Internet Hoax Gooses Stock Market

Traders woke up to a pleasant surprise on Tuesday morning, with equity Futures strongly higher. CNBC anchors were exuberant as previous earnings and credit fears melted away.

The cause? An internet April Fool’s hoax that backfired.

Dedicated short fund manager Doug Kass, of Seabreeze Partners Short LP, put out an early morning, tongue-in-cheek commentary, titled Time to Buy the Bull? The long time Bearish market pundit and writer for The Street.com and Real Money announced that he was raising his year end price targets for the S&P500 to 1,666, which would reflect a yearly gain of 26%.

The Financial press read the commentary literally. The WSJ announced "Bear Flips Bullish!," causing equity futures to rally. CNN Money covered the joke as if it were a real news item, and Marketwatch declared "Short Seller Starts Stock Rampage." Barron’s headline read "Longtime Bear Tosses in the Towel; Says New Bull Market is Upon Us."

Bloomberg  data service ran a full news alert, specifying the details of the longtime Bear’s hoax, without recognizing it wasn’t real:

– The writedown of toxic paper throughout the world’s financial system has dramatically overstated the severity of the credit issue.

– The major money center banks and brokers will be a contributing factor to a surprising 25%+ rise in corporate profits.

– Shares of financials, which have been unfairly targeted by the short community over the last year (monoline insurers, banks, brokerages, etc.), could double in price by year-end.

– Oil prices, stimulated almost entirely by managed commodity trading funds and hedge funds are destined to drop below $50/barrel by year end.

– The U.S. economy will avoid recession, as housing has definitely bottomed;

Bloomberg failed to note these comments were all in jest, adding to the upwards market pressure.

The veteran fund manger had assumed that readers would get the April
Fool’s joke — but never imagined it would go over the heads of veteran
financial writers.

Shortly after the open, US equities were in a strong rally mode. The Dow was up over 230 points, and Nasdaq had gained almost 2%, up 50 points.

The short seller issued a sheepish mea culpa that morning. "I apologize to my partners, and to my friends, and especially to the SEC, for whom I have the greatest possible respect. I never intended markets to be manipulated in this manner. I was only trying to make some traders, who have been having a tough year, break a smile . . .

One part of the hoax turned out to have a surprising result. As part of the April fool’s joke, Kass announced he would host a new CNBC show, called "The Mad Bull," at 4:30 p.m. EDT daily and after "The Closing Bell." CNBC program director Bill McChesney said that the station had already test marketed the idea, and the show had a very enthusiastic response.  The program "The Mad Bull" will begin airing in June.

>

Sources:
Time to Buy the Bull?
Doug Kass
Real Money  Silver, 4/1/2008 7:44 AM EDT
http://www.thestreet.com/b/dps/te/theedge1.html#entryId10410074

Alternate URL:
http://www.seabreezepartners.net/newsArticle.asp?id=213

Short Seller Starts Stock Rampage
Dave Callaway
Marketwatch, April 1, 2008
http://tinyurl.com/32vt5p

Longtime Bear Tosses in the Towel; Says New Bull Market is Upon Us
Alan Abelson
Barron’s, April 1, 2008
http://online.barrons.com/article/SB120674503851173099.html

Bear Flips Bullish!
David Gaffen
WSJ, April 1, 2008
http://blogs.wsj.com/marketbeat/

What's been said:

Discussions found on the web:
  1. yoganmahew commented on Apr 1

    You’re a funny fellow.

  2. michael schumacher commented on Apr 1

    Well that may be what “they ” want you to attribute to this rally however it’s not just because of him. If he thinks it was all causedby his “joke” then he needs to check his ego at the door.

    Yet another excuse to push the “up” button….you really think that bushco would let the markets fall during the great power grab???

    Come on Barry,, even you know how stupid relating to one “event” is…..This is just another excuse since “we” need to find something to cling to.

    The SEC will most likely “investigate” since there was an admission. I guess blatantly buying futures at any cost gets overlooked day after day but a joke?….no we can’t tolerate that.

