|
PureBytes Links
Trading Reference Links
|
I really like this excerpt <g>. However, it seems that everyone else
must believe (or want to believe) the numbers since the market seems
driven by them.
Honey, how come we never go out anymore?. . . We shouldn't forget that
today witnessed the release of an important government statistic --
the PPI -- and once again non-eaters and non-drivers will be happy to
learn that there is no inflation; in fact, prices have dropped. I
almost forgot to mention this because these numbers are such a joke,
it's not even worth paying attention to them. There can't be anyone
out there with an IQ higher than a lampshade who actually believes
these numbers represent reality.
JW
--------
http://www.siliconinvestor.com/insight/contrarian/
July 14, 2000
For every 500 shares you trade, get a free pair of rose-colored
glasses
[an error occurred while processing this directive]
After yesterday's strong close, followed by another round of friendly
earnings reports, the casino was packed with players in the early
going. It took no time for a rip-roaring rally to commence, and right
out of the block we were quickly up 1/2 to 1 percent in the first half
hour, depending on which major indices you're talking about. That led
to a sell-off that took us to the lows of the day. But the dipsters
were there waiting in force, and we had another slingshot move in the
next hour that took us back to the highs.
The Internet indices were up about 5 percent or so, eclipsing the
former lead sled dog, the Sox, which was only up about 3 1/2 percent.
There were boatloads of fireworks again today in some of the
high-flying names, and it would appear that there were some short
squeezes as well. Some of the old favorites were back in play today,
such as AOL (AOL), Yahoo (YHOO), Amazon (AMZN), eBay (EGRP), Lycos
(LCOS), etc. Whether that was new buying or short covering, I don't
know. Having said that, there were a few big-time losers on the
downside, most notably Extended Systems (XTND), which fell
approximately $35 to $52.
Honey, how come we never go out anymore?. . . We shouldn't forget that
today witnessed the release of an important government statistic --
the PPI -- and once again non-eaters and non-drivers will be happy to
learn that there is no inflation; in fact, prices have dropped. I
almost forgot to mention this because these numbers are such a joke,
it's not even worth paying attention to them. There can't be anyone
out there with an IQ higher than a lampshade who actually believes
these numbers represent reality.
As the day wore on, there was a series of rallies and sell-offs, but
the overall direction was up, up and away. All the major indices
essentially settled on their highs. The Dow was nowhere, the S&P was
up about a percent, the Nasdaq was up about 1 1/2 percent, the bank
stock index was up 2 percent, the Sox was up 4 1/2 percent and the
Internet indices were up 8 percent, plus or minus, depending on which
one you're looking at. It was a grand day for speculation. Next week
we will continue the earnings onslaught, paced by Super Tuesday, when
we get Intel (INTC) and Microsoft (MSFT). It will be interesting to
see whether their respective views of the world jibe or differ.
Late in the day, the Florida jury decided to award smokers $145
billion in punitive damages. That earth-shaking sum of money did not
provoke much of a reaction out of the tobacco stocks and was virtually
ignored by the market.
Away from stocks, at least the bonds decided they weren't buying the
story today. Fixed income was down across the curve, with the 10-year
down about 75 cents. The dollar was quiet and the metals were moribund
once again.
Crack that whip. . . One of my favorite balance sheet torturers,
Gateway (GTW), reported last night and beat the number by a penny
(wink, wink). Revenues were up 12 percent (though sales to businesses
were down 10 percent [brrr, nuclear winter]) and net income was up 30
percent. Most of the good numbers came from "outside the box stuff" --
you know, doodads, financing, warranties, etc. There were a couple of
highlights that were just too precious to pass up. Intangibles were up
$121 million since December on a base of $52 million. For those of you
keeping score at home, net income was only $121 million.
The other eye-popper from Gateway was in other assets, which were up
$340 million dollars sequentially since December (other assets are up
more than 500 percent year-over-year). Anyone that's even had high
school accounting can see the potential for future disaster there.
Gateway's balance sheet dwarfs anything that shows up on the income
statement. To put those leaps into perspective, the $450-million-or-so
bump in "intangibles and other assets" is on a sales base in the
quarter of $2 billion. So anybody who thinks these earnings are pure
obviously doesn't know how to read a financial statement.
