unexpectedly bombed by HealthSouth. ?This period has been particularly frustrating for money managers who are trying to beat the market. Everything has been moving together so it?s difficult to pick out home runs. One big loser can mean the difference between a bonus and an unemployment check.? Mark?s Translation: Fear has increased to intense levels in the stock market. Fear of being out of the stock market. When a rally commences, the Riverboaters buy futures or ETFs to ?get on board?. After two trading days, those instruments are sold in order to pile into the top performing HeatMappers found on the next day?s PreMarket. As the money piles into the indexes, by default, the top weighted Supermodels are driven up to the mansions on Mulholland Drive, while the discarded ?Are You Hot?? contestants are left behind in their one bedroom flats on La Cienega. Aggressive stock packer managers grow increasingly frustrated by getting hit by car bombs like Altria (MO), so they double down on screamers like COH, EXPE, and EBAY. The more timid managers buy the ETFs in order to ?hide? in a safe place yet they are able to ?participate? in rallies. This week?s Barron?s Mutual Fund section featured yet another ordinary American turned into a ?star? mutual fund manager. Why not? With over 6000 mutual funds, 4000 hedge funds, and 1000 ?fund of funds? out there, this business must be one of the greatest growth industries of all time. Where else can a second string basketball player make 7 figures in a business which continues to grow while its customers have lost 40% the last 3 years? This week, former Princeton basketball player named John Rogers running Ariel Capital Management. His current ?top picks? include MBIA, Janus, T. Rowe Price, Waddell & Reed. Here?s an example: ?Rogers expects MBIA to benefit from the fact that so many cities, states, and counties with deficits are looking for ways to refinance their debt. Off about 50% from its 52-week high, the shares are cheap, trading at 9x proforma 2003 earnings? Mark?s Translation: Rogers, one of many fund managers desperate to ?catch up? from 3 years of subpar performance, naturally thinks that the ?second half recovery? will be led by key risk players in the Paper Pyramid, where companies like MBIA will continue to rubber stamp its guarantee on Bermuda garbage hurling around in circle inside the Atomic Particle Accelerator. MBIA is considered ?cheap? at 9x pro-forma earnings, which in turn are dependent upon pro-forma consumer spending, which in turn is dependent upon a pro-forma stock market recovery, which in turn is dependent upon the creation of pro-forma money. Dependent upon even more round tripping, leveraging, and pyramiding of consumer debt masquerading as ?short term money market investments?. Speaking of garbage pyramiding, anybody hear about the latest new ?Securitization Exotica?? Seems like there is no end to Wall Street?s creativity. Now it seems that past due, restructured, and renegotiated mortgages are being securitized. Look for it in your March 31 money market prospectus: ?Freddie Mac ?Catch Me If You Can? Past Due Mortgage Receivables 2003 Trust, Unit VI? What?s next? Renegotiated zero interest car loans? ?AmeriCredit Repossession Deferral Trust Securities Series III? No payment, no interest, furniture loans suspended until a husband is obtained? Defaulted boob job loans on a payment moratorium until a benefactor is found to bail out the debt? ?Household International ?Benefactor Awaiting? Postponement Trust Receivables? At this point, I believe that the markets remain untradeable, with the exception of those who maintain small positions which avoid emotional buying and selling. I expected a big bounce off those lows this morning, but now it seems more like a slow drift to the downside within a trading channel, similar to what we saw after last year?s March Madness. Which way are the Commodity Robots trading now? Are they now short the dollar and long gold again? What happened to the ?bond market liquidation? which was to fuel a cyclical bull market rally? I expected it to happen. Roger Arnold mentioned something this weekend worth noting. He thinks FRE, FNM, CCR, etc. are locked in a dangerous dynamic hedging cycle which will drive yields to new lows. Treasury buying is necessary to hedge these giant portfolios against prepayment. More Treasury buying is fueling more refi applications. The entire MBS complex, which now exceeds the U.S. Treasury market in size, is now trying to hedge against the ?inevitable? rise in interest rates. But so far the dynamic hedging is working against them, building up a possible interest rate derivative explosion as these contracts are already way under water. Arnold expects that eventually the mortgage companies will have to stop the refinancings by dramatically tightening qualification standards. Otherwise, there is no way to stop the bond market freight train. Should be interesting to see how Franklin Raines acts once he?s forced into the Wild Cornered Animal stage. How will he be able to manage such a large derivative and hedging position when Commodity Robots are creating so much volatility? And if interest rates move against him and the Robots start piling on, how will he be able to stop the momentum? I have a few small retail and tech shorts out there and a few PM longs. No big positions until the market breaks the February lows or the March highs. Bob Carver says the largest and sharpest Bradley Turn is due in mid-April. New highs are still possible if the Baghdad invasion is successful. That would set up a dangerous ?megaphone top? on the daily which will cause a big market crash into the fall. The other scenario, which Carver anticipates, is that the market falls quickly the next few weeks, resulting in a tradeable low in mid-April which would launch an explosive rally into the July timeframe. Alan Newman issued an intermediate period sell signal today, but doesn?t expect the market to make significant new lows this spring. He?s thinking more in the fall timeframe. Hans Hans Hans Hans Brinker is still bullish, but isn?t ruling out marginal new lows. I wonder if his subscribers are getting nervous with this recent decline. Interesting to see if that big wave of index fund buy orders gets sold sometime soon. For what its worth, I'm thinking that the extraordinary volatility and the unsustainability of the Paper Pyramid will resolve itself badly, destroying all traders in the process. So today, more gold coin was purchased at the dealer. Nothing like safety and security, immune to the machinations of The Matrix.
