In a Fragile Market, a Closer Look at Bear Shenanigans

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It feels like August is going to be about eight weeks long.

That's because the war for control of this stock market has become so intense.

Dow 8000

has become the battle line, with bulls and bears making deep forays into enemy territory. In the past six sessions, the Dow has swung more than 100 points each session -- three up, three down.

There's no question that the battle is starting to wear on the bulls. Too much volatility -- in both directions -- has the bull camp getting more and more fretful that this lovely market will suddenly spin out of control. The bears, happy to draw even a little blood, find themselves invigorated by their recent victories. And in recent days the bears have worked their hardest to seed the market with dire rumors, hoping to prod the market into a terrible spill.

Some wonder about these


conspiracy theories. But let me assure you, the bears in this market are a desperate lot, and will do what they can to secure any type of victory. Here's how the bears work the game from the journalist's perspective.

On Thursday, as stocks began moving lower, a short-seller I know called me. In that stage whisper that shorts reserve for moments of great intrigue, he says: "


has dumped his

Wells Fargo

position. It's going to kill all the interest-rate-sensitive stocks. Banks, insurance, brokerage firms. It's not out there yet. You can break this story."

I spring from my chair, running to deploy reporters to track down the Buffett news. The banks are selling off. Wells Fargo is in free fall. I know in my heart that the phone caller has gone short Wells and is now calling the press to leak the news and make his position a winner. But we want the scoop! It's Buffett for crying out loud.

As we dig, we discover confusion. The


filing is not a standard 13-D, but some other thing. The stock keeps tumbling. We have analysts on the horn, we are vetting this story. Then


reports that Buffett is dumping his Wells Fargo. Chaos ensues as banks get hammered, and the Buffett stocks start to deteriorate.

But we are not so easily fooled. One of my guys says: "This isn't right. The company is telling me this isn't right. And an analyst I spoke to says Buffett's people are saying this isn't right."

And it wasn't right. Buffett wasn't selling. The shorts were. The truth soon came out, but it offered little balm.

There's no question that the battle for Dow 8K has become a major campaign in this bull market. The bulls still have the more persuasive case. The settlement of the


strike, painted as an inflationary win for the bears, is nothing of the kind. Workers are getting let go and UPS needs to slash prices to win back customers who have discovered Bob's Air Freight can also deliver overnight for cheap.

As for the fretting about 1987 redux, forget about it. Richard Bernstein, director of quantitative research at

Merrill Lynch

, points out this week that rates are coming down, inflation is benign and the market's fundamentals remain in check -- completely the opposite scenario from 1987.

"Comparisons with 1987 are completely inappropriate," he says.

Amen to that.


Editor's notes:

How about reader

Mark Johnson

and his totally correct call on the

Insana Effect

? Mark, in a submission to the e-mail to the editors column, showed that when Ron Insana hosts


Street Signs program from the floor of the New York Stock Exchange (usually done during times of anticipated crisis), the market starts to bounce. Mark's 1 p.m. letter was deadly accurate. You could've made a few day-trading bucks with that call!

...I understand why some of these West Coast-East Coast mergers can get interesting. As our new site came online Thursday evening, we in New York chewed fingers, paced and screamed at the walls. In the Pacific Northwest our partners at


were cool as cucumbers, chatting amiably through a handful of early glitches. You could hear the bellbottoms over the phone. Bottom line: The job got done remarkably well. We're just a little twisted here in New York since we hear from a fire-breathing dragon on a daily basis. You get one guess.

...The Aug. 4 Editor's Column made the case for

Advanced Micro Devices

(AMD) - Get Report

. After fumbling along, the generic chip maker landed a solid contract with


(IBM) - Get Report

on Monday. That should help AMD's cause. Its stock is up about 12% since that column ran.