Bubble and squeak. . . There were two great articles in The Wall
Street Journal today that are absolute must-reads. On the front page,
in the left-hand column, there's an article called "Lone Stars" that
discusses how Fannie Mae works, its impact on the mortgage market, its
leveraging, its lending policies and the size of the potential risks.
There are even a couple of cryptic comments from former officers
alluding to the fact that, although the probabilities of something
going wrong are small, the stakes are enormous. For folks that aren't
acutely aware why knowledgeable financial observers are concerned with
the goings-on at Fannie Mae and Freddie Mac, this article is a
must-read.
In the right-hand column, there is an article called "The Color
Green," which discusses the Internet bubble. It's sprinkled with
liberal uses of the words "bubble" and "mania" -- something we haven't
seen very much -- but talks about the Internet bubble in the past
tense. Maybe the author didn't notice the action in that sector over
the last few days. Nevertheless, it's a very good primer regarding
some of building blocks of on some of the history and the present
situation, except it misses one important point. Early in the article
the question is raised: What brought on the mania? While various
explanations are offered, the article misses the number-one reason (in
my opinion) for the mania: The irresponsible easy-money policies of
Alan Greenspan and the merry pranksters at the Fed.
The root of the problem. . . For those of you who have been burned out
there, besides being somewhat culpable yourself for getting sucked
into all this nonsense, the first place to lay the blame is not your
online broker (as some have done), but the ultimate source of the
madness -- the Fed. I have believed for a long time that the
speculation that was and is the Internet mania was engendered by the
Fed. I touched on this in the January 3, 2000, edition of The Rap (an
excerpt follows below). I liked the way I said it then -- in fact I
practically broke my arm patting myself on the back at the time.
Dot.com dad. . . In a sense, Alan Greenspan, not Al Gore, is the
father of the Internet (certainly the father of Internet speculation).
The family tree goes as follows: About this time last year, when
Internet speculation was just getting rolling, Greenspan was busy
putting the liquidity we just described into the system. As liquidity
was jammed in all year, it had to go someplace and went to the place
where there were the fewest fundamentals and the most imagination --
a.k.a. Internet stocks. That's the way speculation always works; it
seeks ideas with the highest imagination potential and fewest hard
facts. He succeeded in powering all sorts of Internet ideas --
money-losing, kooky, whatever - all year long, and then of course we
hit the afterburners late in the year. The fact that Internet stocks
went so crazy and made folks so much money, people concluded that, By
God, there must be something to the Internet. As a result, all the
Internet entrepreneurs were deemed to be visionaries who had read the
Wall Street Journal for the year 2020 and were telling us what it was
going to be.
So my somewhat heretical view is that Greenspan, through his
irresponsible monetary policy, has convinced folks that they know what
the future is, when in fact no one knows how the Internet madness will
sort out. As wonderful as Internet communication is, it is no greater
than some of the technological advances we've seen in the past, not
the least of which were the telegraph, the telephone or the computer
itself, to pick just a few examples.
Today's Journal article touches on some things that aided and abetted
the Internet speculation, but the primary culprit in my opinion is the
Fed.
What he said. . . Some interesting comments by Microsoft CEO Steve
Ballmer passed on today. "A lot of people are over-investing in
dot-com startups," he was reported as saying, adding, "There is too
much money chasing Internet ideas in the short run." He went on to
suggest that e-commerce revenue was more the exception than the rule.
When asked about the company's quarter he demurred, but when asked
about the economic outlook he specifically pointed out Gateway's
decline in sales to businesses, saying "It's an issue." It's as if he
knew what the subject of today's Rap was going to be.
The Contrarian Market Scoop: Has a nice ring to it, don't you think?.
. . Last but not least, I noticed on Bloomberg that CNNfn ran a story
reporting that Salomon analyst John Joseph received death threats by
phone and e-mail after he cut his rating last week on the
semiconductor industry from neutral to outperform. This confirms the
story I talked about last Wednesday. If they had read the Rap, they
could have reported it two days ago. . .
Please be sure you've read "What is the Market Rap?" before you send
me e-mail. As highlighted in this outline, there are certain questions
to which I am unable to respond.
William A. Fleckenstein, special to Silicon Investor.
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.
Mr. Fleckenstein is also a Director of Go2Net. The views and opinions
expressed in Mr. Fleckenstein's columns are his alone and not those of
Go2Net or of its subsidiary, Silicon Investor. Go2Net and Silicon
Investor disclaim all responsibility for Mr. Fleckenstein's views and
opinions.
|