Monday, August 21, 2006

Wedding Bell Blues

The Dow getting whacked more than 50 points this morning has me in good spirits, so I thought I'd do an unusual intraday post........

I went to a wedding on Saturday night. It was spectacular. I'm not at liberty to disclose who was getting married, since it would upset a lot of guys out there! But I've never seen such a star-studded gala. A lot of Internet luminaries, venture capitalists, hollywood producers, and the like. Plus little old me.

But here's why I'm telling the story. One of the fellows there - the founder of a major Internet company that I guarantee you've been to - is someone I know, so I introduced him to my wife and chatted with him a bit. I remarked on how bearish I was, and he smiled and shook his head and said, "Not me."

He went on to say that basically everyone learned their lessons during the bubble. There was no more over-hiring. No more buying too much inventory. No more waste. Not more bad decisions. Therefore - - no more bubble, and no more bust.

I've got to say, it was a little disconcerting to me. I mean, here's a guy who is really successful, really rich, and really smart. He went on........."As long as there are guys like you who worry, I know things are going to be OK. Because the markets are going to climb a wall of worry on the backs of guys like you. When you stop worrying, then there's trouble."

And I thought to myself - sheesh, that's kind of a shitty remark! I mean, what he's basically saying is that bears are sort of like canaries in a coal mine - - just really stupid ones. We are wrong all the time, so much so that when we decide the market is going to go up, that's when it's really going to get hammered. So until that time, it's all wine & roses.

I have a hard time dismissing this gent's comments out of hand. I mean, he's a really sharp fellow. But I also recognize that he's an incredibly successful Internet entrepreneur and, as such, is going to be highly inclined toward a bullish view of the world.

Food for thought.......

17 comments:

bsi87 said...

Tim,

I'd look at this guy's track record of insider trading. If he thinks things are great, he'd be buying with both hands. Of course, his compensation package along with options may be so good, it doesn't matter. Also look at his team's insider trades.

They gotta walk the talk.

AT said...

There is a lot of bullish sentiment out there - people are not aware as we are about the deficit, inflation, recession, etc. That's why the market is in this crazy ranging behaviour for several months. I used to work with a large brokerage firm and met many analysts, mutual fund managers, and others. I used to be amazed how bullish they were, and tried to pump up the virtues of the stocks and funds they were selling. Probably its part of the job, but anyway just goes to show there are a lot of bulls out there. So the best way to trade is to take it cautiously day by day.

stockshaker said...

wow! hey TK, I have more support for this site than I ever have, just based on your last post.

You go to a huge celebrity-studded wedding, and while being surrownded by hot women, free booze, and tons upon tons of food, YOU ARE TALKING ABOUT the stock market?!

You are da man! I know I've been coming to the right stock market blog, and I'll continue supporting it forever!

watcher said...

Of course there is no dot com bubble, nor any major stock market bubble. There are lots of stocks which are overvalued of course (the late HANS was a clear example). What I am concerned about is the housing bubble. I don't think it will burst suddenly, but there is clear evidence of its deflation. With the Dow above 11000, I don't think many people consider it to have a major upside potential. But they have to park their funds somewhere, so will it be gold, foreign equities or currency is the question. I think it will be gold.

So while the guy was correct (there is no stock market bubble), but stocks will still underperform in the next few years.

Anonymous said...

Final hour of trading will indicate tomorrows action. If Dow closes -50 today, we should have another -50 or more tomorrow. Volume is low. Bulls are cautious. Have we established a new resistance level?

jock said...

You only have to be smart for a while to get rich; then you can afford to get as clueless as Joe Sixpack, because you are financially bullet-proof.

Plus, those I know who got richest were not the smartest, but those with eyes (24/7) on the prize .

Also, the mindset that worked in the internet mania doesn't work now.

costas1966 said...

I have to agree with the gentleman. There is no bubble in internet anymore. The bubble however is in Real estate/ mortgage finance, consumer related sectors which is much more important economically than internet ever was and ever will be.
The excesses had been in the banking with relaxed lending standards such as subprime loans wirh 0% -5% down payments, 50 year loans and adjustable rate negative amortization loans. The past 2-3 year they came with every creative finance lending product they could possibly think so they can stretch the bubble to the limit and keep the musical chairs game going. The internet bubble pales in comparison with the real estate bubble.

