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November 15, 2005

Thank you Wall Street for SNDK, Tues., Nov. 15, 2005, 6:52 PM

You know of course that I always try to distribute stock into strength and buy it during market phases where it is weak. For analytics, I use a combination of the momentum technical indicators like RSI and STO (which are almost identical in concept) and MACD or what my mentor Ian Notley called Moving Average Departure Analysis. For candidates, I look at the stocks of the best managed, financially strongest, peer-outperforming companies in the world.

And, yes, there is no perfection, and since Wall Street would like to accentuate the cycle amplitude in the price series of these stocks, so that they and their best clients, family and friends, can manage to buy low and sell high, while managing to convince you to do the opposite, there are market rhythms that must be observed and can be exploited.

SanDisk Corporation is one of the Cara Global 100 Best Companies, and I actively trade its stock to achieve portfolio performance greater than the broad equity market indexes.

Over the years, for all the really good quality stocks, I have watched Wall Street and their friends in Big Media hype these stocks up, and then take them back down. Later they hype them again, and then they take them down again. If you get my drift, this happens repeatedly.

So I decided many years ago to go along with the game " a game that ironically plays people.

If you haven't figured it out by now, here's a replay. There is a $10 billion storm over Florida in September, so Wall Street tells you to sell the U.S. (i.e., the $11.1 trillion S&P 500 as at Sept. 30-05). And the S&P 500 drops say 1 pct on the day, which just happens to be $110 billion.

Then there is a sunny day in Nebraska in November, where the Oracle of Omaha has awoken smiling over his decision to buy USD, and Wall Street trumpets that into a $110 billion red-letter day.

Back and forth. Up and down.

But did America really change?

Let me make the point again another way.

According to S&P, the S&P 500 index covers about 80 pct of the capitalization of all U.S. equities. On Sept. 30, the index had a value of 1230 and a capitalization of $11,083 billion. Three weeks later the S&P 500 index had plunged "4.5 pct to 1175, which is a loss of $500 billion, to a new capitalization of $10,583 billion. And now three weeks after that, Wall Street is screaming to Mom & Pop, and to all the buy-side money managers, that America is on the move again. Kudlow's America has started a new bull market they say.

So where are we? We're back to 1230 on the S&P 500 Index, where we started Sept. 30.

So America is still America after all.

But this time, Wall Street will point out to Mom & Pop that the Index has gained +4.7 pct in the past couple weeks, after losing just "4.5 pct before, which is the distorted form of accounting they use to keep you listening to them, and believing in them.

Yes, it's all a shell game. The public is the loser, and Wall Street ends the year up +$24 billion in profits, to be distributed to themselves, family, friends and the other shareholders who join the Club.

Here is my point. If you really believe in America, don't sell it. When you think there are too many flag waivers, write a call option at some ridiculous strike price. Let the Crazy's take it from you. You'll get it back.

How do I know this? The Gnomes told me so. Those friends at the Club in Fairfield County CT have never sold their homes, as I could see last time I drove by.

Yes, in a matter of weeks, or possibly months, the Crazy's will come to you after you put out the America, For Purchase" sign " those put option writes I talk about, i.e., the ones where you set a strike at a ridiculous (stink") bid.

And you know, you always get filled. That's because there will always be times when those flag-waiving Crazy's decide to burn that flag. Don't ask me why, but I have been watching this waving and burning thing go on for over 40 years.

Well, you can ask me why, actually.

This time-honored tradition has been honed to a T" by Wall Street and Big Media. They do it because they just love those returns.

So do you think I have Wall Street on the Cara Global 100 Best Companies list? You betcha. C, DB, GS, HBC and LEH are five of the best of the Best.

And to pay me back, DB today did the corporate kindly thing to do, they turned those Crazy's against SNDK. Thank you. Thank you.

Come to me Baby...Daddy needs a new pair of shoes.

Now here is the two-year chart for SanDisk, which shows that there have been six times, an average of once every four months, that Wall Street and Big Media have conspired to get the Crazy's to hand them SNDK on a platter.

So I say, watch them play the game, and join the dinner table. You don't even have to be a member of the Club. :-)

Btw, here is a reader letter I received at 3:28pm today by someone who obviously knows the game.

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Here's how I think the SNDK price move downward is playing out. Deutsche Bank Sec analyst downgraded today and in his report he mentions that the Korean Semiconductor company Hynix Semi has a new generation flash card that has applications that are an advancement over what is in high demand for hand-held devices and other consumer electronics etc. However, a quick google of Hynix shows that in the past year they have seen two in management be charged with bribery, and patent infringement suits from Mosaid, Rambus & Toshiba, at the least. What I see is Hynix is a rouge (???) semi manufacturer who is not playing the Intel-AMD game " you know, where every 6 months or so one or the other comes up with a faster chip and gets millions in free publicity a la Coke & Pepsi. Today, there is strong demand for flash while at the same time hard drive manufacturers are scrambling to hold onto markets and find new ones. I strongly suspect that Hynix accessed technology through prior agreements with others that are now suing them. They know the industry roadmap and timetable for rolling out next-generation flash and they are going for the big score by leap-frogging their competitors from whom they have infringed on patents. I have no doubt that the Hynix story today is intended to drive SNDK stock price down to where it can be accumulated by the sell-side, knowing that SNDK will simply move their timetable ahead and bring next-generation chips to market sooner. The market would love that, and take SNDK to new heights. Isn't this how the game is played?"

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Posted by Posted by Bill Cara on November 15, 2005 06:52:03 PM | Category: Cara Today in the Market

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