Brigitte
30.12.2000, 10:40
* * * *
12/30/00 Investment House Daily
* * * *
Investment House Daily Subscribers: HAPPY HOLIDAYS!!
TONIGHT:
- One last selling binge to end the year, but the last 15 minutes Friday
spoke volumes?
- More economic gloom in the morning overshadows the last day of the year.
- Looking forward.
- Subscriber Questions
- Team Trades
Heavy selling to end the year.
Stocks tried to run up early on, but as we stated Thursday night, we did
not expect it to last. Stocks quickly started selling, and muddled their
way through the middle of the session. Then in the last hour institutions
did their final housecleaning for the year, and many stocks were sold down
on high volume. Indeed, the volume on the Nasdaq was amazing given it was
the Friday of a holiday week. Looking at the raw numbers, the session
looked bleak.
But, as we always stress with our writers and analysts, you have to put
everything into perspective given the relevant facts. This was a year of
major losses in some major stocks, and there was a lot of last-minute
shuffling going on for end of year and end of quarter reasons. Moreover,
the entire shortened week, sandwiched between two holidays, sported
remarkably heavy volume. So, some heavy volume on the last trading day of
the year was not really a surprise. We would have preferred selling to
come on lighter volume, but the last-hour dumping of shares told us that
this was the final move to square up portfolios.
Then came the last fifteen minutes.
What happened in the last 15 minutes of the session confirmed, at least in
our minds, what we thought was last-minute position-squaring. Key stocks
that had just been sold hard were suddenly snapped up. CIEN, BRCD, SEBL,
PMCS, DELL, CSCO, EXTR, CHKP, SCMR, AMCC, BRCM and EXDS all jumped higher
on HUGE volume spikes. When we say huge, we mean huge. With a few
exceptions, no interval all session long on any of these stocks came close
to the buying volume exhibited in the last 5 to 10 minutes of trading
Friday. This type of mega-volume only comes from institutions moving back
into stocks that other institutions just got rid of. Where some were
squaring their books for the end of the year, others were ready to place
bets on these stocks heading forward. It could be that some wanted their
yearend books to reflect ownership of these stocks, but we believe most
were looking to own these stocks now, banking on a rally next week. We
are featuring many of these stocks for you in the reports this weekend.
We may have been reading the tea leaves wrong, but we were expecting what
we saw Friday, and as with many of the institutions, we were placing our
bets in that last 15 minutes as well.
THE ECONOMY
JPM says recession is coming.
The entire session had a dark cloud cast over it before the open when JPM
announced that it believed that the economy was going to experience a hard
landing, or to avoid the euphemisms of the current Fed, a recession in
2001. That was pretty sobering news, but something investors already had
in the backs of their minds. Now JPM did not say it was inevitable,
specifically stating that if the Fed acted quickly to reduce rates and did
so by at least 100 basis points in the first half of the year that a
recession could be avoided.
Maybe. We noted over two months ago that the Fed should be cutting rates,
and that if it waited until after the first of the year that the slowdown
would be so entrenched that rate cuts would be trying to reverse a
recession, not just revive a flagging economy. Realistically, the new
administration at best would be able to pass a tax relief package in 6
months, and that would be too late for the economy. It is thus up to the
Fed to loosen rates and pump up the money supply now. The tax relief will
then give incentive to put that money to work. Indeed, there is talk that
the tax cut package will be retroactive to January 1, 2001 in order to
pump up investment in a hurry.
Enough about a tax cut 'squandering' the surplus; the economy needs it.
There has been an overblown and emotion debate over the virtue of reducing
debt versus using surplus funds for a tax cut. Given the economic numbers
we see, there can now be no real serious debate about the best use of
those funds. More to the point, however, is this: the huge, huge point
that is overlooked (more to the point, flat out denied despite what
economic history shows us) is that a tax cut is not going to 'use up' the
surplus. History shows that a tax cut will ADD TO the surplus by creating
more economic activity and thus more taxable income and thus more surplus.
When marginal tax rates are reduce, economic output increases
asymmetrically, and tax revenues actually rise. If government does not
grow itself larger and fights the urge to spend more and more, surpluses
will grow. Thus, a tax cut does not physically give the money back to the
taxpayers, it simply prevents the government from taking more from us in
the future. That is made up, however, by the increases in tax revenue
based on the larger increase in economic output generated by the tax cut
and the incentives it offers.