    Ciao
    MS

  3. AJF commented on Apr 1

    Seriously, I know it is 4/1, but is Kass really hosting the “Mad Bull” on CNBC?

  4. SPECTRE of Deflation commented on Apr 1

    Kass moved the market 233 points, and I guess he was allowed to run the ISM numbers as well? LOL!

  5. rob commented on Apr 1

    Okay this is the second time I’ve been had but good this morning … good work

  6. SPECTRE of Deflation commented on Apr 1

    MS, thankfully we have the Democrats looking out for us. LOL! April Fools indeed!

  7. DH commented on Apr 1

    Kass, once again is King!! He doesn’t move markets because he is ahead of them:)

  8. ferd mertz commented on Apr 1

    4/1 is a semi-permanent state of mind in these markets. welcome back goldilocks!

  9. Jim M commented on Apr 1

    Efficient markets! Buy on the rumor, sell on the April fool’s joke.
    Seriously, if true, this has to go down as an indictment of the perma-bull press. Time for them to engage in some deep reflection on their unthinking cheerleader role.
    Or not.

  10. Jay Weinstein commented on Apr 1

    I like April Fool’s Day There is some funny stuff on Minyanville as well.

    Let’s face it, the market will rally strongly this month whether you like it or not. Shorts will cover, CNBC will scream, etc. etc. We have seen the story before.

    After that, it is anyone’s guess.

    Question: the ISM prices paid number was up dramatically. How good is that data, and what are the margin implications?

  11. Eric Davis commented on Apr 1

    This market is nuts… All my respect to Doug… but usually his bullishness drives the market down…..

    I’m trying to figure out if I’m still asleep…. I’ve woken up in Bizzaro world.

  12. Yargo commented on Apr 1

    Doug Kass already said that he was going long into the quarter end. All that I see is that the guy was trying to juice his profits on the long side and get a good opportunity to short this thing. It’s absolutely shameful that people with his kind of influence can profit off of this.

  13. Too Bearish, Too Late, Rear Mirror Investing commented on Apr 1

    The futures spiked at 3:00 AM, when the European markets open, not when Kass issued his release.

    Why are you trying to distort the facts and to find another “fat finger error” excuse for the rally?

    Just admit that you are too bearish and it was a mistake “going crazy short” at the major bottom (when S&P was trading around 1280 you were talking about going “crazy short” instead of buying).

  14. kaan commented on Apr 1

    I think the real credit should go to the japanese financial institutions.Today is beginning of new financial year and resumption
    of the carry trade party.

  15. rob commented on Apr 1

    Lol, it is BR’s april fools joke, click on the linkees they don’t lead to anything in particular.

  16. michael schumacher commented on Apr 1

    BTW I can’t help but think he knew EXACTLY what he was doing……

    Total douchebag IMO….

    Ciao
    MS

  17. Peter Glyman commented on Apr 1

    I’m just going to stop reading today. lol

  18. Roger Bigod commented on Apr 1

    Is it me, or is this site pretty much the same today as any other day? 😉

    OTOH, could be the times. In the markets, every day is some kind of Fool’s Day.

  19. Larry Blumen commented on Apr 1

    I don’t see anything anywhere else about this.

    Ritholtz – are you hoaxing the hoax?

  20. Boris commented on Apr 1

    Barry- very interesting…
    What is it with this stupid market?We get massive writedowns and it shoots up!!—We are in a recession and Amazon dot com shoots up 3 points??? I think the stock market is an April fools joke

  21. AJF commented on Apr 1

    Barry,
    I’m sure you are smiling right now. Good one. Classic. BTW- if Kass were to host that show, I’d think the apocalypse would be upon us!

  22. SPECTRE of Deflation commented on Apr 1

    Kass didn’t do shit this morning. Check the dollar against the yen and the commodity bloodbath for starters. It was 3:00 AM when futures were goosed, but Kass can be pitched if ya like.

  23. Jay Weinstein commented on Apr 1

    Hello, have some of you had a “sense-of-humor-ectomy” recently?

    This is a grueling line of work, a good laugh every now and again is priceless!