EasyAl Posted March 31, 2003 Report Posted March 31, 2003 Mark: Welcome back and thanks again for your daily column.
martialcomp Posted March 31, 2003 Report Posted March 31, 2003 I have been in capital preservation mode for a long time now. Agree on the gold and silver purchases. IMHO, gold and silver are part of a properly diversified portfolio and are an excellent hedge against dollar fluctuations. IMHO, I am terrified to be in this market, long or short unless...I see the Dow rocket up to over 9,000 with bad fundamentals. However, it sure looks as of 9,000 is gone for a long time on the Dow. Soon, even 8,000 might also be gone.
3Martinis Posted March 31, 2003 Report Posted March 31, 2003 Aloha Mark....wicked new avatar. Gold popping a bit in Access...... $337.35
bubbadropping Posted March 31, 2003 Report Posted March 31, 2003 Just coming up for some air.Insatiable Swedish divorcee has become more demanding. Less time to spend in pursuit of price action. Booty calls coming at any hour of day now. After a week or so away from the Market its amazing to see how wildly off so many gamers are at this stage and how ridiculous some of the prophecies have become. The whole thing in the intermediate term still rests entirely on the War. The War is being gamed. The Markets are down because shock and awe has proven dissappointing. If the blitzkreig had worked we would already be at 9,000. Those trying to Ewave it or whatever are all very interesting but imo it misses the larger point. Its amusing that I keep seeing the Ewave goalposts getting moved all over the field, literally. I don't know,maybe they do that in soccer games down in Juarez but this is real money. Mark welcome back and thanks for the time turn call for mid April. That will be playable no doubt. Bradley turns seem thus far to maintain a modicum of reliability. good luck to all, buddha
wndysrf Posted March 31, 2003 Author Report Posted March 31, 2003 3 Martini's: Yep, 335 on gold now support. Looks like the correction is finally over. Buddha: Glad to see you emerge. The Wall Struck Soap Opera is not the same without your daily blow by blow account of the twists, turns, and madness. Hope your Swedish girlfriend can let you loose for a few hours every day so you can comment. Hope you are satisfied with the new Hawaii Exotica posted as my new Avatar....
machinehead Posted March 31, 2003 Report Posted March 31, 2003 Here's a tidbit from Dr. Hussman substantiating Mark's view on the subject of volume, which has often been discussed on Intraday Stool: "A final note about short-term returns. There is a clear tendency for weak trading volume to be associated with weak market returns. Consider the weeks since 1940 when NYSE trading volume has been higher than in the prior week. In this sample of data, the average total return for the S&P 500 has been 28.6% annualized. In contrast, when trading volume has been lower than in the prior week, the average total return has been -0.7% annualized. In effect, the entire gain in the S&P 500 since 1940 can be attributed to weeks when trading volume was rising." Volume tells As formulated, this is a post hoc rule - you don't know whether volume has risen until the end of the week, when any gain has already occurred. Conceivably it could be tweaked to give a timely signal.
Yaryman Posted March 31, 2003 Report Posted March 31, 2003 End of the world warning. Last night with the S&P futures down 6, I suggested going long YHOO at open for end of quarter markup. I took my own advice this morning, and went long YHOO at $23.85. In a post this morning I stated that I would be closing out my YHOO position before the close, and might even short YHOO. At 12:05 PST I closed at my long position at $24.19, and then went short at $24.16. YHOO closed today at $24.02. The point of the story is this, nothing ever goes as I have planned, so there must be a meteor heading towards the planet, or some other earth ending event about to happen. Glad to have mark back, even if the world is going to an end.
DrStool Posted March 31, 2003 Report Posted March 31, 2003 The weakest of the major indices was by far the Nas 100. Should be the beginning of a trend.
marketneutral Posted March 31, 2003 Report Posted March 31, 2003 Da bulls have been looking for that all-elusive C wave since last year. Well, the top has been in since 3/21 and was confirmed last week with a big red candle reversal on the weeklies amongst numerous other technical/sentiment indicators. When will they ever learn? LOL
The End Posted March 31, 2003 Report Posted March 31, 2003 Covered my shorts at 844. I was tempted to buy them back but, alas I did not. we shall see what tomorrow brings. My guys are either out or long. I can't imagine going balls to the wall long here and their not, just 25% positions.
Mr. Beal Posted March 31, 2003 Report Posted March 31, 2003 Welcome back Mark! One question, can we see what you croped out of that picture?
marketneutral Posted March 31, 2003 Report Posted March 31, 2003 Mark, It's the coming MCHVIE that you are referring to wrt the increasing cross-correlations between equities. MC-mass correlation HV-hyper-volatility IE-illiquidity event (like Mickey Rourke in Barfly, the market needs fuel. And again like the Barfly (aka...perma bull), you can continue to get up after getting beaten down, but it's the same story, different day.) Others refer to this as a coming 10 sigma event. Whatever the name, it's coming to a market near you. Best, MN
MrHanky Posted March 31, 2003 Report Posted March 31, 2003 this guy is nuttier than AJC....... ART HOGAN 'Coiled to explode' "As worrisome issues clear, stocks may blast off", strategist says. I think the volitility is too much do deal with right now....just watching.
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