This happened in 1960 under Kennedy. This happened in 1981 under Reagan:
marginal tax rates were reduced and incentives were given to businesses to
invest. Economic output jumped higher and tax revenues exploded. It is
popular to label this plan as 'the failed policies of the '80's,' saying
that it caused the deficits that came out of that decade. Nonsense. Tax
revenues were huge; the deficits were caused by the choices the government
made, namely spending the USSR into economic ruin. There was no failure
at all with the revenue model; government spending on the military
outpaced even the huge tax revenue gains. Ironically, when the USSR fell,
the economic and technological boom that started with the money invested
as a result of that tax cut continued on and gave us the surpluses we
enjoy today.
Government choices, or we should say the Fed's choices, have now slowed
that boom once again and threaten to derail it. With only about 8 years
left of the unique demographic known as the baby boomer generation that
has driven this boom, we need to do whatever is necessary to jumpstart
this economy once again and take advantage of those years to solidify our
technological leadership in the world. We won't have the massive numbers
of consumers here in the US in 10 years; the consumers will be found in
the exploding populations of Asia and South America. We need to have our
technological lead so we can be the supplier of technology to those
consumers. That is the only way we will be able to maintain our growth
and standard of living we have come to enjoy and rely upon. Talk to your
congressmen and senators; they have to know that we expect our leaders to
do what is right for the country and our future economic security, and
that means getting on board with a meaningful tax relief plan to get the
economy going again.
Help wanted index hits the skids.
Next week the employment report comes out with the unemployment rate,
non-farm payrolls, average hourly wages, and average workweek. The Fed
says it keeps a sharp eye on these numbers even though they, unlike
initial jobless claims, are lagging indicators. In any event, today saw a
sobering statistic that the help wanted index had fallen to levels not
seen since 1993. No one looking for employees out there. How can the Fed
be so worried about a statistic that lags the economy when known leading
indicators show that the employment sector has become quite soft?
Jobless claims were said to be lower, but the numbers were not real.
Thursday the government reported that first time jobless claims fell to
322,000 versus expectations of a 351,000 number. Sounds good. Problem:
g
12/30/00 Investment House Daily
* * * *
Investment House Daily Subscribers: HAPPY HOLIDAYS!!
TONIGHT:
- One last selling binge to end the year, but the last 15 minutes Friday
spoke volumes?
- More economic gloom in the morning overshadows the last day of the year.
- Looking forward.
- Subscriber Questions
- Team Trades
Heavy selling to end the year.
Stocks tried to run up early on, but as we stated Thursday night, we did
not expect it to last. Stocks quickly started selling, and muddled their
way through the middle of the session. Then in the last hour institutions
did their final housecleaning for the year, and many stocks were sold down
on high volume. Indeed, the volume on the Nasdaq was amazing given it was
the Friday of a holiday week. Looking at the raw numbers, the session
looked bleak.
But, as we always stress with our writers and analysts, you have to put
everything into perspective given the relevant facts. This was a year of
major losses in some major stocks, and there was a lot of last-minute
shuffling going on for end of year and end of quarter reasons. Moreover,
the entire shortened week, sandwiched between two holidays, sported
remarkably heavy volume. So, some heavy volume on the last trading day of
the year was not really a surprise. We would have preferred selling to
come on lighter volume, but the last-hour dumping of shares told us that
this was the final move to square up portfolios.
Then came the last fifteen minutes.
What happened in the last 15 minutes of the session confirmed, at least in
our minds, what we thought was last-minute position-squaring. Key stocks
that had just been sold hard were suddenly snapped up. CIEN, BRCD, SEBL,
PMCS, DELL, CSCO, EXTR, CHKP, SCMR, AMCC, BRCM and EXDS all jumped higher
on HUGE volume spikes. When we say huge, we mean huge. With a few
exceptions, no interval all session long on any of these stocks came close
to the buying volume exhibited in the last 5 to 10 minutes of trading
Friday. This type of mega-volume only comes from institutions moving back
into stocks that other institutions just got rid of. Where some were
squaring their books for the end of the year, others were ready to place
bets on these stocks heading forward. It could be that some wanted their
yearend books to reflect ownership of these stocks, but we believe most
were looking to own these stocks now, banking on a rally next week. We
are featuring many of these stocks for you in the reports this weekend.
