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  • Rev Shark:

    You Might Be Smarter, but the Mob Can Trample You
    12/2/2005 9:07 AM EST

    "When I was a kid I got no respect. I asked my old man if I could go ice-skating on the lake. He told me, "Wait til it gets warmer."

    -- Rodney Dangerfield

    A market as strong as this one was yesterday deserves some respect. Unfortunately, many market participants look for reasons why the broad, high-volume, big point action we saw yesterday should be questioned and mistrusted.

    The flawed logic of many market contrarians is that the masses of investors are always wrong and deserve no respect. When the mob is bullish they believe the smart thing to do is to take the opposite view. These contrarians believe they are smarter than the mob that moves the market and they constantly bet against the prevailing trend.

    The truth is that trends persist in the market because the masses of investors that get so little respect are the market. The majority is right about what is happening because it is driving the action. It is only when things are at an extreme and the majority has used up its cash that the market will start to do the opposite of the general consensus.

    Yesterday was a very good example of how the majority drives the market. They obviously had cash and a desire to buy and that is exactly what they did. Is there a good reason to believe that they won't continue to do that in the near future? Did they use up all of their idle cash yesterday and no longer have buying power to drive this market?

    I doubt it. In fact, it is likely that the folks on the sidelines with cash are even more anxious to deploy it into this market so they won't miss out.

    One of the worst things you can do in the market is to disrespect big mo when he is active. He doesn't go away and he doesn't care what your logic may be about why he can't persist.

    The monthly jobs report this morning was almost exactly in line and appears to be a non-event. As I mentioned last night, the market seems less concerned about that data and rather sanguine about what the Fed is going to do in months to come.

    We have a positive start to the day. Oveseas markets were strong. Oil is up and metals are seeing some profit taking. Watch for those dip buyers.

    Gary B. Smith:

  • UBS downgrades US Steel (X 48.91) to Reduce from Neutral, as they believe the co is an unlikely acquisition target, valuation is unjustified, and Q4 earnings should be weak

    Citigroup initiates ValueClick (VCLK 19.28) with a Buy and $24 tgt, as they see strong secular growth of Net advertising, a strong market for Internet Ad Networks and broad solution set for Net advertising

    JP Morgan initiates Blockbuster (BBI 3.87) with an Overweight and $5 tgt, and puts it on their Focus List, as they believe potential for a click-and-brick sales bounce back outweighs the fear that a sudden consumer shift from DVD rentals could drive the co into bankruptcy

    JP Morgan initiates Movie Gallery (MOVI 4.73) with an Overweight as investor concerns are overdone.

    Majandusstatistika:

    Nonfarm Payrolls 215K vs 210K consensus

    Unemployment Rate 5.0% vs 5.0% consensus

    Hourly Earnings +0.2% vs +0.2% consensus

    Average Workweek 33.7 vs 33.8 consensus

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