Moneytalk Bob Brinker Summaries - Information ONLY

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Top 527. Oct 15, 2000 12:28 AM

» JenL_2 - Sept. 30 - Oct. 1, 2000 MoneyTalk

Posting this for David K....Jen

Since Flanigan was the host this weekend, and I know some need their Brinker fix, I thought readers to the site would like to read my Interpretation of the September 30-October 1, 2000 show. Enjoy!

David K's Interpretation of Moneytalk, Financial Education, Helpful Links, Guest Editorials and Special Alerts. September 30-October 1, 2000 Edition

If you want to know how to get on my mailing list, Click on the Following Link and Drop Me a Line:

mailto:davidk555@earthlink.net

Preliminary Disclaimer: This e-mail is not a substitute for listening to Moneytalk. It is only my interpretation and commentary of some of what is discussed on Moneytalk, along with additional educational information that I include, editorial comments about the market, helpful financial links, guest contributors and even humorous remarks. I also provide special alerts from time to time. If you want to know what was actually said verbatim on Moneytalk, listen to the show live. You can even listen to a re-broadcast of past Moneytalk shows on the Internet via the archives. The web site www.bobbrinker.com has all the links to the ABC Radio Network Stations that broadcast the show live and via the Internet. There are even free summaries of the Moneytalk shows on that web site. There is an additional disclaimer at the end of this e-mail.

Market Numbers and Key Economic Data as of the Close of the Market on Friday, September 29, 2000

Dow: 10650.92
Nasdaq: 3672.82
S&P500: 1436.51
30-Yr Bond: 5.869%

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TACTICAL ASSET ALLOCATION WATCH
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Editorial Comment ("EC"): Here is how the major market indexes have played out since Bob Brinker's timing model turned bearish based on the S&P500 Index's close on December 31, 1999:

S&P500 Index: Down 2.23%
Dow Jones Industrial Average: Down 7.36%
Wilshire 5000: Down 0.70%
Nasdaq Composite: Down 9.75%
Russell 2000: Up 3.29%

Monologue: Bearish Bob sounded well-rested after his vacation and delivered a solid effort on Saturday's show (Sunday's show was also good if you like sports).

Bob began the show with some investor psychoanalysis of people who refuse to acknowledge the bear. Bob noted that the Nasdaq is most definitely in a bear market and is actually in its second worst bear market decline in its history -- the worst occurring during 1973-1974 when it lost 59% over a period of 21 months. The current Nasdaq bear market has already declined 38% from its closing high on March 10 of 5048 to 3164 on May 23rd when it hit its closing low.

Bob poked a little fun at the bulls suggesting that there are three phases of bear market psychology:

Phase 1: Denial: (Not a river in Egypt). This is the stage investors were in during the beginning of the year where investors refused to believe that a bear market was even possible. Bob believes that most people have witnessed the Nasdaq decline and finally have begun to accept the reality of the bear market in the Nasdaq. In fact, Bob believes that most people have successfully passed through the denial phase and are now in phase 2.

Phase 2: Anxiety: Bob believes most people are now in this stage, having successfully passed through the denial phase and who are anxious and concerned over whether the Nasdaq will resume its bull market run when in reality it remains in a bear market down trend.

Phase 3: Capitulation: In either calendar year 2001 or 2002, when the bear market ends, there will be phase three - capitulation. This is where it gets nasty. Investors are demoralized and sell at or near the bottom and declare that they will never invest in the stock market again!

EC: Bob forgot about Phase 2.5 -- Constipation.

Bob concluded this segment by pointing out that those who followed his message -- preservation of capital via heavily cash weighted tactical asset allocation have been able to avoid all three stages entirely.

EC: I found it interesting that Bob used his three phases of bear market psychology relative to the Nasdaq. As most of you know, Bob's timing model is based on the broad market indexes, particularly the S&P500 and Wilshire 5000. Indeed, earlier this year, Bob dismissed the Nasdaq as simply another "sector" which he did not think anyone had the ability to successfully "time" given its scant history. This weekend, however, the Nasdaq got top billing. Indeed, since Bob's model turned negative, the S&P500 is only down 2.23% (although it is down almost 6% from its all time high). It has a long way to go before it hits bear market status.

