Greetings, stock investors---
Do YOU know why the stock market will crash suddenly?
Of course, you do.
In this age of instantaneous information accessible via the Internet and global telecommunications, a point of investment peril will be reached wherein a multitude of investors will experience that infamous "collective dope slap" and immediately panic by selling fragile stocks.
The crash will be known within seconds via the Internet. Those who are not connected will be at a loss. Those who are cybernauts will click their *SELL* buttons and pray for a speedy exit. This MASS EXODUS will be global and immediate! There will be few second thoughts as the majority of investors rush to exit and sell at whatever they can get. There will be MAMMOTH LOSSES WITHIN SECONDS!
However, the sudden infusion of MANY SELL CALLS will result in SUDDEN DEATH causing many to lose their entire investments.
This post is a warning of what will soon come to pass...
-- dinosaur (dinosaur@williams-net.com), March 25, 2000
Answers
how soon?
-- Squirrel Hunter (nuts@upina.cellrelaytower), March 25, 2000.
When the great prophet Abby Joseph Cone(head) say's sell!
-- birddog (dog40856@aol.com), March 25, 2000.
Yep, just watch for the lips to move next year.
-- Alert (thinker2000@lycos.com), March 26, 2000.
Dino,
Ever heard of market curbs and circuit breakers? No, probably not,
since your main purpose seems to be spreading your own unique brand
of fear and disaster. You can find information on why your "warning"
is wrong at http://invest-faq.com/articles/exch-circuit-brkr.html.
The markets can't fall more than 30% in one day. If that ever happens
(and it hasn't yet), the market is closed for the day. In addition,
the computers are turned off and trading is done by hand once other
lower curbs are reached.
You can't lose all your money in seconds. Period.
-- Jim Cooke (JJCooke@yahoo.com), March 26, 2000.
30% in a DAY! If that's not F-A-S-T, I don't know what is!!!
-- Gotta (LookOut@Below!.com), March 27, 2000.
There's a difference between fast and "MAMMOTH LOSSES WITHIN
SECONDS". 30% would be about 4000 points, a highly unlikely scenario.
-- Jim Cooke (JJCooke@yahoo.com), March 27, 2000.
In my understanding, the sell programs actually get "adjusted"
even sooner than that; market "curbs" first kick in on a 10% drop and
trading is done "by hand" for the next hour. Jim Cooke's correct,
however, in that a 30% drop gets trading "collared" (shut down) for
the rest of the day to let everyone take a nice, deep breath.
MAMMOTH LOSSES IN SECONDS? Well, I suppose if someone's been stupid
enought to margin themselves to the max and use unsecured credit
and/or a second mortgage to "play the market", even a 10% drop would
hurt them pretty badly (through the dark magic of margin
multiplication and mandatory "calls"). Stupidity can get you hurt, no
doubt about it.
I don't think it will happen all in a day, friends. The real market
crashes (even 1929) took place over many weeks. They had their big,
black days, but it was the long, slow, agonizing declines that really
took the markets down to their lows.
-- DeeEmBee (macbeth1@pacbell.net), March 27, 2000.
Hmmmm...
I posted that reply late last night, then today came across this
most interesting article cited in Bill Fleckenstein's The
Contrarian:
SAM
ZELL
BY TERRY SAVAGE SUN-TIMES COLUMNIST
`We're in the midst of a revolution . . . but that revolution doesn't
change the basic laws of economics."
Sam Zell has experienced volatile and extreme markets, but he ranks
today's
dot-com valuations among the most highly irrational.
"In `Jack and the Beanstalk,' Jack discovered that the beanstalk
doesn't grow all the
way to the sky. In order for a stock to grow, you always need
someone willing to
buy it from you at a higher price than you paid for it.
"Little by little, as valuations escalate, the absolute dollars
required to keep the stock
where it is keeps going up exponentially."
[snip]
On greed
"A venture capitalist in the early '80s would tell you that the
formula was to make 10
investments--and hope for one home run, a few in the middle, and only
one or two
losers. But the home run would return 10-1, and make up for the risk.
Well, today
the expectation is that the home run will return 1,000 to 1. And all
of a sudden, that
possibility changes your entire risk profile, your willingness to
take on risk. And
that's what's attracting all the money."
