Another Polly ("not a kook") says the Stock market will plunge. : LUSENET : TimeBomb 2000 (Y2000) : One Thread

June 7, 1999 Banking & Finance Investor says sell now while market is high Rusty Cawley

Fund manager Barry Kitt sums up the connection between Wall Street and the Y2K problem this way: "For the first time in the history of the stock market, we have a date-certain event that could become a worldwide cataclysmic event."

Kitt controls The Pinnacle Fund, a $31 million hedge fund based in Dallas. The fund invests in undervalued growth stocks. Through May 31, Pinnacle gained 30.22% in value, compared to 15.01% for the Dow and 3.96% for the Russell 2000.

Like all investors, Kitt is assessing what will happen on Jan. 1, when the world's computers make that dreaded shift from the year 1999 to the year 2000.

His conclusion: There will come a financial cataclysm that will affect any portfolio that invests in securities.

Now understand, Kitt doesn't believe that planes will fall out of the sky at the strike of midnight on Jan. 1, or that Russia will accidentally launch all its nuclear missiles.

"I'm not one of those kooks," he says.

But Kitt (who describes himself as "typically a bull investor") knows Wall Street makes decisions more on emotion than on logic, more on perception than on reality. And there are enough investors out there who fear the Y2K Bug to cause the Dow Jones averages, the S&P averages and the Russell averages to shift downward.

"Let's assume that only 30% of all investors pull out of the market during the last half of this year," Kitt said. "That's more than enough to cause a major, major correction. I wouldn't predict how low the Dow will go. No one's smart enough to guess that correctly. But it would not surprise me at all if the Dow falls by several thousand points before Jan. 1."

Kitt expects the Dow and other indexes to cascade downward in the coming months, not in a single plunge, but in a series of volatile up-and-down corrections that will take away much of what the market has gained in recent years.

As the news media begins to feed the public a steady diet of doom and gloom, more and more individual investors will dump their mutual funds and their stock portfolios.

"Everybody thinks they're a day trader now," Kitt says. "All you have to do is make a phone call and you're out. It's just too easy to exit mutual funds."

Corporate bonds also will suffer as investors begin to question their safety.

"The market will implode," Kitt says frankly.

To protect his own investors, Kitt is steadily paring down his portfolio. In recent months, he's moved from an 86% investment in 25 stocks to a 58% investment in 12 stocks. Before long, he expects to have only 50% of his fund invested in 10 or fewer stocks.

"I'm getting rid of my likes and keeping my loves," he says.

As for the individual investor, Kitt's advice is simple: Get out now. Sell that stock; dump that mutual fund. Put your money in a money market account or in a mutual fund that invests in government bonds.

Stay away from everything else, he says. There are no other safe havens.

"If I pull my money out now, I lose nothing," Kitt says. "My only risk is an upside risk and I'll accept that to avoid losing money. No one can time the market. I'd say get out now while the market is at a high."

How about after Jan. 1? When does an investor know when to get back in?

"Don't get back in too soon," Kitt says. "Wait for things to shake out and to settle down. It will take at least a couple of months to figure out whether it's safe to get back in."

-- Jon Johnson (, June 07, 1999


I'm really surprised the market hasn't already fallen.

-- Anonymous99 (, June 07, 1999.

I don't have to be very business savy to know what a hoopla it was to see the dow crack 10k. I wonder just how much more the investors are willing to push the envelope (11k, 12k?) before selling out at outrageous prices and leaving you me and the wall in a millenial depression. Or at least that is what I hear. Oh yeah, I think there was some mention of this type of capitolistic behavior at:

Fascism-- What it is and how to fight it

(For any of you who have enough energy to read it all I think you'll be very, very unpleasantly surprised )

-- (, June 07, 1999.

Well, he's quite obviously an enemy of the state and I guess CPR didn't get to him in time..... to get him to shake that meme....

Must be a lurker here or something.... infected the guy.... oops..

-- Lisa (, June 07, 1999.

Why a fund manager with over 50% equity exposure remaining would declare fiscal fubar is a little mysterious.

-- Dave (, June 07, 1999.

If we have a severe recession or depression, exactly how is your money safe if it is invested in money market accounts or mutual funds that invest in government bonds and securities? Won't they go down with the economy? May be a dummy question, but would seriously like to know how it works (don't really want my money under the mattress!).

-- Valkyrie (, June 07, 1999.

This is gonna be WAY interesting...

-- a (a@a.a), June 07, 1999.

Valykyrie, for those of us allergic to the notion of cashing in our 401(k) or other retirement accounts, switching to a money market or government fund is called hedging our bets. (A related option is not making any more contributions into the fund until Y2K settles down.)

-- Brooks (, June 07, 1999.

