本文发表在 rolia.net 枫下论坛Timid Turkey: The Market Meanders Along
Vital Signs
TRADING DURING A HOLIDAY-INTERRUPTED week is supposed to lack drama and energy. But the unusual thing about the Thanksgiving week just past is that its relative calmness was hard to distinguish from the months of meandering markets that preceded it.
In fact, with a decent rally on Monday after the first consecutive-week drop since March, the action last week was arguably more eventful than average during a period when the indexes have been caught in a band tighter than the Rolling Stones in their prime.
The Dow Jones industrials added 153 points, or 1.6%, to reach 9782 after an inconsequential, truncated session on Friday, which was treated as a de facto holiday by most market participants. The Nasdaq reasserted itself, rising 66 points, or 3.5%, as the crucial semiconductor sector rebounded strongly. The Standard & Poor's 500 index gained 22, or 2.2%, to close at 1058 and inch back toward the upper end of its longstanding range.
It is through a look at the S&P that the market's hypnotic levitation act is most evident. On June 17, the index reached what was then its post-recovery high of 1011. Since then, it has closed no lower than 965. That's 46 points, or 4.5%, lower. It reached its recent closing high of 1059 on Nov. 3, which represented 48 points, or 4.7%, above that June 17 level.
More recently, the lazy drift has become even more apparent. Since the recent high of 1059 on Nov. 3, there have been five different days when the S&P has closed at 1058 and change. That's five out of 18 trading days when the most important U.S. stock benchmark finished at essentially the same level, almost enough to make the curious and suspicious start looking for the man behind the curtain.
The odd recurrence of particular numbers, according to several market handicappers, is most likely due to the extreme fixation on agreed-upon "important" technical index levels among short-term stock jockeys. This pattern is made more pronounced by the proliferation of trading-oriented hedge funds and the popularity of exchange-traded index funds as the positioning vehicles of choice.
Then there's the acute anxiety among professional investors about falling further behind the indexes either by missing an upside breakout or suffering in a sudden breakdown.
The average large-cap core stock fund -- the fund category with the greatest asset total -- is now trailing S&P 500 index funds by almost 1.5 percentage points year to date, according to Lipper. That's a tough margin to make up in one month, but how much worse would it be to lose more ground?
Meanwhile, short interest has trailed off slightly, as those who look for downside opportunities are wary of historical strength in December and the prospect for a final northward rush in the indexes, should the upper end of the range be pierced.
For most of the last three years, the bulls and bears were playing a kind of aggressive, high-stakes tennis, gunning for aces and winners in the hunt for big moves in individual stocks and indexes. The game, for the moment, has been downscaled to a timid ping-pong match, with each side more concerned with avoiding errors than running up the score.
The economic news has been good enough to keep selling pressure at bay. Nearly three quarters of all the economic data releases in November came in above expectations -- right through last week's upward revision of third-quarter gross domestic product to 8.2%, lower weekly unemployment claims and a surge in consumer confidence.
Yet there's also been a flagging of any buying thrust, except when stocks backslide a bit as they did leading into Monday's 1.6% bounce in the S&P 500. At least some vigor has been sapped from the market by the sliding dollar (it hit a new low against the euro Friday), still-high oil prices and an apparent intensification of terrorist activity.
One of the key tactical points made by those looking for further gains is that the strong and stable market of this year could draw in more idle (not to say dumb) money and thus create fresh demand for stocks. This would lead to a continuation of this year's pattern in which the market makes a move higher, then quietly slides sideways for a long time, then pushes a bit higher.
Plenty of strategists are out there noting that the S&P had a similar struggle over the summer surmounting 1000 before the latest 5% climb was achieved. But "headline risk" could always stanch such a flow.
The UBS/Gallup Index of Investor Optimism rose again in the latest month, to its highest level since Spring 2002. This and other investor sentiment measures aren't yet at alarming extremes of bullishness, but they're more indicative of complacency and contentedness than concern.
