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Full Court Compressing


"I like what you're S-s-s-s-saying, brother!"


Hoofy should be eating Boo's lunch today.

The raised guidance parade in chips last night, both Texan (TXN) specific and from the SIA in regards to the industry, should have been enough to keep us green today. It seems both "important" and "unimportant" that the market and all the stocks within it smacked their heads on resistance and turned around; putting in failed rallies both today and yesterday.

Important because the reaction to good news (and argue all you want about the merits of the enthusiasm... I mean, i-pod sales are going to drive the entire semi-industry? Really?) has been poor.

Two things are suggested by the chip news and the tape's pfffft reaction. First, Intel (INTC) will most likely be "A-ok, in a not tremendously exciting way" in their mid-quarter tomorrow night. If past is prologue, Intel will "tighten the range and bump up the middle" of estimates.

That's what Texas Instruments did and that's what Intel always does... whenever they aren't blowing up as they did both last summer and the summer of '03, anyway. But they don't figure to blow up tomorrow. Not with TXN ok and all that Apple (AAPL) stuff to crow about.

The second thing suggested by the recent tape is that, after Intel does go ahead and bump their June mid-range EPS estimate from the current .283 cents (according to IBES) to .29 or maybe even .295 cents, the Street won't care. Put it this way, after the last two days would you trust green futures based on Intel being 1-cent more optimistic? The phrase "hit the bid" lunges to mind.

Before Boo starts looking at my leg lustily I hasten to add that I rather doubt the reaction to Intel on Friday morning is important, in the big picture. I hear the happy sighs being blown all over the Street on the news that hedge funds eeked out an up May and I see the pain behind the numbers. I see the majority of those 8,000-and-growing hedge funds sweating blood to get nowhere and come to two conclusions:

First, it's going to take one heck of a jolt, good or bad, to break the tape out of the Big Huge Range of the last few years. Talk about Google (GOOG) all you want, I don't think most grown up money managers are playing it. They are jamming the short side of Wal-Mart (WMT), wondering why it can't break. They are twisting around GM positions, trying to predict the next senior citizen to talk his book on the name.

The hedgies are grinding against one another and getting no where. The range gets tighter and everyone becomes quicker to flip sides against every move, trying to scrape out the incremental dollar to justify taking 1% per year. Picture a ball dropped from a ledge (perhaps labelled "2000") and bouncing in ever-shrinking hops and that's the range I see.

It's a picture that makes for very, very surly fund managers. "Beating the market" or not, they aren't popping corks over having an up (maybe) May.

Second, I feel their pain... I feel my pain... but that doesn't change my gut feeling that it's going to be very hard to make money either in an average hedge fund or with a "well diversified portfolio of stocks" any time soon.

It's a huge range and the next 2% move isn't going to change that, no matter how the tape reacts to Intel.

Assorted Competitions

  • For purposes of the Minyanville Weight Contest, I'm tipping the scales at 347lbs. The plaid is slimming.
  • On a somewhat related point, put me down as a 32-handicap for the golf tournament at MiM2.
  • I might be sandbagging a bit on both numbers but, to paraphrase Sir Charles Barkley, someone has to be the bad cop and it might as well be me.

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No positions in stocks mentioned.

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