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Barron's-
Up & Down Wall Street: Bonzai, Baby!
A Haru Urara stock
market?
Haru Urara, in case you're wondering, is Japan's all-time favorite horse,
a Nipponese Seabiscuit. Routinely, when she's slated to run, the stands
overflow with her boisterously delirious fans, shouting banzai! and
madly cheering her on as she gallops down the track, straining every
mighty equine muscle to keep her record-breaking streak alive.
And even some clinically abstemious soul who doesn't know the difference
between win, placeand show can instantly appreciate why the Japanese
have gone bonkers over her. For her spectacular streak has passed the
century mark: Haru Urara has been in 106 races -- and she's yet to win
a single, solitary one of them.
Aside from giving the lie to the myth that the Japanese are cold fish,
the massive and ecstatic following Haru Urara commands stands on its
head the old axiom that all the world loves a winner. In Japan, at least,
they obviously love a loser. To Americans -- nurtured on the idea that,
as Vince Lombardi succinctly put it, winning isn't everything, it's
the only thing -- that may seem weird. But, in truth, even for us Americans,
it all depends on where we prefer to do our gambling.
Thus, while it's well nigh impossible to envision the racing addicts
here flocking to Pimlico or Belmont in the hope of seeing an inveterate
also-ran do its melancholy thing, not a few sporting types who like
to get their action on the Big Board or Nasdaq also exhibit a remarkable
affinity for betting on sure-fire losers. Keep in mind, please, we're
quite cognizant that even Haru Urara may break out in front of the pack
from the starting gate, but she's a guaranteed goner in the home stretch.
And, that's the infallible line as well on her investment counterparts
(who, incidentally, happen to be dogs instead of horses).
The Haru Urara stock market is a parallel-or, more accurately, perhaps,
an
underground -- stock market loosely connected with the real one, but
for all
intents and purposes a thing apart. It's a speculative playground, peopled
by
blithe spirits unencumbered by even the most rudimentary investment
savvy or
even a dollop of common sense. Need we say that it is also peopled by
a full
complement of squinty-eyed sharpies ready, willing and able to relieve
those innocents of their weekly paycheck or their life's savings (which
not infrequently are the same).
While the real stock market has pretty much done diddly so far for the
year as
a whole, the Haru Urara version has been running wild. The lure of its
fun and
games has proved irresistible to the faithful followers of Tout TV (those,
that
is, who weren't rewarded for acting on its advice last go-around by
gaining
permanent residence in the almshouse) and the message-board contingent,
in the
main distinguished by a truly awesome naivete wedded to an unshakeable
self-confidence.
Illustrative of the Haru Urara stocks is a little number we wrote somewhat
derisively about back in mid- March called Mamma.com. It is, as you
may or may
not recall, a recent incarnation of an unprepossessing Canadian outfit
called
Intasys, which had been in the wireless billing business. Chucking its
former
trade and assuming its new name, Mamma has gotten into Internet search
engines,
where Google has made such a big splash. Just for the record, from all
accounts,
Google's great, Mamma ain't.
Whatever Mamma is or isn't, its stock has been turning in a breathtaking
acrobatic performance. It closed at 4.05 on March 1. Two days later,
it changed
hands at 15.80 and did so, moreover, on volume of 68.4 million shares,
which was
more than 10 times the 6.5 million outstanding. It then dutifully tanked
and,
when we caught up with it, was 7 and some.
But you can't keep old Mamma down. It enjoyed another great leap upward
in the
past week, soaring above 17 Friday before pausing to take a breath.
And once
again, it did so on hyperactive turnover: On Thursday, volume weighed
in at 37.2
million shares, atop nearly 27 million shares the previous session.
If you're
wondering, the company still has only 6.5 million shares outstanding.
These mercurial bursts upward, accompanied by quite improbable trading
activity, are in no small measure related to the fact that at last count,
the
short interest in the stock amounted to a not inconsequential 11% of
the float.
The trigger for the latest buying stampede was provided by a chap named
Mark
Cuban, and, more specifically, the disclosure that he had taken a 6.3%
position
in the shares.
Mr. Cuban made his money by unloading Broadcast.com, of which he was
co-founder, onto Yahoo! at the top of the Internet craze in '99. Fame
followed
fortune when he become the proud and exceedingly prominent owner of
the Dallas
Mavericks pro basketball team. And celebrity will soon be his as well
when he
does a Donald Trump and becomes host of an ABC reality (?) offering
called The
Benefactor. In the title role, he'll be giving away a million bucks
a pop to the
lucky contestant. A couple of more weeks and red-hot Mamma will furnish
him with
all the moola necessary.
Just what Mamma's attributes are besides a sizable short interest, Mr.
Cuban
as a shareholder and a claim of offering "the mother of all search
engines"
(modesty, to steal a line from Oscar Wilde, is the company's only vice)
is not
abundantly clear. In any case, what makes Mamma worthy of mention again
is not
that its stock's dizzying gyrations and tumultuous trading are unique
or even
peculiar, but precisely because they aren't. If anything, they're increasingly
symptomatic of the strange happenings in the Haru Urara market.
Perhaps we don't understand the charter of securities regulators, but
one
would think that when stocks, as a number of the Haru Urara variety
have, turn
over a ponderable multiple of their entire capitalization in a single
session,
it should pique the interest of the SEC or even the NASD. But more to
the point,
it strikes us that there's a clear and present danger to the real stock
market:
Whatever it is that the Haru Urara market has - heaven forfend -- might
be
catching.