Much critical talk has centered on a return to bubble attitudes, but it's hard to make that case on a market-wide basis. Sure, stocks are expensive by many measures, but in most sectors not to bubble heights. The silly, speculative muscle flexing is less epidemic and more episodic, occupying mostly the non-institutional stratum of stocks. (See the following items for some examples.)
Those market commentators now predicting that the bull move isn't yet mature have a hard time using valuation or overly conservative investor expectations in their favor. So the very steadiness and duration of the indexes' advance has become one of the more popular slides in the bulls' PowerPoint presentations.
Various studies review other periods when the market has gone as long as this one without a 5% pullback, while gaining at least 20%. The current stretch is nearing 170 trading days.
John K. Harris, an investor and emeritus professor of accounting at the University of Tulsa, has computed 25 such streaks of at least 100 days since 1942. On average, the first 5% decline occurred when the bull move was only 60% done. Once, in 1961, the first 5% drop marked the end of the upward run.
He concludes from this history that the odds say the market's strength could endure well into next year.
Interesting perspective for what it's worth, though it's never hard to steer historical data in any particular direction. There were also 11 times when a 100-day run without a 5% dip amounted to only slim gains overall, so consistency in itself doesn't guarantee safety.
And remember all the old maxims that have been overturned in the last few years, such as the one about how the market's "always" higher 18 months after the Fed starts cutting rates?
EVERYONE KNOWS THE BURDEN OF those to whom much is given. Yes, much is expected.
Investors have now given technology stocks valuations that match bubble-peak levels, by some measures. Which means that an awful lot is expected of these companies, and for the market's sake they better deliver.
Vadim Zlotnikov, strategist at Sanford C. Bernstein, calculates that 55% of all technology stocks are trading at multiples of forecast 2004 earnings that are twice the market multiple. That matches the percentage of March 2000.
This time, though, the largest tech stocks do not occupy the area of greatest excess. The smaller names, those below the top 200 in market capitalization, now have the most aggressive valuations versus earlier extremes.
To Zlotnikov, this implies that, in order for these prices to be justified by corporate results, profit margins next year will have to expand to levels exceeding those of the late-'Nineties boom days. That would mean that overall tech-company net margins increasing to 8.6% next year from 6.4% this year. Most of the forecast improvement is supposed to come from semiconductor makers and networking companies. Those groups are either benefiting from lots of cost cutting or entering a projected cyclical upswing in demand.
Zlotnikov thinks those margin gains could be achievable. He also believes that Internet companies, for another example, could get to record profitability owing to their maturation and increased scale.
Yet the strategist still counsels that tech-focused investors begin shifting funds out of the aggressively valued chipmakers and communications-equipment stocks, and into more defensive areas such as computer services and software. The latter category includes such stocks as ADP and EDS, both with some stability and value attributes.
This isn't tantamount to a call for imminent collapse in the headiest tech leadership stocks. But unlike many investors, Zlotnikov is looking ahead to a day when today's winners may begin to disappoint.
THE POST-BEAR MARKET RECOVERY NOW displayed on TV and computer screens everywhere differs from those of other eras in a few ways. One is that not all that many failing companies disappeared. Another: The overall market never sank to a level that, in the past, signified cheapness and disgusted neglect.
Those are differences in degree, but a feature unique to today's "echo bubble" is the way in which the instruments and enablers of the prior mania never went dark or left the scene. They remained, like sleeper cells of the small-time speculator movement.
The ultra-cheap online trading, which helps traders flip stock for less than the cost of a movie ticket, has gotten even cheaper. The Internet stock chat rooms, dissonant forums for bluster and contorted reasoning, are still there at their old URL locations. And still around, too, are the cheerleaders who use the new media to generate greedy fervor for small stocks with big stories.
As a measure of how dramatically the speculative impulse has been rediscovered, just take a look at the daily roster of most-active stocks from last week, a predictably inert week for most of the big, important stocks in the market.
