TheStreet.com's DAILY BULLETIN
December 3, 1999
Market Data as of Close, 12/2/99:
o Dow Jones Industrial Average: 11,039.06 up 40.67, 0.37%
o Nasdaq Composite Index: 3,452.78 up 99.07, 2.95%
o S&P 500: 1,409.04 up 11.32, 0.81%
o TSC Internet: 977.20 up 51.91, 5.61%
o Russell 2000: 460.44 up 6.77, 1.49%
o 30-Year Treasury: 97 12/32 down 9/32, yield 6.316%
Companies in Today's Bulletin:
In Today's Bulletin:
o Truth Serum: Internet Gadfly Meets a Fraud Case He Doesn't Like
o Wrong! Dispatches from the Front: When the Spurned Get Negative, Ignore Them
o Evening Update: Pfizer to File Seeking Ouster of Warner-Lambert Board in AHP Fight
o Bond Focus: Bonds Drop Again and Hunker Down for Tomorrow's Jobs Report
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Where's the best place to invest your money? Top Internet analyst HenryBlodget knows a winner when he sees one. The picks he made on his last appearance are up big ... so what does he say is hot now? Find out in this week's "Stock Drill."
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Also on TheStreet.com:
Herb on TheStreet: *Extra* Is the Surprising Slowdown at SFX Really Just a Y2K Bug?
Or is it proof that
can jump on the Y2K excuse bandwagon?
Internet: Analysts Say Amazon's Sequential Quarterly Revenue Growth Will Drop
Amazon's post-holidays quarter will be smaller than its fourth quarter, analysts say, marking the first time that's happened at the company.
Bob Gabele: Is It All Over at Genentech?
After playing the share price masterfully, Genentech insiders are signaling the end of the salad days.
Tech Savvy: Business.com a Bargain at $7.5 Million
Jim Seymour looks at Jake Winebaum's latest acquisition, along with other tech happenings.
Truth Serum: Internet Gadfly Meets a Fraud Case He Doesn't Like
12/2/99 7:56 PM ET
Life has gotten tough for Anthony Elgindy. The San Diego short-seller, known for his scathing posts on
, claims to uncover the shady side of Wall Street. But these days, it's Elgindy's past that's raising questions.
Elgindy, a 32-year-old former
market maker and retail broker, has taken it upon himself to expose scam stocks, in the process cultivating an extremely loyal following on
message board service, Silicon Investor.
The following that he built posting under the handle "Anthony@Pacific" helped him get reinstated to SI by popular demand after he was
He's parlayed that pseudo-stardom into
Anthony@Pacific, a private trading site he launched in May, attracting some 300 members to pay $600 a month for his trading calls. In October, he helped fund a new investor message board,
WallStreetStand, which had 500 members signed up even before it officially launched.
For his part, Elgindy says he has spent the last five years crusading for the investment community. He testified as a witness in a 1997 civil stock-manipulation trial in Los Angeles federal court and says he has given information to the
Securities and Exchange Commission
about suspect equities.
Yet not even the SI dispute, or a fine leveled against him in 1997 by the
National Association of Securities Dealers
, or the revocation of his NASD registration last year, keeps Elgindy down. In fact, stories run by established news organizations still refer to him as an analyst, failing to acknowledge or disclose his past, his positions or his message board caterwauling.
Last week, in the wake of the stunning run-up in shares of remote-access equipment maker
quoted him as an analyst with his company, Pacific Equity (the firm's full name is
Pacific Equity Investigations
). "There is a misperception that remote access means wireless," Elgindy was quoted as saying in a
story. The article omitted the fact that their "analyst" may have been biased, since he was shorting Ariel.
On the message boards, he was less tactful. "ADSP Short @ 13 !!!!!!news is completely meaningless and anyone who thinks it is related to wireless technology will be sadly stuck like PIGS!!," Elgindy posted Wednesday on Silicon Investor.
Elgindy's bulletin board bravado doesn't show up when he's cited by the mainstream media.
And his detractors gloated when the stock climbed to reach as high as 57 Friday from around 19, before closing at 37. "I'd love to see this guy standing in a soup line!" a trader who goes by the handle "Sly" wrote the following Sunday.
But more than a poor trading call surfaced after Ariel. On Saturday, an investor who goes by the alias "a_and_p_sucks" posted on
certain court filings in a criminal case brought against Elgindy. That posting provided some information on the past of someone who tries to blow the whistle on suspect equities.
No, we're not talking about the fact that Elgindy was fined $30,000 by the NASD in 1997 for performing trades in 1993 on a system designated for retail customers. That has been public knowledge and hasn't deterred Elgindy's followers. ("I didn't know anything about trading; I didn't know how the machines worked. If you hit the wrong button, it'll be a violation," Elgindy says of the disciplinary action.)
The posting instead contained a June 16 indictment of Elgindy by the U.S. attorney for the Northern District of Texas on nine counts of mail fraud and aiding and abetting.