    Any responses to my ISM prices paid query [a serious question BTW]

  24. blin commented on Apr 1

    Some of you may be overlooking the fact (although you wouldn’t be able to tell thus far this year) that the first trading day of the month is one of the strongest trading days of the month.

    Yesterday the market setup for a sizeable move up or down today …it looks like the bulls won this battle.

  25. michael schumacher commented on Apr 1

    lost in this is that FGIC was downgraded three levels by Moody’s…….last night shortly after midnight ET….

    this is not a market…it’s a socialized ponzi scheme now.

    First day of the quarter and the “solvency” issue is nowhere to be found.

    Disgusting…..
    Ciao
    MS

  26. michael schumacher commented on Apr 1

    Joke or not…..this market (and it’s consistent manipulation) is just no longer funny.

    Sorry to rain on the parade but you can joke all you want about it……..the ramifications of the current behavior is not very funny to me.

    Ciao
    MS

  27. Neal commented on Apr 1

    It makes as much sense as anything else does these days.

  28. KirkH commented on Apr 1

    You got me too (for a minute), and it appears some in the comments still haven’t checked the calendar!

    Using a description of a prank as part of your prank is genius misdirection. I’d like to see Penn, Teller, and Ritholtz in Vegas some day.

  29. Pete commented on Apr 1

    Proving Big Picture commenters are as gullible as everyone else. MS was had!

  30. Steven commented on Apr 1

    Barry, you’ve come up with the best April Fools joke of the day.

    Did you get Doug’s permission to use his name?

  31. Bill commented on Apr 1

    This is absolutely the funniest story I’ve heard in a long time!! Truth is stranger than fiction!!

  32. John F. commented on Apr 1

    Following Dick Bove’s bullish pronouncements on the financials makes every day seem like April Fool’s.

  33. Roman commented on Apr 1

    So does today mark the TOP of the Fed Rally. Unemployment comes out Friday. This seems like a good point to double up some short positions.

  34. big tuna commented on Apr 1

    LOL BR, nice one. I like how not all comments get it yet. Or do they. Round and round, reflective hoaxatology.!

  35. Movie Guy commented on Apr 1

    Doug Kass’ piece was entertaining. Anyone stupid enough not to get his April 1 humor shouldn’t be performing work except on highway gangs. Or just stay home, watch TV, and convert oxygen.

    Doug ended the piece with April Fool’s Day! for the slow-minded crowd.

    Yet, some didn’t get it.

    You can’t make this stuff up.

  36. Greg0658 commented on Apr 1

    Lake flows to catch Basin to leeking Valve(WS) to Loops of piping to Valve(G).

    Valve(WS) catch pan provides for east coast & players.

    Loop(A) to pre Valve(WS) provides incentive.

    Loop(G) stuck in flow.

    Valve(G) outflow of Loop(G) debates the following:
    (take Mastercard 45<229 on 131.13M shares)
    W sells on news reaps 400% gain
    X now sells reaps 200% gain
    Y now sells gets 100% principle
    Z now might sell gets Z% loss

    Now that the (G) understands ... sees the interest exspense of 7<24% on credit card balance ... interest income of 0<4% on checking and savings balance ... What To Do Now? When there is only 1 system?

    key:
    A,W,X,Y,Z = algebraic items
    G = Globe
    WS = Wall Street

    ps - did the great GOOG see this one coming?

  37. yusef commented on Apr 1

    Movie Guy. You are an idiot.

  38. Webster commented on Apr 1

    You know, the word gullible is not in the dictionary

  39. Roger Bigod commented on Apr 1

    At least some serious people aren’t wasting time on this trivia. I can’t wait to sign up for the Virgin-Google Mars settlement project.

  40. AGG commented on Apr 1

    This straw the bulls are grasping looks real but will turn out to be a 3D hologram. Next comes the “many people made millions during the Depression years in the stock market”.
    More log rolling in white water.