Ivanhoe Energy has lately spent plenty of time on the list of most-active Nasdaq Small-Cap Market issues. It's a Canadian company with little revenue, some exploration assets in California and -- here's the part that gets the crowds buzzing -- in China. The stock changed hands under 50 cents on Memorial Day and has shot to 4.35, with average daily trading volume of 11 million shares, more than 10% of the public float.
The company is backed by Robert Friedland, a Canadian mining billionaire who also chairs an affiliated company, Ivanhoe Mines, which has had a similar run based on excitement of Mongolian metals prospects.
Friedland, one of the better known mining promoters in Canada, once ran into regulatory friction related to environmental concerns at a Colorado project several years ago.
Ivanhoe Energy now has a market capitalization of more than $600 million. Revenue over the last three quarters has come in at less than $8 million. Production from the highly touted Chinese properties has run about 500 barrels a day.
The fevered action in Ivanhoe shares has been abetted by recommendations from Thom Calandra, a writer of a market newsletter and a commentator for CBS Marketwatch. Much of the bull case hinged on a possible investment in Ivanhoe's China operation by CITIC, a Chinese government finance operation. That investment came about last month -- but at $20 million for a 40% stake in the Chinese unit, it valued that business at just $50 million.
Clandra discloses in his reports that he owns Ivanhoe Energy shares and traveled to Beijing and Mongolia courtesy of Ivanhoe Mines.
One investment manager who is short Ivanhoe Energy believes the stock "is the ultimate example of what we're seeing in the market," where flimsy companies and hype are driving stocks to wild levels. He believes even if "everything goes right" and the China production reaches 14,000 barrels a day by 2005 or 2006 (an estimate repeated in articles by Calandra), it computes to about seven or eight cents a share in earnings for Ivanhoe.
As if the traders flipping the stock every day are truly interested in earnings, or in a two-year time horizon.
MORE FAMILIAR THAN STORIES OF bountiful oil wells in northeast China are the enduring tales of life-transforming technological changes that float even the most marginal players.
One of the latest crazes to capture investor imagination has been voice-over-Internet protocol, or VoIP, a method of cheaply conveying phone calls by dispersing and then reassembling voice signals. No one doubts this is a viable and growing technology. The question is which companies will genuinely profit from it, and how to value the stocks in the group.
8x8 is a small competitor in this area. It offers a service called Packet8, which lets high-speed Internet subscribers buy a phone adapter and get unlimited calling in North America for $19.99 a month. It's very similar to other offers from more-established companies. And the barriers to entry are rather small -- little more than some networking gear, a bulk purchase of wholesale broadband minutes and a Website.
Yet last Wednesday, 8x8's entire 25 million-share float virtually turned over as the stock jumped almost 80% to 6.77. The stock was up another 76 cents to 7.52 Friday on similar volume, as plenty of hobbyist traders must've taken the day after Thanksgiving off to chase mini-cap momentum plays. Newsletter writer Tobin Smith of Changewave.com also pushed the stock.
The true diluted share count is around 42 million, thanks in part to a recent dilutive private placement that gave some institutions the right to sell the stock below $4.
The effective market value of the company -- which had $4 million in sales during the first six months of the fiscal year, mostly from its unprofitable electronics hardware unit -- now exceeds $300 million.
Part of the enthusiasm for the VoIP story was drummed up by upbeat, televised comments from the CEO of Net2Phone, a much bigger and better-capitalized VoIP provider. More attention came from a Merrill Lynch research report highlighting the move by the Baby Bells into this business.
That's some daunting competition for a company such as 8x8, which has at least three better-known VoIP players to deal with in addition to the Bells.
Also note: As the stock was surging last week and all the millions of shares swirled about, a small number of those shares -- just over 100,000 -- were sold by 8x8's chief financial officer and its vice president for development.
