Archived Repost: Depressing Rally - 15 October, 1998

The following is archived from The Contrarian - notes from the wall street underground; I published October 15, 1998. This day was the first and heavy thrust from the bottom coming off the 1998 bear market low. The Nasdaq traded as low as 1,492.40 the previous week, and worked towards its ultimate top of 5048.62, one and a half years later.

The 1998 low culminated with the blow-up of Long Term Capital Management (LTCM). Emotion was running high during this period, and while leadership stocks were considerably strong, especially in terms of relative strength, sentiment in the investing community was resolutely negative.

The material is poorly archived, as it was published pre-Blogger and with a password-protected site. I'm typing-up these now because I am using the material on a related work.

The Contrarian is based on Dostoevsky's Notes from Underground.

Thursday October 15, 1998
Depressing Rally

It's uncanny, really. I can't remember a time the Dow rallied 300+ points and folks seemed so little pleased. Where are the happy campers? Where is the goofy celebration that normally caps such a momentous day? I'll tell you reader, I recognized pain - real inexorable pain out there by the end of the day. Skepticism for sure, but more significant was the pain this explosive rally seems to have created. These people are absolutely unhappy, in disbelief, or worse - they're bloody SHORT!

Okay, it's not the majority who are short here, but I'll tell you there is angst out there. This is the most disappointing huge day on Wall Street I've ever seen. Today was the 3rd biggest point rally ever in the Dow and yet there's a kind of despair out there. I'll tell you what it is. It's the sorry fact that investors, long-term investors no less, sold out of their portfolios in a panic last week and missed today's explosive, foolish rally.

It's terrible, really. To have held onto their portfolios through all that pain, right through to the end last week when it was finally clear there is some kind of problem in the world and stocks had to be sold. Only to have the market take-off again now without them, before they've had time to adjust their perceptions more positive. It's altogether unkind.

I know you think I'm being arrogant, but that's not really the case. So what if cautious folks sold out their stocks, I am the bigger fool. Yes, I may be the world's greatest fool. Perhaps you're down on your portfolio this year, and of course it would have been nice to be a buyer of quality last week instead of finally selling those loser stocks you held for so long. But look - you have a normal, respectable life compared to me. You'll bounce back. But me, reader, I am an insect. A foolish little bug. I live in a hole and I rarely (never really) go outside - I can't risk the good cheer. My biggest draw-downs, you see, my greatest portfolio disasters, have all followed periods of enjoyment and self satisfaction. I had to put a stop to that. For the sake of future gains, I had to make myself more miserable than even you!

Anyhow, we must address this incredible marketplace. This Sebastian of growth. This depressingly large rally and its significance. Yes, my dears, it is not insignificant that the Fed did cut rates today. And that so many now are skeptical following a session whereby up-volume topped down-volume by a nine to one ratio. Indeed, this is confirmation now that one, this market bottomed last week (Root Canal Bottom), and two, it is going much higher. The other day I mentioned I must be the biggest bull on Wall Street. After today's rally, and with all the cautious forward forecasts, and continual questions of liquidity crisis' and looming recessions, etc., I suspected I was the only bull on Wall Street. Not true, of course, but I would not put a top on this market yet, my friend. As fun as that will be, I must expect now that we will make new highs in the intermediate term, and that includes the Russell 2000! Yes, I am crazy, I have told you that. But you will hate me when the Russell makes new highs.

Tomorrow, or by Monday I should warn you, I'm going to be a net seller of stock. When I get this excited I must always lighten up - I've learned that. But I refuse to sell low tomorrow, and if the market is only down tomorrow I will go back into margin, buying more stock instead. In fact I hope they sell-off early tomorrow, at least. My suspicion is we will, if only to allow the frustrated chorus another song: "...the buying was overdone; the rally was largely short covering and option-related activity; one had to expect stocks to cool-off." Yes, I can almost guarantee that at some point tomorrow, or at least by Monday, stocks are going to rally much higher still. Then at the point sentiment shifts from prudence, skepticism and disbelief, to where people are actually seeing bullish, I will lighten things up - for the near term at least.

These include: KNDL, PPDI, GENZ, SEPR, ENMD, INTC, ORCL, MU, YHOO, AOL, CSCO, LIPO, NEM and PDG. I'm not selling any Japan though. It will be a while before anyone likes that trade enough for me to hand it over to them.

Bah!

Repost - The Contrarian: On Heroes and Chiefs (22 Oct, 1998)

I'm going to start punishing you guys, as an aside, primarily to use you whilst working on a related project. Stop reading now and you're off easy!

You'll see too - I'm old suckers. Old like the fine-rug outlet that's been going out of business in your town for 20 years!


The following is from an early online stock market newsletter (The Contrarian - notes from the wall street underground), published in 1998 and 1999. The material is poorly archived, as it was published pre-Blogger and with a password-protected site. I'm beginning typing it up now because I am using some of the material on a related work. That's what I get for being born too soon - I get to re-type shit 12 years later. I'll be mixing these in with my usual amount of too-little work on the blog here, so just learn how to ignore them as we go forward ;^)

Thursday, October 22nd, 1998
On Heroes and Chiefs

Crash and burn - look out below. Did anyone notice Time and Newsweek nailed the bottom in the market - again! Now, two weeks later, the world is a much saner place, but there's still risk - it's choppy out there; be wary; don't be a hero.

I don't mean to be sarcastic (of course I do) but every time the market started a wave down this week the sentiment immediately crashed. CNBC had been running story after story, question after question, considering the possibility that we're in a bear market bounce, while guest after guest has confirmed that risk still outweighs reward, that we're near the upper end of the market's trading range, and caution is recommended. I'll tell you this: the market has been nothing but up for two weeks, and yet put buying has not let up. Near term pullbacks are going to be short-lived and largely a blue-chip affair. And these same cautious people will see safety in higher prices! It's always that way at a bottom - no one wants to stick their neck out too soon - not until the market proves it can rally 30 or 40%. Yes, give the public 30% and things certainly seems safe again.

I'm still holding plenty of stock, you may have noticed. And according to some I'm about to get nailed. I'm taking on too much risk, especially with these small caps; the Techs; the Biotechs and - God save his soul - the Internet stocks. But I am insane, dear reader. You have come to know that. I even bought back into my gold stocks the last two days.

Okay, speaking of heroes, I can't let this go. It's fire season again. Not a terrible time really, except for all the woo over firemen. I get so sick of these guys, riding around and making big noises - the blowhards. It amazes me how everyone only loves them. "Oh, they worked non-stop for four days battling that blaze - what heroes." Meanwhile, the rest of us work all year long. They get away with murder, I tell you. Hell, half the fires out there must be caused by you know who - firemen!

Then there's the paramedics (you were right to bring them up). They're no better. Out there busting their asses every day saving everyone's lives - bullocks! In New York they will run you down in the street if you don't scramble fast enough; all for some fossil or other they're trying to revive. I wouldn't be so sure. I've seen these people. They hate their jobs like everybody else, and like everybody who hates their job they want revenge; they want sabotage - anything to break up the monotony. And if they're willing to run you over out of sheer boredom, I'd hate to know what they're up to in the back with those suckers they bring in. Just stop with all that noise and and I would despise them only half as much. The Coast Guard, Search and Rescue...thank God I don't have to hear the likes of them. They're worse no doubt.