Techs, Financial Services, Consumer Cyclicals

January 4, 2001
Kevin Haggerty

Al Gore
said he invented the Internet — and
Greenspan destroyed it. Ten days ago, Clinton said there was no recession on the
horizon, and Larry Summers followed suit. So now Greenspan makes an overt move
with the rate reduction. My guess is he wanted to avert the looming junk bond
crisis which would have killed many more companies and sent many telecom
companies to their graves.

The brokerage analysts have
been following the sinking tech ship down, reducing and downgrading everything
in sight, but of course way after the fact, as usual. Greenspan has been
essentially wrong on almost every one of his economic assessments and
predictions he has made to Washington since 1996. That is fact, not opinion.

It means that if he tells
the Committee that GDP will grow at 2.5% and it grows at 5.5%, he is obviously
not on his economic game. That doesn’t make him a bad guy, it just points out
that it’s not an exact science. More and more, you come to realize why Peter
Lynch said, “If I spend more than 15 minutes on economic predictions, it’s
a lot.”

Let’s hope Greenspan is on
his game now, and it’s not too late to avoid the pain. Also, be thankful you are
not one of the unlucky retirees that got marked to the market at year-end, or
took their company stock based on year-end prices, in addition to those that
withdrew their IRAs and 401Ks. The world didn’t change in two weeks, and he
could have just as easily done it at the December meeting, because the same
facts were at his disposal.

In the past, the groups
that take off in this kind of situation are the techs, financial services and
consumer cyclicals, in addition to the basics. This is because the assumption
swings to soft landing. The historical stats indicate the S&P 500
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advances about 25% over the next 12 months, but you do know by now that markets
are perverse, so show me the money before you get crazy.

The consumer cyclicals that
should go up, did, like the retail stocks with the RLX finishing +7.1%. Utilities
and drugs backed off, along with energy. The script was on target. The brokers
all advanced on more than double their average volume, with the XBD gaining
13.4%. You all saw the 1.9 billion
shares, with 1.3 billion up, so enough said there.Â Â Â Â

face=”arial, helvetica”>(March Futures)
Fair Value	size=2>Buy	size=2>Sell
15.10	Â 16.60Â	Â 13.70Â

For today, you again want
to forget continuation entries in the early going. Take only second entries
above yesterday’s highs. Let the trend develop and you can again look to play
the pullbacks both ways. If you have the kind of software that gives you an 8-
or 10-period moving average in the highs and the lows, you might take some flash
shorts if presented as they trade below the lower moving average. An example is
(
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PowerRating) below 131. It closed in a Slim Jim between 135 and 128 3/8.Â