THE CRASH OF 2000

PART XXVIII

and the Stealth Bear of 1998-2000

Pre-May 2000 Investing Strategy
Cosmically and Terrestrially we are already triggered for a market correction.  With a a total lunar eclipse all over Europe and America on January 21st, 2000 and the major conjunction of Jupiter and Saturn in May 2000, added to Y2K and a presidential election forthcoming, these will be interesting times indeed. We continue to emphasize Capital Preservation with large cash allocations in all our portfolios, in addition to seasonally higher January-effect stock weighting.

Pre-May 2000 Trading Strategy

We will adhere to a supra-normal V4, i.e. insane trading environment. Positionally, we will mostly hedge by shorting the SP and buying strong stocks or by shorting specific stocks which should do poorly both from an astrological and/or technical viewpoint and which are so overpriced as to make any sane investor think thrice before buying.

IS YOUR PORTFOLIO READY FOR Y2K?

[12/20] Will it be a Happy or Unhappy Y2K?  While nothing may happen, to ignore Y2K totally is equivalent to not buying fire or theft insurance on your home. If nothing happens, the market could rally on January 3rd as it is did on 9/9/99.  Alternately, it may fall considerably.  Either way, buying into one of our 2000 themes, SURVIVAL OF THE FITTEST, is prudent. Also, Y2K could last several months as some Y2K fixes may be worse than the disease. The FBI discovered some cases of foreign agents installing malicious code into Y2K fixes....

As we have previously mentioned the broad market topped in April  1998, the month we first contacted Money Managers to begin exiting the stock market.  A strong case can be made for a stealth bear market from 1998-2000.

Years ago, we proposed a REAL economic behavior model of a four tiered economy or that percentage of companies (stocks) that are in depression, recession, recovery, and prosperity and the need to weight the percentage of each.  For example, in a deep recession, bankruptcy lawyers are often in greatest prosperity.  Similarly, if you ignore the top 100 stocks in prosperity or manic bull phase, out of 7000, the remaining 6900 are not in record territory but many are in a bear market. For example, last week 30% or 1,116 of NYSE stocks traded reached 12 month lows, while only 5% or 180 made new highs. [In future we may list our calculation of stocks in 10% correction, 20% bear, 10% recovery, 20% bull.]

"Most traders are in disbelief of the economic numbers. We keep waiting for the truth."
Matt Frymier Banc of America Securities trader
HW: I hear it is coming RIGHT AFTER Godot arrives!

The US government is said to be trying to further reduce inflation numbers by taking more items that go up out of the CPI and substituting cheaper goods and services. With the price of Chestnuts by Rockefeller Center rising 25% this year, they would price peanuts rather of chestnuts. Even though money managers eat at the Four Seasons, eventually, all the CPI may be monitoring is the price of McDonald's happy meals....


[12/02] Given that events on November 5 and 16 happened as forecast and Oil is well above $25, we are "triggered" for a correction - but it has NOT happened (yet). We believed OIL rising to 9 year highs would be the trigger.  Finally all cylinders are set.  But now when?
From WSNW [11/29]:
"Despite a third interest rate increase and Oil rising to 9 year highs and both Microsoft and IBM stumbling more than once. We predicated a general pull back based on:
1) Rising bond yields
2) Rising oil prices and
3) Y2K.
That is why I am feeling much like I did about the Gulf War, where we were right (within 4 hours), but the traders who thought it wouldn't happen made money.

What about December? Are stocks a "good buy" or is it "good bye"?
With five weeks to Y2K, the stock market is not behaving as if it is scared. Will Y2K have NO effect in December? January 1? The stock market has lost some of its upward momentum and some last minute tax selling is due. Will investors wake up to the fact that asset inflation (stocks and real estate) is beginning to spill over into good and services?

In what history may refer to as the "stealth" bear market of 1998 to 2000, we find a broad divergence between the Tech leaders and most other stocks. The former continues to go through the roof while the rest of the market remains dormant. More and more investors have decided to join the party rather than miss the action.  Still, as I am sure you remember, from November 18th to December 18th of 1899, the Dow lost 23%.  Will history repeat? Will 10,000 hold?  Stay tuned.


TO  BE CONTINUED
© Henry Weingarten  Last Updated:
THE CRASH OF 1999 PART XXVII
THE CRASH OF 1998/99 PART XIX
THE TOP 10 THINGS THAT COULD TANK THE MARKET

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