The chief financial officer, James Sullivan, exercised options to buy 62,195 shares at under a dollar each, and sold them all at an average of 5.07. According to Dow Jones' Federal Filings service, that brings Sullivan's holdings back to zero.更多精彩文章及讨论，请光临枫下论坛 rolia.net
Vital Signs
TRADING DURING A HOLIDAY-INTERRUPTED week is supposed to lack drama and energy. But the unusual thing about the Thanksgiving week just past is that its relative calmness was hard to distinguish from the months of meandering markets that preceded it.
In fact, with a decent rally on Monday after the first consecutive-week drop since March, the action last week was arguably more eventful than average during a period when the indexes have been caught in a band tighter than the Rolling Stones in their prime.
The Dow Jones industrials added 153 points, or 1.6%, to reach 9782 after an inconsequential, truncated session on Friday, which was treated as a de facto holiday by most market participants. The Nasdaq reasserted itself, rising 66 points, or 3.5%, as the crucial semiconductor sector rebounded strongly. The Standard & Poor's 500 index gained 22, or 2.2%, to close at 1058 and inch back toward the upper end of its longstanding range.
It is through a look at the S&P that the market's hypnotic levitation act is most evident. On June 17, the index reached what was then its post-recovery high of 1011. Since then, it has closed no lower than 965. That's 46 points, or 4.5%, lower. It reached its recent closing high of 1059 on Nov. 3, which represented 48 points, or 4.7%, above that June 17 level.
More recently, the lazy drift has become even more apparent. Since the recent high of 1059 on Nov. 3, there have been five different days when the S&P has closed at 1058 and change. That's five out of 18 trading days when the most important U.S. stock benchmark finished at essentially the same level, almost enough to make the curious and suspicious start looking for the man behind the curtain.
The odd recurrence of particular numbers, according to several market handicappers, is most likely due to the extreme fixation on agreed-upon "important" technical index levels among short-term stock jockeys. This pattern is made more pronounced by the proliferation of trading-oriented hedge funds and the popularity of exchange-traded index funds as the positioning vehicles of choice.
Then there's the acute anxiety among professional investors about falling further behind the indexes either by missing an upside breakout or suffering in a sudden breakdown.
The average large-cap core stock fund -- the fund category with the greatest asset total -- is now trailing S&P 500 index funds by almost 1.5 percentage points year to date, according to Lipper. That's a tough margin to make up in one month, but how much worse would it be to lose more ground?
Meanwhile, short interest has trailed off slightly, as those who look for downside opportunities are wary of historical strength in December and the prospect for a final northward rush in the indexes, should the upper end of the range be pierced.
For most of the last three years, the bulls and bears were playing a kind of aggressive, high-stakes tennis, gunning for aces and winners in the hunt for big moves in individual stocks and indexes. The game, for the moment, has been downscaled to a timid ping-pong match, with each side more concerned with avoiding errors than running up the score.
The economic news has been good enough to keep selling pressure at bay. Nearly three quarters of all the economic data releases in November came in above expectations -- right through last week's upward revision of third-quarter gross domestic product to 8.2%, lower weekly unemployment claims and a surge in consumer confidence.
Yet there's also been a flagging of any buying thrust, except when stocks backslide a bit as they did leading into Monday's 1.6% bounce in the S&P 500. At least some vigor has been sapped from the market by the sliding dollar (it hit a new low against the euro Friday), still-high oil prices and an apparent intensification of terrorist activity.
One of the key tactical points made by those looking for further gains is that the strong and stable market of this year could draw in more idle (not to say dumb) money and thus create fresh demand for stocks. This would lead to a continuation of this year's pattern in which the market makes a move higher, then quietly slides sideways for a long time, then pushes a bit higher.
Plenty of strategists are out there noting that the S&P had a similar struggle over the summer surmounting 1000 before the latest 5% climb was achieved. But "headline risk" could always stanch such a flow.
The UBS/Gallup Index of Investor Optimism rose again in the latest month, to its highest level since Spring 2002. This and other investor sentiment measures aren't yet at alarming extremes of bullishness, but they're more indicative of complacency and contentedness than concern.
