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Of course: This is just Fiction

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By throgsnk
May 22, 2002

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I'm sure that no institutional investor, who is about to get out of one of the consumer cyclical sector because the shares are near a 52-week high, would ever float a balloon full of negative rumors to further trounce a stock that may be at the bottom from a share price point of view.

Take AOL, for example. At $50/sh, it was a bargain; at $19/sh, it's a dog. It all depends on whether you want in or out of a stock as an institutional investor. Let's just say hypothetically (because this would never happen on Wall Street), a Hedge Fund has a pile of cash that needs to be invested and the sectors that comprise 60-80% of its investments are at or very near 52-week highs. Not too much upside anticipated there. So, what would a decent MBA from Harvard do to justify his/her salary at the Hedge fund. Wait!!! Here's an idea: Since a company like AOL has been beaten down because "advertising revenue is non-existent" or "the internet is a thing of the past" or, better yet --- "Nobody wants to use AOL any more" - perhaps, investor psychology is so negative and just a little more bad news might make the tired shareholders dump their shares in disgust, tanking the share price even more. With any luck, says the Harvard MBA at the Hedge fund, we may even get AOL at $15/sh and I'll be the hit of the next cocktail party (which is even more important than the bonus, but not by much). Think of the adulation!!!

So, let's get going -- AOL bad, bad, bad. Say it enough and people start believing it. Then when Mr. Harvard MBA has fulfilled his firm's position in the stock - AOL good, good, good. This time, he steps in front of the microphone at CNBC, to the adoring glances of the Money Honey, Maria and tells the world that Motherhood, Apple Pie and AOL are "good, good, good" (sort of like Dr. Frankenstein talking to the Monster).

But, rest assured - on Wall Street, such a thing would never happen....happen......happen......

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