AllianceBernstein Results May Indicate Capitulation

I don't hide the fact that I am a bull, albeit a somewhat cautious one. I've been increasing my long exposure via covered call and short put positions, and I'm actively looking for new names to pick up. One of the main reasons I'm bullish is that we are getting to the point of capitulation, where investors just give up and cash out because the market is just too painful.

This afternoon, while everyone was watching Amazon.com (AMZN), I happened to notice mutual fund giant AllianceBernstein (AB) delivered much weaker-than-expected third-quarter results, complete with layoffs and a 50% cut in its hefty dividend.

The key line for me in the press release was this:

"Retail outflows were driven by both significantly slower sales and a marked increase in redemptions."

The best time to build market exposure are when others are pulling out, because amazing bargains are created. This is especially true when the redemptions come after a big market decline. Stocks go down when there are more sellers than buyers, and mutual fund selling are making a huge contribution to the recent market weakness. And when fund managers are losing assets by the billions, they sell everything that isn't nailed to the floor, not just the junk.

On a positive note, futures are up just a tad, so maybe we'll have better action tomorrow. I'd settle for a decline in the out-of-control VIX, but even a flat market would be a welcome rest from the recent havoc.

Full Disclosure: I am short AMZN as of the time I'm writing this.

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