The charges were related to compensation checks Elgindy allegedly received from
Barron Chase Securities
in 1994 and 1995 while he was simultaneously receiving $7,550 a month in disability benefits from
. (The mail-fraud charges stem from the delivery method of the disability checks.)
According to the indictment, Elgindy received $68,952 to work as a registered representative in Bear Stearns' Dallas private client service department from March 15, 1994, to July 8, 1994, and $16,000 from Barron Chase from October 1994 to February 1995. The case is scheduled to go to trial in March.
"It's a 7-year-old case and doesn't involve the stock market or anything," says Elgindy, who pleaded not guilty to the charges and says he was suffering from clinical depression at the time he was receiving disability benefits. "This is a cloud hanging over my head, and I'll fight it."
If convicted, Elgindy could face up to $2.25 million in fines and 45 years in prison.
Sure, a disability dispute doesn't have much to do with stock trading. But it's at least embarrassing for someone who champions the cause of investors in digging up frauds to be himself accused of mail fraud.
After the allegations appeared on Silicon Investor, some members questioned Elgindy. "Is it true that you are currently under indictment for securities / mail fraud? If it were, sure this would reflect upon your credibility here," wrote "zaxbowow." Elgindy responded, "My credibility is 100% intact ... what u say isn't true."
Add to that a recent split with Matt Tyson, Elgindy's former lawyer, who was also the Web master and owner of his private site, and it promises a circus of accusations.
To hear Elgindy tell it, there was a financial dispute between Tyson and Elgindy. (Tyson's company,
, owned and operated Elgindy's private site.) It worsened when, Elgindy says, Tyson refused to let a third party handle the money. Tyson, on the other hand, says his company delivered checks for roughly $40,000 per month to Elgindy and that Elgindy violated their contract by telling members to cancel their memberships and by steering them to another private site he was building.
"Mr. Elgindy is a world-class salesman," says Tyson. "He can sell glasses to a blind man. He has snowed over a large number of his members."
According to the NASD, Elgindy's registration was revoked last year for failure to pay an arbitration award in December 1998. Further, he never paid the $30,000 fine: Elgindy says he voluntarily left the NASD by stopping payments on the fine.
But as for the fraud indictment, Elgindy says it is a thing of the past. "It was a very difficult time," Elgindy says. "I was depressed, I was taking medication, my wife left me."
Maybe the judge and jury will buy Elgindy's version of the events. And his followers may be well advised to watch their leader carefully.
We're depending on our readers for sources, rumors and ideas. Send any to our Truth Serum hotline at
Wrong! Dispatches from the Front: When the Spurned Get Negative, Ignore Them
James J. Cramer
12/2/99 4:46 PM ET
Is it speculative? You bet. Is it crazy? Absolutely. Can you make big money in it? Definitely.
Join the discussion on
Cramer's Latest, go to the
Red Hots Forum
, or visit our
There are plenty of people worried about this market, and they are bent on making you sell so you can be there on the sidelines with them.
Most of these people are playing the market with
Johnson & Johnson
, to name three stocks that were down today.
They are traditionalists who are unwilling to learn or have a mental block against stocks that you know I write about every day and try to do my best to enlighten you about.
I know if my portfolio were made up of nothing but stocks that move in quarter-point increments, up or down, and "value" stocks, I would hate this market with a passion. I would want to rip the lungs out of guys like me who see the gains in
and say, "I don't care. I gotta have some of these."
But the naysayers and negativists want nothing more than these highflying stocks to crash, or be crushed, or be revealed as frauds and mountebanks. But that won't happen. That's just not how this game works.
I wish I could say that I am 100% long the stocks that are in my rotisserie league, but I am not.
But I had the intelligence -- and believe me, it took more intelligence than love of fantasy -- to have some of them on to enjoy the romp.
In other words, if you can't play or didn't play, no doubt this market is your worst nightmare.
But if you have, you know better.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. 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
Evening Update: Pfizer to File Seeking Ouster of Warner-Lambert Board in AHP Fight
12/2/99 8:17 PM ET
Amid the increasingly heated merger skirmish between
, Pfizer today said it will file by Christmas with
Securities and Exchange Commission
to oust Warner-Lambert's board. Aside from declaring its intention to put a lump of coal in Warner's corporate stocking, Pfizer also said its court date with Warner has been postponed until Jan. 31, but that it still wants the Warner-Lambert antitakeover provisions lifted. Pfizer objects to Warner's proposed combination with
American Home Products
Also contributing to the "small developments in big mergers" category,
Deputy CEO Rodney Chase audibly told
he is "quietly confident" the company's $27 billion takeover of
will be approved by U.S. regulators.
Equity funds reported outflows from most sectors, totaling $3.6 billion for the week ended yesterday, according to
AMG Data Services
. Technology funds continued to report inflows, while international equity funds reported the largest outflow since Sept. 1. Taxable bond funds reported outflows of $454 million, while all corporate bond sectors reported inflows.
