The Chart du Jour

Un-Opened Envelopes

October 25, 2000

By, Barclay T. Leib

I had lunch with my 73 year-old mother today. She is a great impressionist painter, but also fancies herself as a qualified investor on the basis of cocktail-talk banter. For years she has owned such companies as Microsoft, Lucent, Intel, GE, and Corning Glass Works. It's been so easy to believe one is so smart, and despite all my pleadings throughout this year in particular, she never sells. So I asked her today how much money she had lost in the recent market downdraft? 30% of her portfolios value? Maybe 40% or more?

Do you know her answer? "I haven't been opening my brokerage statement envelopes. I don't want to know. I can't bring myself to open them."

Now if this is not an archtypical anecdotal sign of denial in today's market, I don't know what is. When I advised her that it was not too late to dump GE, the stock only being down 10% or so since the Honeywell merger announcement, she even insisted to me that GE hadn't recently been falling. More denial. It truly is amazing what tricks the human brain can play on people who just don't want to wake up and admit their mistakes.

At Sand Spring, we make mistakes as well, but we tend to admit them rather quickly. Although bearish Lucent at $80, we thought it would find some Fibonacci support toward $40. When it slipped to $37, we were out again, suggesting a price more toward $15 was even possible given the huge head and shoulders top. Now we wish to admit another mistake. Bearish Intel from above $100, we previously suggested Fibonacci support should exist for that stock around $42-43 which ended up giving way earlier this month. After the recent bounce, we now have to ask: How low is really low on Intel? $42-$43 not having held the first time down, how far could this stock really fall? Restretching our Fibonacci bands once again on the chart below, we now see the possibility in time to reach $22! Will denial still prevail then? We hope not, but for now, and despite recent massive losses, America's love affair with equity investing seems ever so slow to die.

Chart produced using Advanced GET End-of-Day

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