BUY GOLD !! BUY SILVER !! Take advantage of the biggest runup of precious metals in the history of the world. The feds no it well, thats why they are desparetely manipulating gold prices with Goldman Suks as there middle man. Gold to one thousand. Silver to one hundred before May 1, 2000.

-- no spam (NOSPAM@SPAM.SPAM), June 07, 1999.

What's great about this is that right now everyone is thinking that they will sell in December or November at the earliest. They'll have plenty of time to call the broker or the fund manager's bureaucracy.

About two months from now it will occur to them that there are a lot of other people planning to do the same thing. They'll start thinking, "Maybe I should beat the rush just to be sure and get out in October..."

Two weeks later they'll be calling to bail out of the market. It could start to get ugly in August.

What I don't agree with Kitt about is that the media will somehow be clamoring about doom and gloom. I think quite the contrary. You'll hear a LOT about the uncertainty and how bad it is that everyone is panicking for now reason.

The advice is sound. Get out now while you still can. Hedging in money markets and T-bills is a fair bet, but if it goes TEOTWAWKI, we'll all have a lot more to worry about than our 401Ks.

-- nothere nothere (, June 07, 1999.

Also see this article from May 24th:

"Bank Stocks Plunge on Y2K Worry"

-- Linkmeister (, June 07, 1999.

workathome on your link to Fascism. I found this sentence rather revealing, even if it is over 50 years old.

"Thereare no exceptions to this rule -- fascism comes only when the working class shows complete incapacity to take into its own hands the fate ofsociety. In the United States you will have the same thing."

-- (, June 07, 1999.


The was one particular passage that stood out to me too. I know old timers like Hardliner can testify to the all too real evidence that IT CAN HAPPEN AGAIN. The state we are in is not yet fascism but that is what throws people of when I mention it. What one must realize is that the circumstances that we are in right now are exactly what sparks the fascist regime, and I posted it here on the Stock Market thread because that is how the middle class lose hope, in the face of depression even lose their lives, and seek the person(Clinton) people (Clinton's Administration) to help them through this very rough time by delivering a miracle. It's so easy to think that everything is fine because the Market has been at an all time high. Peruse the link given above and you'll see that the stage in 1920/1930 is being set up all over again sixty years later on a much broader, global scale. I wouldn't spread fear unless I thought it was what was warranted. To me, it's a subject that requires an all-or-nothing attitude. Think about it, if the middle class don't defend their rights now then they will be squandered away by the inevitable killer of us all, time.

-- (, June 07, 1999.

-- Anonymous99 commented:

"I'm really surprised the market hasn't already fallen."

-- Anonymous99, been watchin the Market for a looong time, no one really knows when it will tumble but I think it is safe to say it will tumble. It may have one last blowoff top with VERY FEW stocks except the bluest of blue chips participationg. The past two days have seen 100+ on the Dow with NYSE advances/declines about 1600 to 1300. This is a MAJOR sign of weakness.


-- Ray (, June 07, 1999. sayeth Ray - Stock Market Guru...hee,hee.

-- Y2K Pro (, June 07, 1999.

Wow, the eloquence of Y2K Pro's rebuttals is always just so overwhelming. Stupid troll.

-- King of Spain (, June 07, 1999.

y2k Immature(Amateur .. sorry):

This morning I gave Poole the benefit of the doubt and suggested to Andy On This Thread that he DOUBLE Poole's brain size. I believe Andy agreed since he got right to the task.

Now y2k Immature in your case I am sincerely sorry to report that at this time your brain size is so infinitesimal that we can not display it here. This is not to say that with the proper diet and mental exercises, at sometime in the distant future, it MAY be possible.

Your Pal, Ray

-- Ray (, June 07, 1999.

Hey, just for the record, check this thread for just a small example of Ray's stock market "expertise".

-- Hoffmeister (, June 07, 1999.


Guess if you can't win the battle for the FAA you gotta try to find some salvation elsewhere. Defending a bunch of LIARS ain't no fun.

GM closed at 69 1/8 today do you feel any richer than you did a week ago?

Your Pal, Ray

-- Ray (, June 07, 1999.

Good work Hoff - funny stuff, another example of the Ray-man wearing his dunce cap in public.

-- Y2K Pro (, June 07, 1999.

Aww, Ray, all in good fun.

Tell me, do you "short" stock splits too?

Seriously, never said I owned GM stock. But if I worried about 1 week changes, my guess is I'd never feel, much less be, any richer.

-- Hoffmeister (, June 07, 1999.


With Market Capitalization at 150% of GDP it's getting close to that time. But one better use some Stops here and there for now!!


-- Ray (, June 07, 1999.

