Grading on a Curve
report card elicited strong reader feedback (thanks), much of it positive and much of it urging me to reconnect with the bears and hold their paws to the embers. Ronny Kraft, CEO of
Gotham Capital Management
, was singled out by several emailers as a candidate for a follow-up, as well as for some less pleasant endeavors.
"Dear TaskMaster: The only place for this Kraft is on my deli sandwich," one reader wrote. "Another
foe bites the dust."
Well, I can assure you Kraft is alive and feeling very well after
today's setback for stocks and bonds.
"The crash is happening. Game over," the hedge fund manager said in his typically understated style. "The selloff begins today."
Kraft observed the
Dow Jones Industrial Average
has made a series of "lower lows" since the end of August and believes the decline today augurs the lowest low of all for the cycle (not to be confused with the greatest love of all).
In addition to today's market action, he seemed downright giddy about
profit shortfall. After the bell today, Intel
reported third-quarter profits of 55 cents a share vs. the 23-analyst estimate of 57 cents. After closing the New York session at 76 11/16, Intel was quoted as low as 71 1/4 in after-hours trading. (For more on the numbers behind Intel's numbers, see
Kraft believes today's report vindicates his
skepticism about the chip company's second-quarter results, which also fell shy of expectations. He was further dubious about Intel's claim its fourth-quarter revenue and gross margins will exceed third-quarter results. Gotham Capital is short Intel.
"Intel last quarter talked the talk. Now it's time to walk the walk," he said. "This, in my opinion, is going to go down as the biggest channel-stuffing of all time," Kraft added, referring to the practice of pushing inventory out to vendors and customers in order to bolster the current quarter's results.
Finally, Kraft noted the coup in Pakistan could be the catalyst for the big downturn he's forecasting.
While cautious about "inflating Pakistan to levels unnecessary, the reality is you have a military coup to overthrow a government that possesses nuclear weapons," he said. "Pakistan is on the periphery but it's concerning. That's why the bond market got a little bit of a bid into the end of the day."
Be it Pakistan's coup, tensions between China and Taiwan, rising crude prices, the short position in gold, or any of a number of other issues, it seems Kraft has been on a never-ending search of late for
that will ignite a big downturn. Still, I give the guy credit for sticking to his guns.
Moreover, he earned a soft spot in my heart today by pointing out the dramatic solemnity expressed by
in their reporting on Intel's "shocking" profit shortfall.
It's called "overacting."
On the Other Hand
For a completely different view of the world (and the stock market) we turn to Peter Canelo, U.S. investment strategist at
Morgan Stanley Dean Witter
, who maintains a long-term bullish view while acknowledging the short-term obstacles in the market's path.
"My view is that the
not raising rates last week was bad because now we have another month of this torture, this great cloud handing over us," Canelo said. "You have to go through another week or two of nervous markets."
The strategist believes the big challenge facing the central bank is determining whether signs of rising inventories is "real demand" or due to anticipation of Y2K.
and the gang decide the course of interest rates at the
November meeting, the financial markets will celebrate, he predicts.
He forecast the long-bond yield will soon exceed 6.25% -- which isn't exactly a bold prediction at this point. But he also said, "I don't think it goes much beyond that" -- which is bold, given the level of negativity in fixed-income markets these days.
"I don't know if you'll need a precipitating event, but once everybody has bailed out
of bonds you'll see a reversal," he said. "There's such incredible bearish sentiment in bonds it's pretty obvious people have been bailing out of bonds for many reasons. But there comes a point where the last seller's sold and it's time to buy."
At that juncture "in the not-too-distant future," a "rally phase" will begin in both stocks and bonds, Canelo said, taking the former to new highs in the process.
Kibbles & Bits
Today's story in
The Wall Street Journal
about Pittsburgh selling muni bonds online is a great example of how the Internet is changing just about every aspect of the financial world. But the
missed a much more compelling story.
announced the launch of an online bulletin board for coal trading.
"Coal trading has evolved significantly in just the last two years, and our coal trading quote screen truly moves the market forward by creating virtual trading networks using the Internet," NatSource president Jack Cogen (having to do with cogeneration?) said in the firm's press release.
Yes! You heard correctly ... now all your coal-trading needs can be met online via
. Moreover, this development in coal moves follows similar advances in the markets for sulfur dioxide and various oxides of nitrogen emission credit trading.
Happy days are, indeed, here again.
Yesterday's report card omitted the performance of
, which was recommended by
Salomon Smith Barney
equity strategist John Manley on
Sept. 9. Through yesterday's close, the stock is down 27.1% since then. Also, the table incorrectly identified
. From Sept. 9 to Oct. 11, Lincoln National dropped 15.8%.
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