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Nasdaq!
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Caller Jon: Do you think the Nasdaq is ripe for a bounce back to the 4200 level? Bob was very careful in his response to this caller. First, Bob noted that the Nasdaq bear market rally top is now in place in the 4200-4400 level. Bob did say there is a "possibility, not a certainty" that the Nasdaq could retest the low 4000s area where it went at the end of August. However, even if the Nasdaq does return to that level, Bob doesn't think there will be any meaningful upside beyond that level. On Sunday's show, Bob was asked repeatedly if he "thinks" it will return to that level; however, Bob wouldn't commit to any definites. Bob did finally opine that IF the Nasdaq returned to those levels, he thought it would be sooner, rather than later -- probably within the coming weeks.

EC: Clearly Bob does not want to make an absolute prediction at this juncture as to whether the Nasdaq will return to 4200 or above. At the end of the last call, the caller asked if the bounce in the Nasdaq would be caused by an extremely oversold condition that exists in the market and Bob wholeheartedly agreed. Bob also commented that the put/call ratio is not at a level that would warrant any sustained level of bullishness.

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"MOABO = Mother of All Buying Opportunities"
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Brinker Comment: Somehow, Bob came up with the idea of using an acronym to describe a future buying opportunity. The new acronym is "MOABO." This term should be music to Moneytalk trekkie ears because it stands for the "Mother Of All Buying Opportunities" Bob believes MOABO will be coming either next year, or 2002. What will precipitate it? When the market bottoms out, after phase three -- the capitulation stage.

EC: Bob referred to "MOABO" several times during the weekend. You could almost hear him licking his chops salivating over the possibility of being able to call another market bottom. I have always maintained that Bob's market timing forte lies in predicting buying opportunities. And, as of right now, he believes the next buying opportunity is going to be huge! Once again, however, I found it odd that Bob kept bringing up MOABO in the context of the Nasdaq bottoming out. It could be that this was simply because most of the callers were asking about the Nasdaq. Unless Bob has tinkered with his timing model, I have to believe that "MOABO" will be triggered by the broader markets hitting a bottom. Then again, Bob did identify the bottom of the Nasdaq in connection with the STCTBMTROOFST (Short term counter-trend bear market trading rally opportunity only for sophisticated traders). This is something I will be paying close attention to in the future.

Caller: This caller asked if Bob had heard about Elaine Garzerelli's announcement last week that her model is getting close to issuing an outright buy signal. Bob said he heard about it, but had no comment. Jon also asked Bob what he thought about Elaine Garzarelli, but Bob said he had no opinion.

EC: Although Bob didn't comment on Elaine Garzarelli this show, she has been the target of Bob's needling for many years. Sometimes referred to by Bob as "Her Ladyship," Elaine Garzarelli is credited with calling the 1987 market crash. However, subsequent to that, her funds underperformed the S&P500 and she issued a sell signal during a correction bottom around Dow 5350 until she got back in the market around Dow 7000. On the other hand, many people think she is the most brilliant market strategist around. In fact, Garzerelli has achieved "the best track record in predicting the stock market of any Wall Street strategist (98% track record over 20 years)." At least that is what her web site says!

Anyway, this past Friday, Elaine Garzerelli came out and said that the current stock market weakness should be used as a buying opportunity. Apparently, a level of 65% in her indicators represents a clear buy signal and her indicator has doubled recently to 61.3%. You can read the entirety of her current outlook at the following link:

http://www.garzarelli.com/

EC: I personally keep an eye on Elaine because she did call the 1987 bear market (which Bob's "former" timing model failed to do) and because Bob has ribbed her for so long. Lately, however, Bob seems to have softened in his view toward Elaine. At Bob's charity event in San Francisco, it was reported that Bob actually praised Elaine as one of the best in the business with the exception of her get-out-of-the-market call a few years back. Bob's kindly words toward her, however, are a far cry from what he used to say. In fact, using what many believe to be his first Internet alias, Don Lane, Bob spoke quite frequently about Her Ladyship on the Silicon Investor message boards. Here is but one post of many where Bob, er Don, took a less favorable view of Elaine's record. Note that the post was written in 1997:

"Just for the record, here is what actually happened with Elaine Garzarelli's disastrous sell signal in July of 1996. She issued the sell signal on the exact date of the correction bottom at Dow 5350 on Jul 23. She remained bearish as the market soared straight up through 5500 then 6000 then 6500 and as it neared the 7000 level early in 1997 she did an about face and said she was wrong to be bearish and wrong to have issued her famous sell signal at Dow 5350 and did a complete one-eighty and issued a buy signal near Dow 7000! Now she is saying the market is in a trading range of Dow 7000 to Dow 8500! Do people actually pay real money for this advice? A weather forecast of partly sunny with possible showers is worth more than Elaine's 'intelligence.'"

http://www.siliconinvestor.com/stocktalk...

Caller Mary: After the recent marked decline, do you think Intel is a buy. Answer: I have no recommendation on Intel.

EC: That call lasted exactly 4.6 seconds. I timed it on my official Moneytalk stopwatch. I was actually stunned that Bob didn't take the opportunity to comment on Intel. Long time listeners know that Bob has discussed Intel probably more than any other single stock on the show. A couple years back, Bob even shared his trading positions in Intel until he realized that many listeners were doing exactly what he did and then finding out on the weekend that Bob had exited the trade. (sound familiar?) I can only hypothesize that Intel was the company that Bob referred to a few weeks back when he said he knew of a company that was facing a slow down in business and he didn't think he should talk about it. But then again, who knows.

Call Joe: When the Nasdaq bear market occurred in 1973-1974, did all of the other major indices also suffer bear markets? Yes, but not right away. The bear market didn't play out for 21 months. Brace yourselves folks. Here comes the $1 Million Dollar Question: Do you think only the Nasdaq will suffer a bear market, or do you think the other indexes will also become bears? Bob believes there is a "real probability" that the Dow and S&P500 will also enter bear market territory. Since bear markets are measured from their highs, Bob noted that the Dow has another 11% to go before entering bear status, and the S&P and Wilshire5000 have another 13-14% to get into bear market territory. Bob does think that those indexes will go down 20% or more and the Nasdaq has the potential to go down 40% or more -- all as measured from their closing highs.

Brinker Comment: Bob doesn't think the market's decline is being caused by energy prices, nor even the weakness in the Euro. Bob thinks it all relates to the Fed's 6 rate hikes which are only beginning to make their way through the system. Bob noted that this quarter has already seen earnings disappointments because of those fed hikes in companies such as Dupont, Kodak, Intel, Apple and others. Bob noted that companies will blame their poor earnings on everything but management. For example, Bob thought that blaming the Euro was a false reason in that the Euro has been in a bear market since 1999 as compared to the U.S. dollar. Similarly, oil prices have been going up since December 1998. Bob believes the bottom line is that the Fed's interest rates are impacting corporate America's bottom line.

EC: Clearly, Bob remains fully entrenched in the bear camp. In fact, I did some alias surfing and found a post on bobbrinker.com that perfectly captured the essence of Bob's thinking this weekend. Almost as if it came right out of his mouth....see if you agree:

Wasn't it great to hear Bobs voice on the radio today. What a relief to know he was just taking some well deserved time off. Bob pulled no punches today. This market is in severe trouble. He was crystal clear. Interest rates are impacting the bottom line. The market is so over priced buyers are becoming fewer and fewer and fewer. Feels good to leave the party early. Thanks for the guidance Bob.

http://www.bobbrinker.com/message.asp?th...

Caller: Do you think if we have a "soft landing" in the economy, the stock market could recover? Not necessarily. Bob pointed out that even if you do have a soft landing, it doesn't necessarily mean the stock market will rally and you could still have a bear market.