As all the world knows -- but if you, by chance, are vacationing on
Mars let
us be the first to tell you -- changes are afoot in the 30 stocks that
make up
the Dow Jones Industrials. Due for the guillotine are three members
of the
ancien regime: A&T, Eastman Kodak and International Paper. They're
being
replaced by a somewhat livelier trio, each of which itself, though,
is
reasonably venerable: American International Group, Verizon Communications
and
Pfizer.
Dow Jones & Co, our beloved parent as well as that of our sister
publication,
The Wall Street Journal, was careful to disabuse anyone of the notion
it was
making an investment call. "Additions and deletions from the Dow
Jones
Industrial Average," so declared the official announcement of the
additions and
deletions, "do not in any way reflect an opinion on the investment
merits of the
company."
And just as well, according to our old friend and money manager, Michael
O'Higgins. Mike has a kind of proprietary feeling for the Dow as the
inventor of
the "Dogs of the Dow" theory of investing, which holds that
last year's big
laggards in the index are likely to be this year's big winners. He even
wrote a
book about it, and one, we have to say, that was an oddity in the genre,
being
both intelligible and blessedly short. Mike, we should note, is a little
wary of
change, a conservative sort, which is why he has done so well over the
years.
Mike points out that the last time Dow Jones shook up its index, back
in '99,
the New Economy additions- Home Depot, Intel, Microsoft and SBC
Communications-subsequently fared a heck of a lot worse collectively
than the
Old Economy stocks that got the gate-Chevron, Goodyear, Sears Roebuck
and Union
Carbide. (Including dividends, the new arrivals were off 35.2%, or three
times
as much as the deposed stocks.)
Perhaps that'll prove of some solace to the shareholders of AT&T,
Kodak and
International Paper. All three companies issued communiques in response
to their
ejections that, in effect, said it won't make any substantive difference,
they're still great and, anyway, real men don't cry in public.
Whew!
That great exhaling sound you heard was Mr. Bush responding to the news
that,
at long last, employment came to life with a bang in March, to the tune
of
308,000 new jobs, the best showing in nearly four years. And especially
worried
as he is about one particular job-his own-little wonder that the surge
in
employment made the president happy to the point of exultation. A sharp
contrast
to the lugubrious monthly monotony of dismal numbers, last month's report
was
good stuff pretty much across the board. Even manufacturing proffered
a pulse,
if still a faint one; for the first time in 44 months, it failed to
suffer a
loss of jobs. Moreover, some of the sting of the less-than-stellar tallies
for
February and March was eased when the totals for both months were revised
sharply upward.
The March upswing in jobs proved that the people who get paid for guessing
what the figures will be are completely without bias-they're just as
errant
underestimating as they have been overestimating. But, then, as Cantor
Fitzgerald points out, the worthies who labor for the Fed aren't much
better.
Three of the pooh-bahs-Messrs. Bernanke, Gramlich and Kohn -- in remarks
delivered separately last week intimated that no big change in the dim
job
picture was in the offing. Could be Mr. Greenspan refuses to let them
have an
advance peek at the report and we don't blame him a whit- what's the
point of
being chairman if everybody knows what you know.
Of course, the report
contains a bit of embarrassment for the sizable bunch of
Street economists who have been insisting with varying degrees of stridency
that
the household survey, which has been posting significantly better readings
than
the payroll survey, is the real deal. Alas, according to the household
survey,
March was actually a bummer. Far from rising a spanking 300,000-plus,
jobs, by
this measure, were fewer, and the unemployment rate ticked up to 5.7%.
The
proportion of the population working slipped further, to 62.1%. And
there was a
big jump in folks who'd love to draw down paychecks full time but had
to settle
for part-time work.
Indeed, as Wells Fargo's Sung Won Sohn observes, the swelling of the
ranks of
part-timers who really want to be full timers, to 4.7 million from 4.4
million,
was responsible for most of March's improvement. As he comments: "It's
too early
to celebrate. The average monthly gain over the past eight months has
been only
95,000, far below the 150,000 to 200,000 jobs needed to absorb new entrants
into
the labor force."
There are other reasons, too, why we ought to mute the noisemakers.
The
workweek shrank a tad, and as a result weekly earnings declined. Collapse
of the
grocery-chain strike in California and balmier weather provided fillips
to both
retail and construction employment that aren't apt to be repeated.
And the most inclusive and -- as it happens, sobering -- assessment
of
joblessness was less, rather than more, encouraging last month. If in
the sad
mix of the involuntarily idled you include all marginally attached workers
and
everyone working part-time because they can't latch on to regular jobs,
the
unemployment rate at the end of March was a formidable 9.9%.
Still, to state the obvious (our specialty), better 300,000 additions
to
payrolls than 200,000 or 100,000, or none at all. Investors were a bit
tentative
in reacting to the upside surprise. They wanted earnestly to throw a
party but
were nagged by concerns that the bounce in employment might presage
higher
interest rates. In the end, they did celebrate, but not with true abandon
and
gusto.
Our advice is not to worry: Lay aside your fears of a rate hike. It's
an
election year and no one in this fair land is more aware of that than
Alan
Greenspan. Trust us.
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