  41. Jonathan Garber commented on Apr 1

    No wonder why LEH needed to raise $4 billion

    5:13PM Lehman Brothers: Moody’s downgrades certain Lehman XS Alt-A deals (LEH) 37.64 -0.23 : Moody’s Investors Service has downgraded the ratings of 279 tranches from 27 Alt-A transactions issued by Lehman XS Trust Series. One hundred sixty two downgraded tranches remain on review for possible further downgrade. Additionally, 97 tranches were placed on review for possible downgrade. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, Alt-A mortgage loans. The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels. The actions described below are a result of Moody’s on-going review process.

  42. Andy commented on Apr 1

    New trading scheme:

    “Buy on the joke, sell on the reality”?

  43. Toro commented on Apr 1

    He had me going, that was for sure. It was not until he wrote that Dubai was going to buy all the SPYs and QQQs that I thought “Wait a minute?”

  44. Rod Raynovich commented on Apr 1

    I must admit I read Kass’s column and sometimes act on the info.
    But really his recommended trades can leave you dizzy as they reverse course faster than your fingers can do the walking.
    His opinions change as fast as Oprah’s weight.

  45. Francois commented on Apr 1

    The real April Fool hoax is the market is strong rally mode, because (cough) as per news outlets (cough cough) banks will raise capital (future tense here…) and manufacturing is doing “better than expected”. (Where have we read that expression before? Hmmm!)

    Like it should be a surprise with a dollar that weak.

    Having fun yet?

  46. FulhamFrankie commented on Apr 1

    This jape is too close to the truth for comfort. Hands up those who can actually see a day when this happens!

    “We laugh because it’s funny and we laugh because it’s true” unknown

  47. Paul M. commented on Apr 1

    Gee, I’ve rebooted my computer five times already but it still shows the market up 3%. I want some of whatever the market’s smoking – but its probably illegal.

    It would be a very painful April Fools joke if Doug Kass gets a margin call today – but it was a fun read none the less.

  48. Rod commented on Apr 1

    Buy the rumor, sell the humor.

  49. Darkness commented on Apr 1

    Yummy meta-joke. Nicely played.

  50. DonKei commented on Apr 1

    Lehman Gains as $4 Billion Share Sale Calms Investors (Update2)

    By Yalman Onaran

    April 1 (Bloomberg) — Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, rose the most in two weeks in New York trading after raising $4 billion from a stock sale aimed at quelling speculation it’s short of capital.

    >let’s rewrite this headline to make it less of an April Fool’s joke and more real:

    “Lehman raises $4b because its investors know its Uncle Ben is good for the money, and they’ll get paid more by Lehman than they would by investing directly w/ their Uncle.”

  51. Darkness commented on Apr 1

    >THIS is funny….

    >http://www.planet-f1.com/story/0,18954,3213_3373128,00.html

    >And it was put out yesterday so it’s not part of today’s .

    Yeah, that article yesterday could have been a classic April firster, especially the part about Hitler attending his parents’ wedding, which was held in Goebbels’s house.

    http://www.timesonline.co.uk/tol/sport/formula_1/article3649197.ece

  52. meneame.net commented on Apr 1

    Una broma como posible causa de la subida de las Bolsas. [EN]

    Una pequeña broma puede ser la causante de la vertiginosa subida (+3,19%) de la bolsas estadounidenses del 1 de abril. El desencadenante han sido unos informes favorables al banco Bear publicados en el servicio de ‘News alert’ de Bloomberg …

  53. moom commented on Apr 1

    Rather “post-modern”.

  54. The Big Picture commented on Apr 2

    Meta April Fool’s

    Okay, this is now getting downright silly. Let’s clear this up, before it gets further out of hand: Last night, I set to post my April Fool’s gag — about Google’s new search engine that allows you to search one day into the future. It was cute, but ta…

  55. The Big Picture commented on Apr 2

    Meta Recursive April Fool’s

    Okay, this is now getting downright silly. Let’s clear this up, before it gets further out of hand: Last night, I set to post my April Fool’s gag — about Google’s new search engine that allows you to search one day into the future. It was cute, but ta…

  56. Chuck commented on Apr 2

    It’s really scary that this “joke” seemed just as believable to its readers as any serious expert advice column written by any of the leading serious advice analysts. And is just as likely to be true.

Read this next.

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