Coping With the Crash That Never Was

It took some quick retooling, but Ronny Kraft was able to bounce back after his crash call didn't pan out. Plus, just how much volume can the Nasdaq handle?
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Back and Bullish, but Grudgingly

SAN FRANCISCO -- As promised, here's the update on Ronny Kraft, CEO of

Gotham Capital Management

.

In the wake of his "sell the house, sell the kids, I'm never coming back, it's over, forget it" call on

Sept. 8, the hedge fund manager put 35% of his roughly $150 million portfolio in cash and went short with 75% of the rest. In the past two weeks, however, he has been long as much as 90% of noncash assets.

"I still believe this bubble will resolve itself in an ugly way,

but I wasn't going down with the ship," Kraft said in an interview yesterday. "Luckily we were very nimble and able to move" when the crash call obviously wasn't panning out.

Nimbleness (or is it "nimbility"?) notwithstanding, the year-to-date performance of Kraft's fund went from as high as up 62% to as low as up 36% during the past two months, he said, calling a short position in

Merrill Lynch

(MER)

the biggest "loss of note." Through Tuesday, the fund bounced back to up 47% year to date, thanks, in large part, to a long position in

Qualcomm

(QCOM) - Get Report

, since unwound.

"We had a Draconian

fundamental view and got a sell signal from two indicators that don't give signals that often and went very short. We basically braced ourselves for the big one," the hedge fund manager said, offering no apologies. "At the end of the day, we're doing well, our clients are doing well and the portfolios are doing well."

Now, Kraft foresees the market hitting some "sideways action" for a few days before it's "off to the races again" until at least mid-December. "I'm willing to debate our fundamental position with anyone, but the

Fed

was able to keep it together."

Funny, I always thought it's love that keeps us together.

Things That Make You Go ... Duh!

So I'm walking home last night, feeling pretty good about my

column on the

Nasdaq

trading shutdown. Then it hit me (one time) like a ton of e-bricks: In its statement, Nasdaq said, "The specific cause of the disruption in service is still under review, but is believed to be related to an

interday sic software upgrade that was put in place to respond to today's heavy volume

."

I've added the italics because what hit me (two times) was that

last week, Nasdaq's spokesman Scott Peterson said the Nasdaq system can handle 4 billion shares in a given day.

Yesterday, 1.47 billion shares traded on the Nasdaq, admittedly a record (until

today ), but a far cry from 4 billion. So what necessitated the upgrade?

I tried Peterson repeatedly today. He got back to me well after 5 p.m. on the East Coast and sounded harried, admitting he didn't have a "good answer" to that question.

A request to speak with Nasdaq Chairman and CEO Frank Zarb (or any other exchange exec) was fruitless at that late hour, but I asked anyway. Peterson didn't get back to me tonight. If and when he does, I'll ask that question again, as well as if Nasdaq officials feel the system is ready for decimalization and how they're dealing with complaints from traders and market makers about the recent snafus, etc. Certainly, I'll air the replies to those questions when (or if) they get back to me.

There were apparently no problems with the Nasdaq system today, but the head trader of one West Coast brokerage reported an outage lasting more than 10 minutes at the open this morning in

Instinet

, an electronic communications network and a unit of

Reuters

(RTRSY)

.

"These billion-share days sure put a strain on all the systems. If you can't access something, you're dead," he said. "All bids and offers were suspended. I had a bunch of orders and wanted to make sure they weren't suspended. They weren't, but I couldn't retrieve reports" confirming the execution.

An

Instinet

spokesman did not return a phone call seeking comment.

Anybody else see a pattern here?

Signs of the Apocalypse

Track Data

(TRAC)

trumped those looking to get a bang from the "announcement of a pending announcement" fad. Today, the company announced in a

press release that "after two straight weeks of daily press releases," it had "no news to report."

Track Data shares slid 15/16, or 5.9%, to 15 today (perhaps in reaction to this news vacuum?).

Repeated phone calls seeking confirmation of the veracity of the release were not returned. But a colleague in New York said he was the recipient of an affirmative reply to a similar inquiry.

"I want to apologize to our faithful stockholders who are looking each morning for our latest corporate developments," Barry Hertz, Track Data's chairman and CEO, said in the statement. "Rest assured that we do not take this lack of news lightly. The management team at Track is continuing to structure deals, identify new business opportunities and develop new products. I was assured today by our CFO that there will be a news release tomorrow."

I can hardly wait.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

taskmaster@thestreet.com.