EC: For a contrary opinion, check out this link. It brings you to an article that suggests tech stocks and financial services stocks will do well in a soft landing. Entitled, "Managing a 'soft landing' Financial services, Techs top money managers' list as economy slows" you can read it at the following link:

http://cnnfn.cnn.com/2000/09/01/news/sof...

Brinker Comment: We have seen distribution in the market anytime the indexes reach their area highs. Even though there is plenty of money coming into the market in terms of 401(k) money and other retirement money, the selling pressure has been tremendous. With all of the indexes down for the year, the 3% you have earned in money markets this year at no risk looks pretty darn good at this point.

EC: I wonder if Bob may get some of his ideas from the DismalScientist.com? Check out this article entitled, "Market Risks Are Rising" which echoes some of Bob's market views:

http://www.dismal.com/todays_econ/te_091...

Caller: He has some money in Microsoft and Infospace and needs to sell them in 6 months. Should he sell them now, or try to get out at a higher price later. The only guidance Bob could give was to say that it would depend on two factors (1) where the Nasdaq goes and (2) whether these companies meet or beat earnings expectations.

EC: With respect to Microsoft, I figured there was no way the Supreme Court was going to hear MSFT's appeal before the circuit court of appeal reviewed the record. If you have ever looked at the number of cases the Supreme Court turns down, it should come as no surprise that the Supreme Court turned down the Justice Department's request, even though Microsoft is no ordinary case. What did strike me as odd, was that Microsoft's stock hardly got any play out of the ruling other than a minor pop on the day it was announced. The Nasdaq decline took Microsoft with it and as of Friday, Microsoft is trading at $60-5/16 -- just shy of its 52-week low.

Brinker Comment: Bob was asked by several callers over the weekend how the markets would be effected by Gore vs. Bush being elected as President. Bob thinks gridlock is the best thing for the markets. Bob thinks there is no chance the Democrats will take control of the Senate. If Bush is elected with a Republican Congress, Bob thinks there is a good chance that tax cuts will be implemented, thereby, eliminating any budget surplus. It would also stimulate the economy, which Bob believes would lead to inflation given the tight labor market. This would not be good in Greenspan's mind. Bob said point blank that he personally doesn't like either candidate.

Caller: What do you think the main catalyst will be to get the Nasdaq out of the trading range it has been in during the last few weeks. In a word, time. Time time time. Bob took then took the time to review the timeframe of his call. In the beginning of this year, Bob estimated that between 12 months and 24 months we would be in a difficult market environment. Could poor earnings drive the Nasdaq below 3250? Again, Bob said the catalyst will be time. Bob emphasized that the Nasdaq is in a major bear market and in a downtrend. Bob doesn't see anything at present that will reverse that trend.

EC: Yowsa! What happened to my QQQ shorts? For those of you who like charts, this one will make you wet your moneytalk shorts. This charts the Nasdaq on a weekly basis from 1978-2000 with projections that the Nasdaq could go below 2000!

http://stockcharts.com/charts/historical...

Caller Rick/Brinker Comment: Rick pointed out to Bob that he has been preaching to his friends Bob's message of risk since January but they wouldn't listen. Bob pouted a little and said he was subject to ridicule and criticism all year by people who didn't want to hear his message of risk. Why? They were in denial.

EC: If I find out who was ridiculing Bob, I am going spank 'em with my copper plated Moneytalk paddle.

Caller Rick: What stocks do the best in bear markets? Bob said he has pointed out on the program that utilities are good defensive stocks. Bob also referenced pharmaceutical stocks as good defensive stocks, but they posed a different risk -- the risk of Al Gore passing legislation that will hurt the industry.

EC: Given Bob's comments, if Bush is elected, there might be an opportunity in the pharmaceutical sector. I think Bob is watching that sector very closely in tandem with the Presidential race.