Anonymous said...

Tim - The answer is simple - This time it is different! (Note the sarcasm). This chump will be valeting your Benz come December.

costas1966 said...

Similarities of 2000 and 2006


The market topped in March 2000 at 1552 with a nasty sell off until the middle of April. Then it put a very erratic price action going sideways with a upward bias until the end of August. The action in August 2000 is very interesting and it has a lot of parallels with the current rally. The whole month of August was marked by a very strong rally but the volume was light and declining as the rally progressed. The market managed to reach 1530 on September 1, 200 coming within 20 point of the all time high and then a vicious bear market started.

Leaping forward into 2006 I see very similar action. We have a top in May and a very nasty sell off followed by an erratic move with an upside bias on decreasing volume. We had a bubble in internet/ internet related sectors back in 2000, we have a bubble in real estate, real estate related sectors today. We had a tightening FED in 2000 that paused in August and we have a tightening Fed in 2006 that paused. I just don't trust this no volume no leadership.

Charts are in my blog

Ghost said...

Tim,

I remember an (or more =) earlier comment saying something like "Following this first shakeout will be a period in which the bulls will feel secure again, the headlines will be about making easy money and John Doe next door will be giving investment advice. Then will come another shakeout much bigger than the previous one."

Give ´em more rope and let´s wait...

Anonymous said...

Tne scenario that Tim writes in his last message has at least some merit.Remember,this market has had a very steep ROTATIONAL correction already without destroying the DJIA and so there is a very real possibility that IT won't retreat much further.The homebuilder stocks
HAVE had a 30 to 40% pullback already,so they have had their correction.Same goes for several other major sectors.In regards to Tim, who seems like a great guy,I have no idea what kind of a NET WORTH he has and wonder if he can loose a couple of Million and shrug it off.Some people out there do have the resources to loose large amounts for some time and can stay in the game without worry and some will jump off a bridge if they loose another 5 grand. The theory of RELATIVITY always applies to the market.Gravity,in the case of THIS market may not,at least for some time to come.By that time,they will have taken all the "LITTLE" guys money.Thanks for the forum Tim!!

Anonymous said...

Frame of reference - If it's the last 10 years then the primary bear you know is the 2000-2002 buble collapse. Maybe we won't experience that, on the other hand if the economy continues to slow, enters a recession, inflation stays up or not, maybe we see a 20 -30% correction. I'd rather be short thru that than long. Seems like it's a matter of perspective

Anonymous said...

CEO's are paid to pump:

a) their stock
b) their business
c) their vision
d) their confidence

CEO's are very hesitant to EVER be negative, be bearish.

The PIGGY BANK public sheep need to be fleeced on a daily basis. 5-9% gains over years is "awesome" as they say. Yet, a few take in a 1000% per year.

look at those nice CEO sales on INTU, WGO, and many other What a Phucking joke.

acceltrader said...

Were you seated at the same table as Hurricane? What did his wife look like? lol

Tim Knight said...

Hurricane was there, yes. He looked terrific in a tux. I left him a nice tip.

duggy@gate.net said...

Hey Tim,
I have always been more Bearish than Bullish, but I do take heed to what the gentleman said. Even though I am short the market now, I do have concerns about the fact that this market has withstood so much adversity (interest rate hikes, doubling of gas prices, war in Iraq\Afganistan, multiple hurricanes, high budget deficits, high trade deficits, manufacturing fleeing overseas, etc.) and still it holds up. Is this the sign of a Bear market, or a market with great strength just pushing to bust out? But one thing is bearish for sure - the housing bubble has barely begun to pop. I remember the bubble of 1989 - this time around, the pain is only beginning and things will get a lot bloodier than they are now. Wait until mid-2007 ... Oh boy!

Anonymous said...

Dear Tim,
Your last paragraph is what caused me even during last long w/end still tryng to connect to ur site via internet cafe next to the beach in Bali, fyi among the "finance community" here even some of them never been to US the topic of US housing (read US consumer strength)is kept people "cross the finger" yep hope all is well