Wall Street’s Not-So-Happy Bulls
The stock market continues to fight its way higher, seemingly against all odds. But don’t ascribe this rally to investors. So far, the buying is largely the work of short-term traders, Wall Streeters say. It’s the Quick-Buck Rally--or so the traders hope.
“This is basically a trading market--nothing has changed my mind about that,” says Thomas Walsh, trader at Nikko Securities in New York.
Since Oct. 11, the Dow industrial index has bounced back and forth but still has managed to ratchet higher by 180 points, or 8%. The index closed at 2,545.05 Thursday, off 14.60 points.
Just since the end of October, many beaten-down stocks have rebounded 10% to 25%. The temptation may be to believe that the bear market is over and that stocks have already reflected the worst of the economic slump ahead.
But the buyers who have pushed stocks up generally aren’t investors who look to the long term when making stock decisions. Instead, the recent buyers mostly are short-term speculators just trying to play a brief bounce in prices, say Wall Street traders who are in the middle of the action.
“The volatility breeds trading,” says Will Porter, over-the-counter stock trading chief at brokerage Cruttenden & Co. in Newport Beach. “The opportunity to bottom-fish when a stock is oversold is easy, and that opportunity presents itself to everyone--from mom-and-pop players to institutions,” he says.
It does indeed seem too simple a game, to look at the sawtooth pattern of the Dow over the past two months. Trading in and out of stocks for 10% to 20% gains over a few days’ time has almost become the new “sure thing” on Wall Street.
To get a sustainable rally going, however, the market needs the real investors buying again. But so far, those folks don’t see any reason to believe now’s the time to make a big commitment to stocks. “There’s no sense of urgency on their part,” says Len Hefter, OTC trading chief for brokerage Jefferies & Co. in Dallas. “There’s a great amount of cash on the sidelines waiting to be put to work, but I don’t think the time is right. There are too many uncertainties.”
Nikko’s Walsh puts it this way: “People have been so bitten and washed out by hanging on to positions that you can’t get anyone to think long-term now.”
Yet if the market continues to be pushed higher by the traders, the nervous investors on the sidelines will feel growing pressure to jump in--against all of their better instincts. As Porter notes, “I’ve never seen a rally where everyone is so unhappy. The bulls don’t own enough stock, and the bears are getting clobbered.”
Of course, the market always does its best to confound the majority. There’s a good chance that the buying wave soon will spread, and stocks’ short-term gains could amaze everyone. But with the economy rapidly crumbling, consumer confidence plummeting and the credit crunch just beginning, many true investors still believe that stocks’ ultimate lows lie ahead.
Broker Cutbacks Spread: The ranks of Los Angeles brokers, investment bankers and analysts continue to thin. But the area seems to be faring better than other West Coast cities, including San Francisco--a sign that L.A. is unquestionably now the money center on the West Coast:
* GE Capital, a unit of General Electric Co., is cutting four professionals from its Los Angeles corporate finance office, leaving 11, a spokeswoman confirmed. The office handles new financing for company leveraged buyouts, a business that has been severely slammed by the nationwide credit crunch.
GE Capital is laying off 100 of the corporate finance unit’s 428 employees nationwide. While the L.A. office is losing staff, the spokeswoman said the office also may pick up some people from other sites. In particular, the firm is closing offices in San Francisco and Menlo Park altogether, leaving L.A. as its only West Coast office.
* Citicorp has cut about a dozen L.A. jobs in corporate finance this fall and shut its Century City office, a spokeswoman confirmed. But the firm’s L.A. office, as well as its San Francisco office, will remain open, while corporate finance offices and real estate division offices in San Diego, Seattle and Phoenix will be closed.
* Brokerage firm Bateman Eichler, Hill Richards laid off three L.A. investment bankers over the past two weeks, sources say. The firm also cut analyst Allen Strand, who followed “special situation” stocks. Meanwhile, analyst Daniel Hersh, who follows airline stocks for Bateman, now is working out of its sister firm, Boettcher & Co., in Denver. But Bateman’s research chief, Norman Mains, said Hersh’s relocation is temporary and for family-related reasons.
Briefly: The latest market sentiment poll from Investors Intelligence newsletter in New Rochelle, N.Y., shows that 39.8% of investment advisers now are bullish, 49.2% are bearish and 11% see a simple correction in stocks ahead. The bulls have jumped from 30% in late October, while the bears have fallen from 56%. That shows that plenty of market professionals truly want to believe the worst is over, even if they aren’t necessarily acting on their convictions by buying. Market contrarians will argue that the rising number of bulls is a sure sign stocks’ recent strength won’t last.
QUICK-BUCK STOCKS?
How some Southland stocks have jumped as short-term traders have pushed the market up so far this month:
Closing price Pct. Stock Oct. 31 Thurs. chng. HomeFed Corp. $4 5/8 $7 1/4 +57% Security Pacific 18 5/8 23 3/4 +28% K Swiss 12 1/2 15 3/4 +26% MacNeal Schwendler 7 3/4 9 1/2 +23% Fluor 32 3/8 38 1/2 +19% AST Research 20 3/4 24 5/8 +19% Price Club 31 1/4 35 1/2 +14% Hilton Hotels 28 7/8 32 1/4 +12% S&P; 500 index 304.00 317.02 +4%