As for the public, he notes, "I recognize the siren song that's luring
everyone into this
world is as alluring as it's ever been. . . . There's a belief that
there's no perceived
risk. And life is full of historical examples where there was no
perceived risk. That
always came just before the crash. If you're going to be investing in
this arena, you
always have to take some [profits] off the table. Take as much as 80
percent off the
table."
On markets
"It will probably end slowly rather than with a 1,000-point drop in
one day, primarily
because it's tough to convince people who've been winning that the
game has
changed. The whole new wild factor is all these individual investors
who don't have
the discipline of the pros. The market will go down, and they'll say,
`Oh, another
dip, a chance to double up.' But as the market keeps declining,
they'll run out of
money, and we'll get back to reality."
Zell notes that margin debt is now at record levels. "Maybe it ends
because the Fed
says, `OK, margin is now 65 percent instead of 50 percent [down
payment] to buy
stocks. There's no 15 percent additional out there to meet that
margin call."
On Greenspan
"If I were [Federal Reserve Board Chairman Alan] Greenspan, that's
what I'd
do--raise margins. It's more effective than anything else he can do.
Greenspan's
really talking about the fact that we have this extraordinary,
speculative environment,
and it's dangerously distorting the entire economy.
"In 1990, Citibank almost went broke because they had a staggering,
$23 billion
exposure to the real estate market, which had been distorted by
unprecedented
capital pouring in during the '80s. It kept the economy going, but
eventually we
recognized that everything built in the last five years was worth
less finished than it
cost to build. That's the kind of distortion we're getting in tech
stock valuations
today."...
Stocks can and usually do go down much faster than they went up. There
is nothing holding up tech valuations but sentiment and psychology.
Cisco passing Microsoft for biggest market cap is just the latest in a
whole slew of ridiculous events in the markets. Folks just keep
"buying the dips" in the sure and certain hope that the markets will
just keep going up, up, up. Truly amazing...
-- DeeEmBee (macbeth1@pacbell.net), March 27, 2000.
Uh, because if it goes down slowly it's not a crash?
-- Flint (flintc@mindspring.com), March 27, 2000.
DeeEmmBee:
Thanks for the post form the Contrarian. I saw another article, which
I no longer have a link for, that described the same type of mania
and speculation. It was written in 1835 about railroad stocks. I
don't know if the dotcoms of today are like the railroads of 1835 but
it's something to think about.
The margin exposure sure bothers me though. Where do you think that
this growth in margin accounts is coming from? Pros or the general
public trying to get in on a good thing?
-- Jim Cooke (JJCooke@yahoo.com), March 28, 2000.
The Trouble With Bubbles
http://www.worldlink.co.uk/articles/30031999125222/21.htm
-- (trouble@with.bubbles), March 28, 2000.
Jim -
IMHO, the willingness to work on margin is inversely proportional to
the perception of market risk, i.e., the greater the sense of risk,
the less likely someone is to use margin. There is currently a broad
consensus that the markets will not be allowed to fail, thus
encouraging a trading or gambling mentality. Dr. Greenspan's actions
over the past few years have created a very real "moral hazard", in
that the majority of the investing public are now behaving as if the
risks in equities are much, much less than history would seem to
indicate, and that the Fed (or someone) will step and put a stop to
any serious market drops.
Grocery clerks are touting penny stocks; I heard one at Albertson's
just the other day. Ads for day trading and online investing
systems encourage individuals to "take control" and "play with the big
boys". The markets have taken on a casino atmosphere, so why wouldn't
folks use credit cards and all other forms of leverage to join in the
"fun"? Sad, really...
If you haven't already come across it, I recommend a very clever site
called iTulip.com, which has tons
of info on bubbles and manias.
-- DeeEmBee (macbeth1@pacbell.net), March 28, 2000.
Well, well, well...
It appears that the SuperBull herself, Abby Joseph Cohen, is now
recommending that investors "take a little off the top" and convert 5%
of their equities to cash: Thanks
to Abby, Market Set to Dive
By Thomas Lepri, Staff Reporter, 3/28/00 9:18 AM ET
Stocks seemed to be having a pretty tough time figuring
out what to do with themselves before Goldman Sachs
strategist Abby Joseph Cohen showed up.
