On Tuesday, May 31, the NASDAQ reported almost the greatest one day percentage increase in history, although analysts still worry (folks, this is their nature) that the market has no depth and is not very broad.

What they mean is the fact that a few stocks are being traded in astronomical numbers day-after-day, while the rest of the 5,000 or so US domestic stocks have little activity and are way below their 52 week high.

CISCO, considered a fundamentally sound tech stock and very much in the news traded 75 million shares in one day a couple of weeks ago.

The Lemming analogy This is only one company in one sector of the entire stock universe! Investors, however, tend to be emotional and react very much like lemmings in some situations, so when momentum on a market mover like CISCO picks up, even the most seasoned money managers may abandon their normal investment strategy and jump on the bandwagon.

This has been so evident lately when hedge fund managers like Julian Robertson and George Soros admit that they followed the herd, and then were not able to read the signals correctly to sell out positions before a major drop.

Why use an analogy like lemmings? Because the classic example of lemmings (a small Arctic rodent) is the scenario where a lemming leader becomes disoriented during migration and runs off a cliff into the sea with the rest of the herd diligently following right behind! Has anyone actually seen film of this phenomenom? Maybe this is nature's law of supply and demand.

Payroll and sales economic indicators come in sharply lower.

Last week, after the report of United States non-farm payroll came in quite below expectations, the stock market and its investors read this news as a sign that the US economy is slowing down.

It never ceases to amaze me that investment markets view these types of indicators as positive information. Certainly, if we were one of payroll statistics, we would find this discouraging news, particularly if we were just entering the job market.

A slowdown in net payroll new hires means more companies are letting people go through attrition, redundancies and retirement than those are hiring. Other indicators of economic slowdown are popping up as the number of new housing starts dropped, the number of new cars sold fell and Circuit City (all those electronic goodies) reported lower sales. Construction activity is always closely watched because dollar for dollar, this industry and related affiliates is the largest employer in the United States, and one of the largest lobbying influences in Washington. Isn't it everyone's dream to own their home? And, why does the stock market view this as good news? First, these signs are interpreted as meaning the US Federal Reserve may not raise interest rates again this year, thus allowing the economy to continue to grow at a more moderate pace. Is that good? Slower pace means in my mind still less spending by consumers, i.e. more vacations taken close to home (driving to see Grandma, instead of hopping a plane to a vacation spot), the deferral of many major purchases, new car, new appliances, new home, and less chance to find a better paying job. None of this seems very appealing to us, yet the markets react crazily to this type of news.

And very often a rally can be precipitated which then drives the economy upward again in a see-saw reaction.

The long and the short of investing Signals are interpreted as lesser of two evils. Second, these slowdown signals are the lesser of evils. Investors would rather take a smaller rate of growth, than no growth or negative earnings. The pace that the market had performed at for the last year or so, along with the alarming rate of increase in margin lending and consumer debt, made everyone extremely nervous. Not that this did not mean that every broker and investment firm stopped taking your investment dollars! Brokers were only too happy to rack up some of the largest gains (and bonuses at year-end 1999) in history, but the market is also future oriented. Looking down the road, any investment manager worth his /her salt knew the good times just could not last (at that pace). With honed instincts for survival, they will also strategize at quarter-end in order to show best results possible, that is selling off the losers. While some can still thrive in a bear market, most are hoping that this next year will not turn out to be recession-based.

Oh no, it could affect their bonuses; they might only get $1 million, instead of $5 million. But, what I want to know is, does money buy happiness? Never, ever think that the stock markets move anytime on altruistic tendencies.

Third: one man's folly is another man's fortune. Those investors last week who were holding long positions or bought calls had a great week. Those sitting short, particularly on borrowed money, or bought puts most probably had to imbibe several double strength Dark and Stormies (martinis, straight vodka?) later in the day. The careful investor diversifies even in this highly risky and volatile area and would have taken both call and put positions, sometimes in what's known as an equity collar.

Taking a position in a stock or a group of stocks by owning them, simple right? Going long also means that you are betting this group of stocks will rise.

Mock Portfolio Not a lot of movement, still too much market uncertainty. The tech stocks went up a little. Some readers have asked why some of the results are not very promising. Answer: because this is a teaching tool, investing for the long-term. We've only been at this three months, and we deliberately picked stocks that not all may perform well in this environment to demonstrate the forces of market trading. And that is why, see below.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or any other investments. Martha Myron CPA CA is a Bermudian, holds a Series 7 NASD license and is a United States federally authorized tax practitioner. Questions may be sent to her at 234-0290 or Email: marthamyron y northrock.bm CHART