Here Are My Thoughts On The NYSE
Market
Trend: Topping pattern continues
Market Outlook: Extremely cloudy
Sector Watch: Broad Markets (+); Tech,
Retail, Automotive, Financial (-)
Peter’s Pick:
(
ITMN |
Quote |
Chart |
News |
PowerRating) SARS Play
Peter’s Market Take: On My Grasso
Soapbox
Before I give you my take on why the NYSE is such a
piece of garbage, let me say two things about the broad market trend.
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First, I note the first major
short-term divergence between my market perspective and David’s. While he
remains bearish, I continue to see a remarkable resilient in the market
fueled, in part, by legitimate optimism about the strength of the recovery and
fueled in part by the purest kind of pre-2000 speculation. I say, “Have some
fun while it lasts.†David, as you will see below, has a different
perspective. -
Second, I think David will
eventually (and perhaps soon) be right.
NOW FOR
MY GRASSO TAKE:
“Slick Dick†Grasso’s job was to articulately defend an antiquated system of
stock trading that benefited a small handful of wealthy middlemen and monopoly
seat-holders at the expense of anyone seeking to buy shares on the New York
Stock Exchange (NYSE). For that sleight of hand, Chairman Grasso was paid
obscenely well. While Grasso is gone, the obscenity is not. Indeed, it would be
a HUGE mistake to think that anything has really
changed yet at the NYSE — even though in the name of both market efficiency and
fairness, it should.
As an active stock trader, I first discovered the “Big Board†was rigged, simply
by experience. Whenever I would trade a stock on the Nasdaq market, it would
clear almost instantaneously, and I’d usually get a good price. In contrast,
every time I’d traded shares on the NYSE, there would be a very noticeable wait
— sometimes minutes would pass — and
I would often not get a good price. Thus, I
quickly learned what all professional traders know: It is the Nasdaq and not the
NYSE that most closely approximates the market ideal of “best price in the
fastest time.â€
To ask why this is so is to understand what must be done to change things —
beyond merely scapegoating Grasso. The answer lies in the two very different
ways that the Nasdaq and NYSE are organized.
The ultra-modern Nasdaq is a perfect reflection of many of the high technology
stocks that trade on it. It is a decentralized, electronic “virtual†auction
seamlessly connected in cyberspace. Trades literally move at the speed of light
unimpeded by layers of middlemen.
In contrast, the NYSE is a centralized “physical†quasi-market layers of
middlemen and “market specialists†who rake off their cut with each trade. At
opportune times, they can even manipulate order flow for further advantage.
This is a great system — for the market specialists! They make a few pennies on
every hundred bucks traded — whether the market is going up or down! When you
add those few cents up over trillions of dollars of volume, it’s a huge reward
for simply getting in the way of a true auction. That’s no doubt why a seat on
the NYSE costs several million dollars — a license to steal if there ever was
one. Of course, everybody on Wall Street knows what should be done about this.
Like the Nasdaq before it, the NYSE should replace its
physical-centralized-specialist market with a virtual-decentralized-auction
market. But that is a lot easier said than done. The major problem? The NYSE is
run by a board of directors that, quite remarkably, lacks any significant
investor representation. Instead, the board is largely controlled by the
broker-dealer “foxes†who have the most to gain from the current system and the
most to lose to the investor “hens†from any substantive reforms.
So how will we know if the public outcry over le affaire Grasso will
indeed lead to such reforms? Watch carefully if the NYSE Board moves to provide
significant representation for investor groups. Watch equally carefully who the
NYSE Board appoints to replace Grasso. If the new chairman is a true reformer
and electronic market devotee like former SEC Chairman Arthur Levitt or former
Fed Chairman Paul Volcker, then the NYSE cartel will be broken. If on the other
hand, we simply get another Grasso-like puppet, forget about it — and go trade
the Nasdaq.
The
Week’s Macro Data Market Movers: An Ultra-Lite Week
The
Macroeconomic Calendar
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* Potential major market
movers in red
Not exactly a scintillating data week.
Still, there’s (yet) another chance for the housing sector to show us some
pimples. And watch the jobs data closely for another possible upside surprise
like last week.
Up — The
Broad US Markets, for now, but watch out! (Leaders: Internet, Electronics,
Computer Hardware).|
Down —
Watching the Broad Markets, especially the over-valued “Techâ€
sectors, Retail, Automotive, and the Financial sectors
(mortgage/housing/insurance, et al).
Peter’s Pick: Die Rich With Intermune
(
ITMN |
Quote |
Chart |
News |
PowerRating)
According to Market Edge,
this company, “develops and commercializes products for the treatment of
pulmonary, infectious and hepatic diseases. The company has three marketed
products: Actimmune, for osteopetrosis and chronic granulomatous disease;
Infergen, for chronic hepatitis C infections; an d Amphotec, for
invasive aspergillosis.†Note the reference to “Infergen.†This was rushed
into the Toronto SARS epidemic and seemed to be the only drug that showed any
promise in treating SARS. If SARS resurfaces, ITMN will give a very big boost —
but you may merely “die rich†is SARS reaches the U.S. of A.
Has to be held as longer-term position trade. My cash conservation speculation
is on the April 2004 calls with a $22.50 strike price. Technicals are very
strong.
If you have a favorite macroplay or stock you would like us to consider in
this column, send an e-mail to
peter@peternavarro.com or go directly to
https://www.peternavarro.com. We’d love to hear from you.