Cohen, generally regarded as one of the
bull market's most emphatic supporters,
has cut her recommended exposure to
equities by 5 percentage points to 65%,
in the process upping her exposure to
cash by the same amount. Her
balanced aggressive portfolio now looks
as follows: 65% equities, 27% fixed-income, 5% cash
and 3% commodities.
What heresy! No one must allow any funds whatsoever to be out of the
market! We must all be 100% invested, preferably in tech stocks, which
will continue to return 50-100% every year forever! 8-}
-- DeeEmBee (macbeth1@pacbell.net), March 28, 2000.
DeeEmBee:
The amount of people who are trading on rumors and using money they
can't afford to risk is the one parallel with the 1929 market that
really bothers me. These are the people most likely to bail when the
going gets choppy and exacerbate a market plunge.
I've been transferring some of my stock profits to cash over the last
4 months. It seems silly not to take some profits in the face of the
recent runups in equities. I've made as much in the market in March
as I usually make in one year of working so, at some point, not going
to cash is just pure greed. And, you can't go broke taking a profit
:^)
-- Jim Cooke (JJCooke@yahoo.com), March 28, 2000.
http://www.investech.com/others/chart.cfm?id=102
The bigger the Bubble... the louder the
"BANG"?
March 13, 2000
Total net earnings among the 4800+ domestic Nasdaq stocks actually
declined from January to February, as more and more companies adopt
the "new
economy" business plan: spend today, earn tomorrow... or
whenever. That, in conjunction with soaring valuations, sent the
cumulative Nasdaq P/E
Ratio even further into the stratosphere. The latest formal number
released for February (direct from the Nasdaq Exchange) is 245.7,
while our
"unofficial" estimate for March 10th is 264! If investor psychology
is endangered by a high-tech "bubble" on Wall Street, then this
represents an awful
lot of hot air just waiting for that first pinhole...
Hi, Chuck. Glad ya dropped by!
Cohen's call to essentially "take some off the table" echoed through
tech today - took longer than many predicted. Nasdaq will likely test
recent low of 4600. If it finds support, the party continues. If not,
next level is around 4400. Below that (and frankly most unlikely,
given current "true believer" psych re tech) is around 3900.
Anyone else see the current Business Week? Excellent cover
story on Wall Street's Hype
Machine:
COVER STORY
Wall Street's Hype Machine
It could spell trouble for investors
David Talevi wanted to take hold of his financial future--and he did.
The 32-year-old Talevi, who runs a trailer park in Wells, Me., decided
to open an online brokerage account. It was easy--just as it was in
the TV commercials.
''They talked about low-cost trades and ease of use. You can make a
bunch of money--you heard them all, they're still playing them,'' he
says. In the words of the young woman in the Ameritrade brokerage ad,
he didn't just want to beat the market, he wanted to ''throttle its
scrawny little body to the ground and make it beg for mercy.''
Talevi put a TV near his computer. He started buying and selling
stocks featured on CNBC--only to find that the stocks moved in the
wrong direction by the time his trades were executed.
He listened carefully to the CNBC pundits when the market turned sour
in September, 1998. ''All the panelists they had on the TV were
saying, 'This is it, we're finally right. The bubble's going to
burst.''' So he bought a mutual fund designed to move in opposite
direction to the market. And sure enough, the market went up--and his
portfolio went down. He kept on watching CNBC and trading stocks
through 1999. By the time he gave up in disgust, a few months ago, he
had lost $40,000.
Welcome to the Wall Street Hype Machine. True, there have always been
losers as well as winners in the stock market. But never before has
Wall Street raised expectations quite so high--and never before have
the media joined in quite so willingly as cheerleaders and
stock-pushers. According to Competitive Media Reporting, a New York
research firm, brokerage-firm advertising zoomed 95% last year, to
$1.2 billion, and is now three times ad spending five years ago.
The brokerage campaigns that lured Talevi are part of a marketing
juggernaut whose dominant message is simple: Wall Street can make you
rich--and fast. There is only one problem with this message. For most
people, it's just not true. So far the pain has been limited by the
market's overall advance. But if the market turns south, the
disappointment--and wreckage--will be considerable...
Article goes on to thoroughly document the current market
mania, including comparisons to previous bubbles (1901, 1929, etc.)
and a profile of the phenomenon of
market-analyst-as-shill-and-superstar. Recommended reading.
-- DeeEmBee (macbeth1@pacbell.net), March 29, 2000.