Caller: Do you think there is a possibility of a credit crunch considering the Federal Reserve is tightening the monetary supply. Bob thinks the real danger lies in the amount of debt that exists in our society. Later in the show, Bob emphasized that the incredible amounts of personal and corporate debt levels goes largely ignored by the media.

EC: For a very interesting and bearish outlook on the market based in part on the credit crises, check out this article entitled, "A Tale of Two Bubbles." Before you read it though, consider the source - PrudentBear.com:

http://www.prudentbear.com/credit.htm

Brinker Comment: Returning to his bear market psychoanalysis, Bob concluded that most people are in the anxiety stage and the only question is how long they will stay in that phase. Could it last into 2001? Or possible 2002 before the market hits a final bottom. If it goes into calendar year 2002, Bob noted that this would become a "classic off presidential year bottom."

Brinker Comment: Bob discussed an article written by Gene Epstein in which he referenced a study showing that an Incumbent President, or Vice-President, generally has an advantage going into the elections if the economy is doing well. With the real gross domestic product up 4.8% in the first quarter, and 5.6% in the second quarter, that bodes well for Al Gore.

Caller John: What do you think about oil services, drillers and power producers sectors. Bob pointed out that the companies that own and build the power plants are in a great position. Bob is wary of the valuations in such stocks, although the fundamentals currently appear to be strong. Bob conceded he didn't follow these sectors too closely.

Caller Jim: The general consensus seems to be that earnings this quarter will be strong and that most of the earnings shortfalls have already been pre-announced by companies. Thus, the prevailing wisdom is that the Nasdaq should rally between now and the end of the year. What do you think Bob? Bob doesn't agree. In fact, Bob referenced the "prevailing wisdom" as predicting that when portfolio managers came back from Summer, they would be buying buying buying. In reality, September was a disaster. But Bob, do you think the disaster will continue in the next three months? Bob didn't really add anything beyond what he discussed earlier in the show. Bob reiterated that the Nasdaq has already reached its bear market rally top, once in Mid-July and the other at the end of August and the first day of September. Jim tried to get Bob to provide some type of odds as to whether the Nasdaq would once again rally to the 4200-4400 level. Bob didn't give in and simply said it is possible.

EC: Remember, Bob doesn't have crystal balls.

Brinker Comment: Bob observed that with the new SEC rules prohibiting selective disclosure, investors will now have more access to corporate conference calls which are usually held on a quarterly basis. Bob has some conference calls produced by Best Calls on his website.

EC: Here is a link to a calendar of corporate conference calls coming up in the month of October:

http://biz.yahoo.com/cc/

EC: And this link takes you to the Conference Calls listed on bobbrinker.com:

http://www.bobbrinker.com/bcinfo.asp

Brinker Comment: The economy has grown faster than expected. Nobody expected the economy to grow in excess of 5% during the first half of this year. One caller asked if Bob sees stagflation around the corner. Bob said he can't predict stagflation, but did note that with higher commodity prices (which we seeing now) comes the risk of growth slowing. When that happens, yet inflation remains, then you have a recipe for stagflation.

EC: I looked up the word "stagflation" on Encyclopedia.com (A website I wish I had access to in Junior high). This is what it said:

"Stagflation. In economics, a word coined in the 1970s to describe a combination of a stagnant economy and severe inflation. Previously, these two conditions did not exist at the same time because lowered demand, brought about by a recession usually produced lower, or at least stable, prices. Large U.S. government deficits and sharp rises in the costs of energy have been cited as the chief causes of stagflation in the 1970s."

http://www.encyclopedia.com/articles/122...

Caller: Bob thinks many analysts mistakenly forecast a company's projected earnings simply by extrapolating one quarter's earnings into the future. Indeed, Bob thinks that is precisely what happened to Intel. A few weeks back when Intel was $75, Intel was trading around 40 times next year's earnings estimates. Bob noted that this type of multiple was extraordinarily high for a large company like Intel.

EC: Now there's a tip to be had. Put that in the Moneytalk notebook. When Intel's P/E gets around 40, it may be flying to high. I wonder if Bob adopts a short position on Intel whenever its P/E gets to that area?