Much critical talk has centered on a return to bubble attitudes, but it's hard to make that case on a market-wide basis. Sure, stocks are expensive by many measures, but in most sectors not to bubble heights. The silly, speculative muscle flexing is less epidemic and more episodic, occupying mostly the non-institutional stratum of stocks. (See the following items for some examples.)
Those market commentators now predicting that the bull move isn't yet mature have a hard time using valuation or overly conservative investor expectations in their favor. So the very steadiness and duration of the indexes' advance has become one of the more popular slides in the bulls' PowerPoint presentations.
Various studies review other periods when the market has gone as long as this one without a 5% pullback, while gaining at least 20%. The current stretch is nearing 170 trading days.
John K. Harris, an investor and emeritus professor of accounting at the University of Tulsa, has computed 25 such streaks of at least 100 days since 1942. On average, the first 5% decline occurred when the bull move was only 60% done. Once, in 1961, the first 5% drop marked the end of the upward run.
He concludes from this history that the odds say the market's strength could endure well into next year.
Interesting perspective for what it's worth, though it's never hard to steer historical data in any particular direction. There were also 11 times when a 100-day run without a 5% dip amounted to only slim gains overall, so consistency in itself doesn't guarantee safety.
And remember all the old maxims that have been overturned in the last few years, such as the one about how the market's "always" higher 18 months after the Fed starts cutting rates?
EVERYONE KNOWS THE BURDEN OF those to whom much is given. Yes, much is expected.
Investors have now given technology stocks valuations that match bubble-peak levels, by some measures. Which means that an awful lot is expected of these companies, and for the market's sake they better deliver.
Vadim Zlotnikov, strategist at Sanford C. Bernstein, calculates that 55% of all technology stocks are trading at multiples of forecast 2004 earnings that are twice the market multiple. That matches the percentage of March 2000.
This time, though, the largest tech stocks do not occupy the area of greatest excess. The smaller names, those below the top 200 in market capitalization, now have the most aggressive valuations versus earlier extremes.
To Zlotnikov, this implies that, in order for these prices to be justified by corporate results, profit margins next year will have to expand to levels exceeding those of the late-'Nineties boom days. That would mean that overall tech-company net margins increasing to 8.6% next year from 6.4% this year. Most of the forecast improvement is supposed to come from semiconductor makers and networking companies. Those groups are either benefiting from lots of cost cutting or entering a projected cyclical upswing in demand.
Zlotnikov thinks those margin gains could be achievable. He also believes that Internet companies, for another example, could get to record profitability owing to their maturation and increased scale.
Yet the strategist still counsels that tech-focused investors begin shifting funds out of the aggressively valued chipmakers and communications-equipment stocks, and into more defensive areas such as computer services and software. The latter category includes such stocks as ADP and EDS, both with some stability and value attributes.
This isn't tantamount to a call for imminent collapse in the headiest tech leadership stocks. But unlike many investors, Zlotnikov is looking ahead to a day when today's winners may begin to disappoint.
THE POST-BEAR MARKET RECOVERY NOW displayed on TV and computer screens everywhere differs from those of other eras in a few ways. One is that not all that many failing companies disappeared. Another: The overall market never sank to a level that, in the past, signified cheapness and disgusted neglect.
Those are differences in degree, but a feature unique to today's "echo bubble" is the way in which the instruments and enablers of the prior mania never went dark or left the scene. They remained, like sleeper cells of the small-time speculator movement.
The ultra-cheap online trading, which helps traders flip stock for less than the cost of a movie ticket, has gotten even cheaper. The Internet stock chat rooms, dissonant forums for bluster and contorted reasoning, are still there at their old URL locations. And still around, too, are the cheerleaders who use the new media to generate greedy fervor for small stocks with big stories.
As a measure of how dramatically the speculative impulse has been rediscovered, just take a look at the daily roster of most-active stocks from last week, a predictably inert week for most of the big, important stocks in the market.