We may have been reading the tea leaves wrong, but we were expecting what
we saw Friday, and as with many of the institutions, we were placing our
bets in that last 15 minutes as well.
THE ECONOMY
JPM says recession is coming.
The entire session had a dark cloud cast over it before the open when JPM
announced that it believed that the economy was going to experience a hard
landing, or to avoid the euphemisms of the current Fed, a recession in
2001. That was pretty sobering news, but something investors already had
in the backs of their minds. Now JPM did not say it was inevitable,
specifically stating that if the Fed acted quickly to reduce rates and did
so by at least 100 basis points in the first half of the year that a
recession could be avoided.
Maybe. We noted over two months ago that the Fed should be cutting rates,
and that if it waited until after the first of the year that the slowdown
would be so entrenched that rate cuts would be trying to reverse a
recession, not just revive a flagging economy. Realistically, the new
administration at best would be able to pass a tax relief package in 6
months, and that would be too late for the economy. It is thus up to the
Fed to loosen rates and pump up the money supply now. The tax relief will
then give incentive to put that money to work. Indeed, there is talk that
the tax cut package will be retroactive to January 1, 2001 in order to
pump up investment in a hurry.
Enough about a tax cut 'squandering' the surplus; the economy needs it.
There has been an overblown and emotion debate over the virtue of reducing
debt versus using surplus funds for a tax cut. Given the economic numbers
we see, there can now be no real serious debate about the best use of
those funds. More to the point, however, is this: the huge, huge point
that is overlooked (more to the point, flat out denied despite what
economic history shows us) is that a tax cut is not going to 'use up' the
surplus. History shows that a tax cut will ADD TO the surplus by creating
more economic activity and thus more taxable income and thus more surplus.
When marginal tax rates are reduce, economic output increases
asymmetrically, and tax revenues actually rise. If government does not
grow itself larger and fights the urge to spend more and more, surpluses
will grow. Thus, a tax cut does not physically give the money back to the
taxpayers, it simply prevents the government from taking more from us in
the future. That is made up, however, by the increases in tax revenue
based on the larger increase in economic output generated by the tax cut
and the incentives it offers.
This happened in 1960 under Kennedy. This happened in 1981 under Reagan:
marginal tax rates were reduced and incentives were given to businesses to
invest. Economic output jumped higher and tax revenues exploded. It is
popular to label this plan as 'the failed policies of the '80's,' saying
that it caused the deficits that came out of that decade. Nonsense. Tax
revenues were huge; the deficits were caused by the choices the government
made, namely spending the USSR into economic ruin. There was no failure
at all with the revenue model; government spending on the military
outpaced even the huge tax revenue gains. Ironically, when the USSR fell,
the economic and technological boom that started with the money invested
as a result of that tax cut continued on and gave us the surpluses we
enjoy today.
Government choices, or we should say the Fed's choices, have now slowed
that boom once again and threaten to derail it. With only about 8 years
left of the unique demographic known as the baby boomer generation that
has driven this boom, we need to do whatever is necessary to jumpstart
this economy once again and take advantage of those years to solidify our
technological leadership in the world. We won't have the massive numbers
of consumers here in the US in 10 years; the consumers will be found in
the exploding populations of Asia and South America. We need to have our
technological lead so we can be the supplier of technology to those
consumers. That is the only way we will be able to maintain our growth
and standard of living we have come to enjoy and rely upon. Talk to your
congressmen and senators; they have to know that we expect our leaders to
do what is right for the country and our future economic security, and
that means getting on board with a meaningful tax relief plan to get the
economy going again.
Help wanted index hits the skids.
Next week the employment report comes out with the unemployment rate,
non-farm payrolls, average hourly wages, and average workweek. The Fed
says it keeps a sharp eye on these numbers even though they, unlike
initial jobless claims, are lagging indicators. In any event, today saw a
sobering statistic that the help wanted index had fallen to levels not
seen since 1993. No one looking for employees out there. How can the Fed
be so worried about a statistic that lags the economy when known leading
indicators show that the employment sector has become quite soft?
Jobless claims were said to be lower, but the numbers were not real.
Thursday the government reported that first time jobless claims fell to
322,000 versus expectations of a 351,000 number. Sounds good. Problem:
g