Caller: Where does the money go when you pay down the national debt? Answer: You pay off the holders of treasury bonds, notes and bills. If we pay off the national debt, we save ourselves billions of dollars of interest we as tax payers must pay each year. Bob noted that not many people are aware that the national debt increases about $75 million per week.

EC: Hmm. In the last Interpretation I did, I referenced the fact that the National Debt was increasing about $75 million per DAY - not week. You don't think that.... nah, just a coincidence! Perhaps Bob had a slip of the tongue. Our government does have a site which provides the national debt to the penny for each day. The Bureau of the Public Debt Online has this and other valuable information relating to the national debt at the following link:

http://www.publicdebt.treas.gov/opd/opdp...

Caller Frank: This caller points out that many of the people who think that we are entering a great buying opportunity are forgetting that we are entering a tax selling season, which this caller thinks will be "horrendous." Bob noted that he has talked about tax selling and reiterated that the first round of tax selling ends October 31st -- that's when most mutual funds end their fiscal year. The second round of tax selling goes all the way up to December 31st which is the deadline for individuals to take tax losses for this year. What are the most likely candidates for tax loss selling? The stocks that have already been killed. Bob specifically noted Intel, Apple, and Priceline as stocks that could be candidates for tax loss selling.

EC: Along these lines, James Cramer from the Street.com makes the case that if you are interested in buying a mutual fund, you should wait until after the institutional tax loss selling season is over (October 31st) before jumping into a fund to avoid the potential distribution that typically occurs during this time frame. Read his article at the following link:

http://www.thestreet.com/funds/smarter/1...

Caller: This caller wants to buy some more of the Vanguard Ginnie Mae Fund, but noticed it is trading just above $10 per share -- around its 52-week high. Should he buy more now, or wait for a lower price. Bob had no problem advising the caller to buy more now. Bob noted that the Fund has traded higher in years past and is basically trading in the middle of its range over the last decade.

EC: Vanguard's "Plain Talk" educational site provides a great starting point for understanding financial topics. This link brings you to the Plain Talk web page that teaches you all about investing in bonds:

http://www.vanguard.com/educ/lib/plain/p...

Brinker Comment: On Sunday, Bob devoted his opening monologue to the next Federal Open Market Committee meeting which is scheduled for this coming Tuesday, October 3rd. Bob noted that the FOMC historically does nothing in the meeting prior to the general election. In addition, Bob doesn't view the current economic data coming out of Washington as sufficiently inflationary to warrant rate hikes at this time. The more interesting question is whether the Fed, ala Greenspan will change its "bias" towards raising rates. That, we don't know, but on balance, Bob thinks there will be no change out of the FOMC.

EC: Anyone remember who Alan Greenspan's predecessor was as Chairman of the Fed? If you guessed Paul Volcker, you guessed right! Mr. Volcker is best remembered as the man who "broke the back" of inflation which was rampant at the time of his first appointment by President Jimmy Carter. Mr. Volcker is a big trout fisherman and was thought of highly enough to have been reappointed by President Reagan. Here is a nice fact sheet on everything you want to know about the Federal Reserve Open Market committee:

http://woodrow.mpls.frb.fed.us/info/poli...

Brinker Comment: Bob discussed the changing demographic trends in our country. The trustees of the social security fund estimate that the number of senior citizens will double in the next ten years. Conversely, the workers putting money into the social security system will only go up 16%. Therein, lies the problem. Later in the broadcast, Bob got quite animated over whether Congress should create a new prescription drug entitlement. At one point, Bob got really heated and starting speaking in the third person. "Bob Brinker has never said he supports more entitlements." "It was Bob Brinker that said the last thing we need is a national entitlement to drugs."

EC: David K says Oy Vey.

Caller Moe: This caller has been listening to Bob for several years, but never had any money to invest. He just came into some money and wants to know whether he should start investing right now or wait? Bob thinks there will be a great time to invest down the road (MOABO) and he should focus on learning about investing right now.

