Jim:
How do we explain
the fact that the
market looked like
it was going to be
down 400 points last
night when I went to
bed... that was
supposed to be
completely and
utterly annihilated
today, laid to
waste... and yet the
Dow Jones average
ended up an
incredibly bullish
65 points... How
about the NASDAQ?...
Up 32... that's what
I call a remarkable
turnaround...
But, before we can
come up with a Game
Plan, we need to
understand what the
heck is going on
here... We were hit
with the biggest
hedge fund scandal
ever... and alleged
Ponzi scheme that
could create $50
billion in losses,
courtesy of some guy
named Bernie Madoff...
who almost nobody
had ever heard of
until this
morning...
Then, the Senate
Republicans killed
the auto bail out...
Today should have
been a short sellers
paradise... Instead,
the shorts all came
in to work today,
all hung over...
they had seen the
futures last night,
right?... And they
spent the whole
night drinking
Cosmos... to
celebrate what
should have been an
enormous victory!...
that turned out to
be the jaws of
defeat... No 500
point selloff
here... we closed up
65...
That's not just
because one of our
three presidents...
the three being
George Bush, Barak
Obama, and Hank
Paulson... who has
been at least as
powerful as the
president ever since
the TARP gave him
the authority to
mandate whether
whole industries
might live or die...
Paulson said that he
might use the $700
billion that he has
in his back pocket
to save GM... That
does make things
better, but it still
doesn't explain all
the action... I have
to tell you
though... I find
myself momentarily
befuddled... now
that Paulson has
finally done
something right...
Look, it's hard for
me to believe, and
even harder for me
to say... but
Paulson actually
did... he did
good... and then I
think of the old
adage... about a
broken clock being
right couple of
times a day...
See all
of
tonight's
stocks
mentioned
on
Yahoo!
Finance,
here...
Friday,
December 12, 2008
(Cont'd from
above)...
Jim (cont'd):
What we saw today
was much bigger than
Paulson, getting
with his five-year
plan... This is a
market dominated...
and I worked all day
on this analogy...
this market is
dominated by the two
Jacks... I'm talking
Jack Nicholson,
first as Jack
Torrance and "The
Shining"...
I mean, he's been in
charge ever since we
started coming down
from Dow 14,000...
when the euphoria
was palpable than
and everyone just
wanted to buy, buy,
buy... The bears
burst in burying
axes and asked, not
plaintively, "Here's
Johnny!"... that's
right, "here's
Johnny"... were the
bears...
Since then, we've
seen stocks
destroyed left and
right... as everyone
sold aggressively...
That was the first
Jack... Jack
Torrance... all work
and no play make
Jack a very dull
boy... good to be
back, Lloyd...
But today, we saw
the second Jack take
over... Jack
Nicholson as RP
McMurphy, at the end
of "One Flew over
the Cuckoo's
Nest"... Jack
Nicholson,
post-lobotomy!...
This is now a market
where everyone who
wants to sell has
sold, and the only
people left are the
comatose... the
lobotomized... and
the buy-and-hold
types who believe
that selling is
always wrong...
The sellers have
completely and
utterly exhausted
themselves to the
point where people
don't even sell when
they hear about
Bernie Madoff's
alleged Ponzi hedge
fund scheme... or
the eminent
destruction of GM...
one of the largest
companies in
America!...
Everyone that has
sold has already
pulled a "Elvis has
left the
building"...
Look at this way...
the market is always
driven by supply and
demand for
equities... I'm not
talking about supply
and demand in the
real economy... what
does matter to us...
the actual supply
and demand for
stocks!...
We've now reached a
point where there is
no supply... this is
now economics 101...
when there's no
supply of sellers,
even bad news can
knock us down...
When we were at Dow
14,000, we ran out
of demand for
stocks. Ever since
bouncing back from
close to Dow 7000,
we've been low in
supply... there's
nothing to buy...
the hedge funds and
put an end to
redemptions...
Then there are all
these people who are
down 40% for the
year, and only have
18 days left to make
up a lot of points.
They can't make
those points out
unless they buy,
buy, buy...
You got funds now
they're willing to
make themselves
right by buying, in
order to move their
stocks higher. This
is the classic end
of the year gambit,
because they know if
their stocks don't
move, they are dead
anyway...
Why does all this
matter?...
Because hedge funds
take their cue from
the action... Their
experience is that
when you get bad
news, sellers
materialize... they
are short in stocks,
letting against
them... and, even if
they could've
predicted the
collapse in Madoff's
hedge fund, and the
death of the auto
bill in the Senate,
which would be like
hitting the
investing home on a
lifetime, it's not
making them any
money, because
stocks just aren't
going down. I found
myself at one point
today crying for the
hedge funds...
crying for their
inability to make
money on the short
side... Now, if this
happened in me back
when I was at my
hedge fund, if I
felt like everything
I had done was
wrong... what I
first did was that I
would either fire
everyone...
fortunately its
smallest guy in the
room, because that
would be the guy
that I would least
fear... and then I
would throw things
at them like
keyboards...
Then, when I had
exhausted all those
methods and myself,
I would say, you
know what... I know
nothing, and I would
cover all my short
positions... and
just say listen,
I've got to take my
bat and ball and go
home... until I can
figure things out.
That's what money
managers are doing
today... they are
changing their bias,
because the market
didn't get crushed
on terrible news.
That's bullish...
We were just happy
that the world
didn't end... the
earth didn't stand
still... that's how
well everyone's
expectations are...
Your Game Plan is to
continue to do
what's worked all
along... by the
accidental high
yielders... when
they're down, pull
the trigger... and
the recession
resistant names that
are starting to come
back in vogue...
and, of course, the
stocks that are
trading near cash,
because they didn't
go through cash...
That strategy works
in this
environment... you
saw it today...
NYX, it opened at
$25... a couple of
smacker pullback...
and then people
piled in... and
bought more, sending
it higher...
I know, I liked it
yesterday... Of
course, the buyers
will simply conclude
that they are
geniuses and I know
nothing... a fate I
am completely
resigned to...
Here's the bottom
line...
▼ ▼
▼ ▼
▼
The Bottom Line!:
We've run out of
sellers. We got hit
with awful news
today, and the
market came through
with flying colors.
This was the most
bullish day I can
recall since the
market bottomed on
November 21st. The
bears are now
humming a new
tune...
