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I think Cramer's right on this one. The specialist and market maker
systems are most often justified because they are alleged to deliver
market liquidity not available in a pure auction market. I suspect this
will be proven to be another brokerage industry hokum. Might have been
true in the past dull days of the stock market but no one is going to
stand in front of a roaring train with the speed and size of this stock
market.
Earl
----- Original Message -----
From: "JW" <JW@xxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Tuesday, January 11, 2000 1:46 AM
Subject: [RT] Mkt: Interesting comment
> Wrong! Dispatches from the Front: A Volatility Nightmare
>
> By James J. Cramer
>
> 1/10/00 5:35 PM ET
>
>
>
> Volatility nightmare. Instead of the dot-coms calming down and trading
> with more precision and in smaller increments, the opposite has
> occurred: Everything is now trading like a dot-com.
>
> Look at the points put on in the semiconductors and the semi-equipment
> stocks. Or check out the action in Compuware (CPWR:Nasdaq), which was
> down 4 in regular trading and is now up 4 after a failed bear raid.
>
> Sun Microsystems (SUNW:Nasdaq) and Nortel (NT:NYSE) are going nuts on
> the hardware side. And last week Procter & Gamble (PG:NYSE) and
Bristol
> Myers (BMY:NYSE) shocked to the upside.
>
> What the heck is going on?
>
> We left the office today stunned at the ranges that all stocks are now
> trading in. These are frightening ranges for those of us who like to
> control our risk (and, as a hedge fund manager, that's my key
> variable). We love it, of course, when they go up, but the ride down
is
> too hard to hedge against. I'm shaking my head here, wondering whether
> the dot-coms have infected the rest of the market with illiquidity.
>
> Perhaps, and I am still working on this thesis, what has happened is
> that the market makers in the Nasdaq simply have ceased to try to make
> orderly markets. They are solely acting as agents buying stock and
> selling stock for customers, without positioning a thing. If someone
> wants to buy Oracle (ORCL:Nasdaq), she goes to a market maker and the
> market maker, rather than stopping her on the stock and working the
> stock in, just goes out and lifts all of the offerings. The market
> maker wants none of the risk of the trade.
>
> (To join the discussion on this article, visit our Message Boards:
> http://www.thestreet.com/bbs/Forum4/HTML/000038.html)
>
>
>
> (To refresh, in the old days, a market maker used to work an order.
You
> wanted 15,000 Oracle? He shorted you 5,000 and then he tried to work
> the stock in over time. Now he doesn't short you anything; he is
losing
> too much on that 5,000. He just goes in as an agent and buys whatever
> is available from others.)
>
> Suffice it to say that if you thought that parts of the market were
not
> for the squeamish last year, you ain't seen nothing yet.
>
> The flaw here is that it still doesn't explain how listed stocks
became
> so illiquid. That's going to take some digging, but I bet that the
> listed market makers at the big brokerage houses are just as unwilling
> to make orderly markets, too.
>
> James J. Cramer is manager of a hedge fund and co-founder of
> TheStreet.com. At time of publication, his fund was long Nortel,
Oracle
> and Sun Microsystems. His fund often buys and sells securities that
are
> the subject of his columns, both before and after the columns are
> published, and the positions that his fund takes may change at any
> time. Under no circumstances does the information in this column
> represent a recommendation to buy or sell stocks. Cramer's writings
> provide insights into the dynamics of money management and are not a
> solicitation for transactions. While he cannot provide investment
> advice or recommendations, he invites you to comment on his column at
> jjcletters@xxxxxxxxxxxxxx
>
> *****
>
> JW
>
>
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