EC: Short call, but what Bob didn't say speaks volumes. Bob didn't tell Moe to dollar cost average into the market up to 35% equities and instead referred Moe to Moneytalk classes and the future buying opportunity down the road. Either Bob now has better visibility and is more convinced of the pending bear and subsequent buying opportunity, or he simply thought the guy needed more knowledge before beginning to invest. Given that Moe has been listening for a few years, you would think he would be ready to go!

Caller Jerry: What do think of Investor's Business Daily Founder, William (Bill) O'Neil, and his unique method of evaluating stocks using the "SmartSelect" system. Bob thinks O'Neil's has contributed to investors by supplying daily statistical data. Bob didn't comment on O'Neil's stock picking strategy.

EC: If you have never been to Investor's Business Daily's website, I strongly encourage you to check it out. O'Neill is one smart fellow. The term "SmartSelect" describes O'Neil's five proprietary data items for the stocks listed in O'Neil's data base. This link will bring you directly to the Ask Bill O'Neil section of IBD's website where Bill answers the question of whether Thursday marks the first day of a rally in the Nasdaq:

http://www.investors.com/askbill/

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STCTBMTROOFST
(Short term counter-trend bear market trading rally opportunity only for sophisticated traders).
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Caller: This caller asked Bob if was able to predict the bear market rally buying opportunity by using technical analysis. Bob said he made the call, and it was an "amazing" call according to Bob, based on an analysis of market internals relative to historical experience. The caller asked Bob if used the "Fibonacci Ratio" in his analysis. Bob said he never uses it.

EC: I don't know if it is semantics or what, but Bob does not like people referring to his work as having anything to do with "technical analysis." Frankly, I don't see any difference between studying "market internals" from conducting "technical analysis." Perhaps Bob doesn't want people to view what he does in the less than scientific realm of technical analysis that some investors follow. For example, the caller asked whether Bob used any of the Fibonacci mathematics in his calculations and Bob was quick to say absolutely not.

EC: In case you are wondering, the Fibonacci Sequence (0,1,2,3,5,8,13,21,34...) was discovered by the Italian mathematician Leonardo de Pisa in the 13th century and is the mathematical basis of the Elliot wave theory where the first two terms of the sequence are 0 and 1 and each successive number in the sequence is the sum of the previous two numbers. This forms the basis of scores of books, web sites and articles that many day traders and users of technical analysis follow.

EC: Speaking of technical analysis, I am considering doing a series of editorials in my Interpretations on the basics of Technical Analysis. Would anyone like to share their thoughts? Write a guest editorial? Please drop me a line.

Caller: This caller decided to short two Nasdaq high flyers -- Ariba, Inc. (ARBA) and Broadcom Corp. (BRCM). Bob was not impressed and pointed out that both stocks have shown relative strength compared to the Nasdaq and you never want to short a stock showing relative strength. Of course, all of this was against the backdrop of Bob's overall caution against shorting in general.

Brinker Bio: Bob's paternal grandparents are from Greensburg, Pennsylvania.

EC: I am trying to visualize a little Bob Brinker being bounced on his grandpa's knee, but for some reason, I just can't conjure up the image. I am sure he was a nice kid, not like the terror I was when I was a youngster as evidenced by this candid photo taken of me when I was but a baby. Sorry Mom, but I am sure my subscribers are curious to know what I looked like as a child. See for yourself at the following link:

http://www.weeklyworldnews.com/batboy/st...

EC: Since I know many of you own the Firsthand e-commerce Fund (TEFQX) per Bob's recommendation, I though you might like to know of some updates that recently came out of that fund family. In May and June, the Fund established significant positions in a few companies. As of 6/30/00, the Fund's investments in BEA Systems (Ticker: BEAS) was 4.8%. In addition, the fund's investments in PSINet (Ticker: PSIX) was 2.3%. To view TEFQX's top ten holdings, go to the following link:

http://www.FirsthandFunds.com/funds/tef/

You might also be interested to know that on Friday, Firsthand Funds just launched its sixth no-load mutual fund, the Global technology Fund, which will be managed by their six-member Technology Equities team, which includes Kevin Landis and Ken Pearlman. You can learn more about the fund, including obtaining a prospectus at the following link:

http://www.firsthandfunds.com/news/new_f...