Ivanhoe Energy has lately spent plenty of time on the list of most-active Nasdaq Small-Cap Market issues. It's a Canadian company with little revenue, some exploration assets in California and -- here's the part that gets the crowds buzzing -- in China. The stock changed hands under 50 cents on Memorial Day and has shot to 4.35, with average daily trading volume of 11 million shares, more than 10% of the public float.
The company is backed by Robert Friedland, a Canadian mining billionaire who also chairs an affiliated company, Ivanhoe Mines, which has had a similar run based on excitement of Mongolian metals prospects.
Friedland, one of the better known mining promoters in Canada, once ran into regulatory friction related to environmental concerns at a Colorado project several years ago.
Ivanhoe Energy now has a market capitalization of more than $600 million. Revenue over the last three quarters has come in at less than $8 million. Production from the highly touted Chinese properties has run about 500 barrels a day.
The fevered action in Ivanhoe shares has been abetted by recommendations from Thom Calandra, a writer of a market newsletter and a commentator for CBS Marketwatch. Much of the bull case hinged on a possible investment in Ivanhoe's China operation by CITIC, a Chinese government finance operation. That investment came about last month -- but at $20 million for a 40% stake in the Chinese unit, it valued that business at just $50 million.
Clandra discloses in his reports that he owns Ivanhoe Energy shares and traveled to Beijing and Mongolia courtesy of Ivanhoe Mines.
One investment manager who is short Ivanhoe Energy believes the stock "is the ultimate example of what we're seeing in the market," where flimsy companies and hype are driving stocks to wild levels. He believes even if "everything goes right" and the China production reaches 14,000 barrels a day by 2005 or 2006 (an estimate repeated in articles by Calandra), it computes to about seven or eight cents a share in earnings for Ivanhoe.
As if the traders flipping the stock every day are truly interested in earnings, or in a two-year time horizon.
MORE FAMILIAR THAN STORIES OF bountiful oil wells in northeast China are the enduring tales of life-transforming technological changes that float even the most marginal players.
One of the latest crazes to capture investor imagination has been voice-over-Internet protocol, or VoIP, a method of cheaply conveying phone calls by dispersing and then reassembling voice signals. No one doubts this is a viable and growing technology. The question is which companies will genuinely profit from it, and how to value the stocks in the group.
8x8 is a small competitor in this area. It offers a service called Packet8, which lets high-speed Internet subscribers buy a phone adapter and get unlimited calling in North America for $19.99 a month. It's very similar to other offers from more-established companies. And the barriers to entry are rather small -- little more than some networking gear, a bulk purchase of wholesale broadband minutes and a Website.
Yet last Wednesday, 8x8's entire 25 million-share float virtually turned over as the stock jumped almost 80% to 6.77. The stock was up another 76 cents to 7.52 Friday on similar volume, as plenty of hobbyist traders must've taken the day after Thanksgiving off to chase mini-cap momentum plays. Newsletter writer Tobin Smith of Changewave.com also pushed the stock.
The true diluted share count is around 42 million, thanks in part to a recent dilutive private placement that gave some institutions the right to sell the stock below $4.
The effective market value of the company -- which had $4 million in sales during the first six months of the fiscal year, mostly from its unprofitable electronics hardware unit -- now exceeds $300 million.
Part of the enthusiasm for the VoIP story was drummed up by upbeat, televised comments from the CEO of Net2Phone, a much bigger and better-capitalized VoIP provider. More attention came from a Merrill Lynch research report highlighting the move by the Baby Bells into this business.
That's some daunting competition for a company such as 8x8, which has at least three better-known VoIP players to deal with in addition to the Bells.
Also note: As the stock was surging last week and all the millions of shares swirled about, a small number of those shares -- just over 100,000 -- were sold by 8x8's chief financial officer and its vice president for development.
The chief financial officer, James Sullivan, exercised options to buy 62,195 shares at under a dollar each, and sold them all at an average of 5.07. According to Dow Jones' Federal Filings service, that brings Sullivan's holdings back to zero.更多精彩文章及讨论，请光临枫下论坛 rolia.net