Speaking of market tops and suchlike, ZDNET's Jesse Berst offered his views on e-commerce stocks recently - The Coming Crash of '99: Ecommerce Stocks at Risk - and got an earful from his readers.

Most comments agreed re a potential serious correction and shake-out in these stocks; others took issue with the very idea. I parrticularly enjoyed this one from a Prof in VT:

You're 'jumping on the bandwagon' of doom and gloom!

Paul Tartaglia

Friday Jun 04, 1999

Occupation: PROFESSOR


It seems to me that you're 'jumping on the bandwagon' of doom and gloom! First of all, you quoted the Barron's article out of context - the $10 per share was not in terms of current shares but rather took into account stock splits! I would also add that being profitable in the first 'few years of business' is a positive sign and not a negative one (not too many companies become profitable right away). Lastly, although there are problems with net shopping, I think you'll see them cleared up a lot sooner than you would in normal commerce because the stakes in this mode of operation are so high (this is not a 'fad'!). More and more people are starting to realize that this is a whole new paradigm and cannot be evaluated in terms of past enterprises. Shades of '29. "The old rules don't apply."

-- Mac (sneak@lurk.hid), June 07, 1999.

Here's a paragraph from David Wilkerson's World Challenge Inc. newsletter which I received 14MAY99:

"I respect my country, but I also know my Bible. I know that no nation can continue shedding innocent blood and not be judged. I have been called a doomsayer, a fanatic who cannot see all the good things about America. It no longer matters to me what anybody says; I am telling all who will listen that America is going into a frightening depression! The stock market is going to crash with amazing suddenness, and speculators are going to be bankrupted. The suffering is going to be horrendous!"

David Wilkerson is certainly no Pollyanna. His warning of a sharp plunge rather than a gradual decline in the stock market would indicate how a mass panic could happen.

The faster the crash, the madder the dash.

-- Randolph (, June 07, 1999.

The DOW will touch 12,000 by Dec. 99. It will also touch 1,200 by Dec. 2002

-- Not Me (, June 07, 1999.

Not a kook, eh? Are you suggesting that this person who suggested that the stock market would collapse as early as January of 1998 IS a kook?[ST_rn=ps]/getdoc.xp?AN=314992225&CONTEXT=928 803334.1074135089&hitnum=394

Just asking.


-- Anita Spooner (, June 07, 1999.

(1) You don't have to be a MENSA member to know that the market is overvalued (overpriced)...just watch the daily stock reports. Look at price/earnings ratios. Look at the prices for stock in companies that have never made a dime in profits...and many of which never will. Listen to those who are espousing versions of the greater fool theory:

"It doesn't matter what I pay for a stock, only that I can find a greater fool who will pay more..."

This ignores the underlying economic fundamentals.

(2) Look at what has happened in the past. Not merely the late 1920's, but the Great Tulip Bubble, the East Indies Trading Company, etc. These were the result of everyone trying to get rich investing in the same thing.

(3) Some of us (even GIs) cannot move what pitiful assets we have (vow of poverty, you know!) out of 401K plans...and have limited investment options. So we hedge as best we can, into bond funds. As things get shakier, more and more marginal Y2K thinkers will be moving their funds out of the market...just to be safe. The thought that some (or even many) investors are still thinking December, but might just drop back to November, or even October is right on. Historically, September and October have been bad months.

(4) A bad drop in the stock market would cause a loss of consumer confidence, which in turn would cut back expenditures during the critical Christmas season. Recession would be a highly likely outcome. Then we have Y2K...

(5) If you are still invested in the stock market, I suggest strongly that you consider some serious prayer about when you ought to get out.

-- Mad Monk (, June 07, 1999.

Sell all your stocks/bonds, liquidate any 401Ks/IRAs, clean out your bank accounts, and do this with them: 1) Buy what you will need to survive: food, water treatment stuff, firearms, dogs, dog food, medical supplies, alternate heating/cooking means, etc. 2) If you have anything left over after this, buy barter items that you can trade, and preferably can mostly use yourself if trade becomes impossible OR Y2K=BumpInRoad. There is a barter item list on my website with some seldom-thought-of items on it. ( 3) If you have money after doing a fair job of #1 & #2, then buy small silver and gold. Do not buy gems, jewelry, collectibles, or anything with numismatic/other premiums. Pre-1964 circulated US silver dimes/quarters, 1 oz. silver ingots, 1/10 ingots/coins are good. 4) Any GIs want to comment on my summary here?

-- MinnesotaSmith (, June 07, 1999.

Market will close early for Y2K

-- Do It now! (, June 07, 1999.

Wow, this is scary. Good advice from Minnesota Smith. What ever happened to him?

-- (, January 13, 2000.

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