End of quarter, "tape painting" abounds

Come the end of another quarter, come another unsavory, dishonest practice that the Securities and Exchange Commission (SEC) opts not to be concerned with; that practice being the art of “painting the tape.” “Tape painting” involves the accumulation of stocks by "manager’s of other people’s money" (MOPS) in those companies that have been performing the best so that they can show how smart they were last quarter when statements are printed and mailed to clients. Almost like clockwork, markets often begin to get a nice bid starting on the second or third-to-last trading day of each month and quarter; with ends-of-quarters, for obvious reasons, usually seeing more exaggerated moves. And today, given the dearth of any obvious catalyst, except maybe tomorrow’s FOMC meeting, markets began to levitate around 1:30 PM anyway. Thank god that 3.6% correction in the S&P 500 is now behind us. The typical 30-something hedge fund manager must have had nightmare-ish visions of working well into their late-30s…..Dutch supermarket Royal Ahold, postponed its sale of $650 million in bonds that was slated to finalize its $7.1 billion buyout by the equity firms Kohlberg Kravis Roberts and Clayton Dubilier & Rice. There are now accumulating signs that indigestion has set-in on the private-equity bubble….. Best Buy (BBY) said that it would open more North American stores than previously planned, even though they recently cited sluggish consumer spending as a contributing factor for its most recent disappointing earnings report. It also stated its intentions to buy back $5.5 billion in stock and raise its dividend by 30 percent. Its current yield of less than 1-percent makes a 30% increase in that sound good even though it moves the yield to somewher around 1.2%. Of course, given that the company has just $2.8-billion of cash and short-term investments currently on its balance sheet, we’re witnessing yet another financial engineering project., ala IBM, Xilinx, ASML and NSM. For its efforts though, Best Buy was up a nifty $1.68/share….The Wall Street Journal’s front page story today was titled, “How Wall Street Stoked The Mortgage Mess.” Adding to the recent Bear Stearns’ hedge fund and CDO angst, was news that Durable Goods orders fell off a cliff last month. Of course, when the world’s financial system appears to be teetering, possibly, on some sort of potentially debilitating “credit event,” given the unfolding Bear Stears (BSC), CDO and subprime stories in recent days---the obvious thing to do is to buy tech stocks and sell gold and silver mining companies. Don’t ask me the logic behind recent market action, but that’s what has been happening to a more or less degree and today’s ramp in semiconductor shares can only be explained by the fact that client statements go out after tomorrows close. I believe a potential explosive “paired trade” opportunity is developing as the quarter is coming to a close—to go long gold, silver, and miners and go short semiconductors and financials….As an aside, the fact that Blackstone Group (BX) has now traded at a pretty nice discount to its Friday IPO price (as low as $29.13)—a 6% discount to its Friday IPO failed to help the MOPS (managers of other people’s money) draw on that particular clue and what it might mean for this markets only real energy source, liquidity and tons of it—at least today. The Dow finished up a chunky 90-points and the tech-heavy Nasdaq added a sprite 31-points. Tomorrow is the FOMC and that merry band of misfits.