Bill Meehan
The emperor has no clothes, the wizard no wisdom, the New Economy is hardly a miracle and the minions are mad as hell and not likely to take it anymore.
A modern-day Diogenes equipped with a Hollywood spotlight would be hard pressed to find a semblance of truth on the Street of Dreams. As for prudent analysis and independent, sound thinking: Better to consult tarot cards or a phrenologist. But leave those entrails alone; there are already several million more market technicians now than just a year ago, and they're giving the erstwhile dark side a bad reputation.
Head conveniently bought the "New Era" nonsense and preferred to cede his power to "millions of well-informed investors." Mr. G. was a demigod on the way up and is now seen as growing horns and cloven hooves on the way down. And for all the wrong reasons! It ain't easy being Greenie. Speaking of the wrong reasons, I was wrong about the Fed skipping a beat and going directly to ease without pausing at neutral. CNBC's gaffe only made it a bit more difficult to come to terms with, as I couldn't fathom why the market didn't immediately tank on
Hampton Pearson's mistaken report that the Fed hadn't changed rates or its directive. The Dow Jones Newswire headlines only added to the confusion, as did the delay in pulling up the Fed's Web site for the exact words. Not only had its URL been changed, the Web was jammed with others seeking the truth. However, being wrong about the outcome of the Federal Open Market Committee meeting didn't negatively impact my trading strategy one whit, proving again that it's better to be lucky than good. A little luck might help many of the sell-side strategists and analysts who have collectively failed to see numerous minicrashes and a multitude of corporate implosions over the past couple of years. And now all many of them can look forward to is cashing their last outsize bonus checks as the new millennium nears. Heads will roll on Wall Street and congressional hearings will begin before the summer solstice, as "investors" look for somebody or something to blame for their gambling losses. Nobody heeded Mr. Levitt, and the few voices of sanity were derided as senile old-timers who just didn't get the New Economy. The Federal Communications Commission and the Securities and Exchange Commission should also ask the media some tough questions about the "news" they helped to make rather than report. There's plenty of blame to go around, but it all starts with individual greed. The old saw "You can't cheat an honest man" is mostly true, although more than a few individuals were unwittingly damaged by trusted "investment advisors." With the major market measures having all made new 52-week lows Tuesday, the news
after the close was mostly bad. Foundry Networks (FDRY Quote - Cramer on FDRY - Stock Picks) was almost halved after
warning that it will miss by half, taking Extreme Networks (EXTR Quote - Cramer on EXTR - Stock Picks) down with it. Jabil Circuit (JBL Quote - Cramer on JBL - Stock Picks) was hit after it reported and Vishay Intertechnology (VSH Quote - Cramer on VSH - Stock Picks) was down on yet another tech warning. However, Tibco Software (TIBX Quote - Cramer on TIBX - Stock Picks) guided analysts higher and, like Solectron (SLR Quote - Cramer on SLR - Stock Picks) did on Tuesday, bucked the trend of falling prices last night. Perusing Tuesday's most active list names such as Ciena (CIEN Quote - Cramer on CIEN - Stock Picks), Sycamore Networks (SCMR Quote - Cramer on SCMR - Stock Picks) and Redback Networks (RBAK Quote - Cramer on RBAK - Stock Picks) were all down more than 20%; and retailer Dollar Tree Stores (DLTR Quote - Cramer on DLTR - Stock Picks) was pounded to the tune of almost 44% after it warned that it won't come close to analysts' expectations. Investors and traders will have to brace for further warnings into the first week of January, which will make a year-end rally in tech stocks a very difficult task. However, the prospect of Fed rate cuts and more reasonable valuations should keep the broader market in relatively good stead. There's a bear market in full rage in the tech sector, but the damage has been very well contained, all things considered. Could Tuesday's reversal have been the beginning of a bottoming process? That's a distinct possibility, and there's no reason to change my target of 2250 on the Nasdaq Composite Index. What I'll be looking for is heavier volume and more one-sided action in the daily advance/decline action and down/up volume, which was "only" a bit more than 5-1 on the Naz. Perhaps year-end tax loss selling will get us to the nadir, but it's more likely that mutual fund repositioning at the beginning of the year might mark the bottom in techland. Aggressive traders should consider taking some profits this morning and wait for a bounce to sell 'em again. Techs, financials and retailers appear to offer the best opportunities to short, while investors should do some bottom fishing in lower P/E technology stocks and retailers by scaling into positions. Investors and traders alike should use any pullbacks in selected energy stocks as an opportunity to add exposure on the long side, with a focus on services and gas stocks. However, the key to success in the new millennium is simply to focus on absolute value rather than growth. It's likely to be that simple, but difficult for many new investors to deal with. With any luck at all, some of the more esteemed strategists might throw in the towel soon, which will also be a sign that the bottom is drawing nigh. Having failed to take my own advice about taking the other side of the trade when economists are mostly in agreement (all but one primary dealer, Deutsche Bank, expected the Fed to move to a neutral "bias"), I was lucky to profit from the market's disappointment that there was no rate cut. Have a plan, make justifiable assumptions and become more aggressive as prices move lower, rather than cower in fear. The economy is not falling off a cliff, and getting valuations more in line with historical norms is good news for investors. Individual investors should use what they know or learn enough to be cautiously confident about making investment decisions. Until then, rely on seasoned professionals and use mutual funds by dollar cost averaging in a diversified manner. And don't be fooled into thinking that you can match wits with the pros that make a very good living trading the market. You'll be caught with your pants down every time in the long run.
RSS