American International Petroleum
cracked 2 million shares traded in after-hours trading on
, a record postclose volume for the ECN. The company has not released any news and none is being reported on it, but "reputable" sources like the message boards on
speculate that a recent oil strike in Africa is the cause.
Oil in Africa? Here's that
grain of salt you ordered.
Island's volume has gone from fidgety to hyperactive. This week, other small stocks such as
were seven digits active.
In other postclose news (
earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified
Earnings/revenue reports and previews
said it sees third-quarter results falling far short of expectations. The company, which operates
Sears Portrait Studios
wall decor stores, did not give a reason for the shortfall. CPI said it expects to report a third-quarter loss, while the current single-analyst estimate calls for earnings of 51 cents a share.
said its November same-store sales dropped 4.6%, citing in part softness in its men's apparel and footwear business.
said it will close its Canadian mail order operation, saying the unit wasn't performing up to plan and didn't fit with the rest of its businesses. Valassis said it sees a one-time gain of $3 million to $4 million from tax benefits, while also noting it expects a fourth-quarter after-tax charge of $6.5 million for repurchasing bonds.
Mergers, acquisitions and joint ventures
said it agreed to buy privately held
MicroLegend Telecom Systems
for about $43.6 million in stock. MicroLegend makes software used by telephone carriers to control their core communications networks.
Offerings and stock actions
said its board of directors approved a 3-for-2 stock split of its common stock, payable Dec. 20, to shareholders of record on Dec. 10.
said its board boosted the company's stock buyback program by 5 million shares after completing all share repurchases authorized under a previous 10 million-share plan.
, a small, privately held Ohio firm, filed suit against four makers of pocket-sized electronic organizers, alleging infringement on its 1997 patent. Khyber is suing
, privately held
. In a sign that the companies are not exactly running scared, representatives for Philips, H-P and Everex said they were unaware of the suit and had no further comment, according to
announced it has retained New York-based
to advise it on the financial implications of a full range of potential remedies in the landmark
antitrust case. A Justice Department official made it clear that retention of the firm reflects no view by the department on whether the case would be resolved in court or through mediation.
Tele Norte Leste Participacoes
said it plans to announce restructuring plans. Tele Norte, which said the English version of its restructuring plan would not be released until tomorrow, was bought by a group of Brazilian investors as part of the privatization of Telebras last year.
Bond Focus: Bonds Drop Again and Hunker Down for Tomorrow's Jobs Report
David A. Gaffen
12/2/99 4:45 PM ET
After taking its lumps in the morning following the new homes sales release, the bond market buckled down for tomorrow's employment report. Since traders are reluctant to take on risk one day before the market's most important monthly release, Treasuries were unable to snap back from the early spate of negativity.
Lately the 30-year Treasury bond was down 8/32 to 97 13/32, bumping the yield up 3 basis points to 6.32%. It would seem that the market could rally tomorrow if the November employment report shows a loosening in labor conditions. Since the
raised the funds rate to 5.5% on Nov. 16, the market's done almost nothing but sell, tacking on more than 30 basis points to the 30-year bond's yield.
But analysts believe that the Fed's current tough-talking stance and the stream of economic releases displaying broad economic strength puts limits on any positive reaction to the jobs report.
"It's hard to see how it would be wonderfully positive," said Jim Kochan, chief market strategist at
Robert W. Baird
. "Average hourly earnings would have to decrease and unemployment would have to rise. It's going to be difficult to rally this market in a big way."
That's partially because even if the employment report showed signs of slackening in labor, the rest of the economy is steaming along. Economists often use the housing market to predict a slowing in economic activity.
As the theory goes, people who buy homes are expected to actively consume in the next few years, through home improvement projects, furniture purchases and the like. When the housing market slows, it shows consumers are less confident about current interest rates and their own purchasing power.
Well, sales of new homes rose an astounding 16.3% in October to a seasonally adjusted annual rate of 986,000, surpassing November 1998's record pace of 985,000. That's even as mortgage rates increased (although the
Mortgage Bankers Association
shows people are increasingly turning to cheaper adjustable-rate mortgages).
It shows that consumer demand remains strong and there may not a discernable slowdown as Y2K approaches, which was originally forecast. The market reacted negatively to today's figure and trended downward for the balance of the session, but activity was light.
"What it comes down to is, the consumer's very confident," said David Jones, chief economist at
Aubrey G. Lanston
. "They're very secure in their jobs, financially secure, they're seeing a rebound in stock prices and their financial position is improving. There's a wealth effect from higher house prices and that just leads to stronger spending everywhere."
There are a couple of problems with this figure: it's volatile and is subject to wild swings and large revisions. (September's number was revised downward to 848,000, an 8% decline.) Also, today's report contradicts the 6.6% decline in October's
existing homes sales
, reported Monday. "It makes a muddle out of trying to understand what's going on in the housing sector," Kochan shrugged.
Expectations for tomorrow, according to
, are for a 226,000 increase in
and a 0.3% increase in
average hourly earnings
is forecast to remain steady at 4.1%.
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