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DAVID WHERE CAN I FIND...
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I am always happy to try and answer subscriber questions about financial issues and try to provide links that help you find more information. In the past, several subscribers have asked me the same question, so I decided some others might be interested in the issue.

Question: David, do you have a link to a web site that lists the companies that are about to be added to the Standard & Poor's 500 Stock Index?

Answer: I wish I did! Having your company's stock added to the S&P500 has typically caused a quick run up in the stock price in the time frame immediately following the announcement by Standard & Poor's that the stock will be added to the index. The run-up is fueled by investors -- well, really they are speculators, realizing that over $1 trillion in mutual funds are indexed to the S&P500 Index who will be required to purchase the stock pursuant to the terms of their prospectus which require that they own the same stocks that are part of the Index. In the last year, Wall Street has seen several stocks "pop" dramatically in the days following the announcement -- remember AOL, JDSU - just to name a few. Who decides which stocks get added to the S&P500 Index? Easy. The Standard & Poor's Index Committee makes all those decisions and their discussions are kept very confidential. For a review of what factors goes into the Committee's deliberations, check out this excellent article written by David Blitzer, the Chief Economist and Chairman of the Standard & Poor's Index Committee:

http://www.spglobal.com/howmany.html

Now if you are looking to gamble, or try and make a trade out of the addition of a company to the Index, it is a lot harder than it sounds. Announcements concerning new additions (or replacements to be exact) to the Index are made about 5:15 p.m. New York Time. Not even the companies being added know ahead of time. The information is released to the public by the major wire services and posted on the S&P500 Index Services webs site at the following link:

http://www.spglobal.com/

One interesting tidbit from Chairman Blitzer was his statement that on the rare occasion where there is unusual trading activity in a stock slated to be added to the index due to investor speculation, the Committee sometimes changes their selection before the public announcement! (See article linked above)

For those of you who still think their is money to be made in this type of speculation, than I found an article for you! The article, aptly entitled "How to Trade S&P500 Index Replacements" reviews a book by Wing Chow, head of Quantitative Analysis at Bear Stearns who analyzed the trading performance of stocks added to the S&P500. Chow discovered that the stock performance after inclusion in the Index relates to the origin of the included stocks and depends on whether the stocks named to the S&P500 were exchange-listed, or Nasdaq listed, and whether shares previously belonged to the Mid-cap or Small-cap S&P indices. For the pedal to the medal Nasdaq crowd, they will definitely like one of Chow's conclusions; namely, that Nasdaq stocks added to the S&P500 tend to make traders money, even if bought after they open following the inclusion announcement and, later, after inclusion. Of course, Chow also concluded that these stocks tend to decline over the 20-day period after being listed in the Index, so be careful! The article is worth a read and you can find it at the following link:

http://biz.yahoo.com/ii/000817/industry_...

That's it for this week's Interpretation! Check out this link to see how the futures are trading right now at the following link:

http://www.mrci.com/qpnight.htm

If you want to know how to get on my mailing list, Click on the Following Link and Drop Me a Line:

mailto:davidk555@earthlink.net

Disclaimer: I am just a listener to Moneytalk and provide this service on my own volition. I am not associated with ABC Radio Networks, Moneytalk or Bob Brinker and this service is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker. This e-mail is simply my own interpretation and commentary of some of what is discussed on the show, along with educational information I provide that I think is useful to help better understand financial issues. There are also editorial comments, useful links and contributing editors and even special alerts. I am also a frustrated writer and comic and try to weave humor throughout. You should not rely on any statement made in David K's Interpretation of Moneytalk, Educational Links and Other Financial Information or Special Alerts as constituting financial advice.
Copyright 2000 David Korn, L.L.C.

-- posted by JenL_2

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