"Six Hours Ahead of its Time" The Wrong Stuff

GENERAL COMMENTS: Monday's modest 70-point rally in the Dow was enough to tweak a bear's ugliest suspicions about the stock market's underlying health. As few observers outside of CNBC's perennial cattle drive could have failed to notice, most of the other indices were down, Big Board declines led advances by a wide margin and the list of new lows expanded dramatically. As these statistical warts were growing on Wall Street's nose, Big Money was plundering the oil patch, which lately has enjoyed what I will warrant as short-lived respite from the ravages of global deflation. The robustness of a relative handful of big cap favorites told us something else we should have long since recognized -- that there is still so much money flowing habitually into the stock market each and every day that it is well nigh impossible for shares to fall across-the-board. So the funds sold tech stocks and used the proceeds to jump on the likes of Exxon and Mobil. For this kind of tactical brilliance many of them will no doubt take home 7- or 8-figure bonuses this year.

No Prats

Lest we disparage the money managers indiscriminately as brainless prats, it should be conceded that at least a few of them evidently thought to divest themselves of America Online's shares recently in order to redeploy the proceeds in other, presumably more promising, stocks. AOL's collapse continues apace, and although it has not yet reached the very bearish target at 87 that I had projected here a while back, it did trade below 90 yesterday. When I made that forecast I was merely reading a chart and had no idea what might cause AOL to receive its comeuppance -- not that its absurd overvaluation should have troubled the stock's most ardent sponsors. Now I know the reasons for its steep decline, courtesy of Steve Sjuggerud, who sent me a draft of a newsletter that he is about to launch, Pirate Investor Letters. According to Steve, AOL has a bandwidth a problem: Its customers are connected to the service via old-fashioned telephone wires and will therefore be unable to download movies and other bandwidth-intensive goodies that such competitors as AT&T/Microsoft will soon deliver via cable modem. In a stock market that is driven in large part by Internet hubris, the revelation of AOL's small penis size is surely going to play havoc with the valuation of its shares.

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