A Double Blow to the Bull-Market Psyche

There's been some real damage to the bull-market psyche these past few days. Let's focus on two of the blows that have stinging impact: Tyco (TYC Quote) and Electronics For Imaging (EFII Quote).

Tyco: Join the discussion on TSC Message Boards. Both of these stocks have defined the bull market in many ways. Tyco, well, Tyco is the market. It is one of those stocks everybody owns and the S&P funds and their mimickers keep buying more of. Heck, I own the darn thing (so do Janus, Fidelity and everybody else, from what I hear).

Everybody has a profit in this stock. It has been the consummate winner. Now people see those profits going away off a report from nowhere. I bought the stock because Tyco just had its books approved, blessed, whatever by the SEC, and it seems like a vicious overreaction to some guy's report that may or may not be right. I am now down badly on the stock I bought yesterday but up nicely on the stock I bought today. That said, I wish I had bought Tyco Toys by mistake, either the old stock, or the actual toys!

As Tyco has done many acquisitions, it immediately gets lumped into the Waste Management (WMI Quote)/Cendant (CD Quote) cohort when people buzz about accounting irregularities. So the big-winner managers just blow it out. Shoot first and don't even bother to ask questions. That creates the halt in trading. This kind of stop-trading/order-imbalance stuff really freaks out the bulls. To me, most stocks are closer to a bottom than a top when we see this kind of action. The exceptions, of course, are Cendant, Waste Management and, alas, U.S. Surgical, which is one of the companies Tyco has purchased, so you understand why people aren't clamoring to get in.

Whatever, there sure were a lot of cheap shots at this one, including a ton of rumors that seemed pretty outrageous and not worth pursuing or repeating here. One of the most brutal comments came from this site, where Herb Greenberg seemed to suggest that my friend and former counsel, Mark Belnick, blew out of Tyco's stock ahead of this news. Good grief, man, that's a blow right to the kidneys. Belnick's no two-bit scummer trying to get out ahead of some scam. This was a totally gratuitous reference. I defend Herb's right to make it, but strictly because I believe in the Constitution. As far as fairness goes, give me a break.

The other blow to the psyche was Electronics For Imaging. Here is a total darling stock that people love because it beats numbers constantly and then tells you to raise numbers. This is one of the most managed stocks in history, and it is a beautiful thing to watch. But this morning, EFII beat numbers and didn't tell us to raise numbers. The result? Down 8!! Ouch!!!

We have all gotten used to our faves delivering. If I can football-analogize for a second, this is like the 49ers or the Vikings having a terrible October! It makes it hard to bet going forward.

Sure enough, they have, and it is.