False Bottom By Alan Abelson
Two-teared market.
No, that isn't a spelling howler or a silly typo. It's merely one of the many changes, large and small, that occurs when a bull market departs and a bear market arrives.
For many years, of course, when the bull was in the ascendancy, the phrase was "two-tiered" and described two distinct tiers of the stock market -- the nearest thing we have to the British class system -- one tier occupied by all the snooty high-flying momentum favorites and the other, infinitely-more-populated tier, by the plebian shuffling mass of shares.
With the coming of the bear, however, tiers gave way to tears. But the transition took place in two distinct stages. First came the collapse of the top tier of aristocratic stocks, an excruciating process that consumed the better part of a year. All the while, the unsung, pedestrian plodders that constitute the great bulk of stocks continued to slough on, rather oblivious to the suffering of the broken upper crust.
But, it emerged, they possessed no immunity to the wrath of the market gods and, perhaps befitting their lesser station, in a matter of weeks rather than months, they, too, buckled under vicious assault. Which occasioned the shedding of the second monster tear.
That the punishment finally has been meted out universally -- that we now have a one-tiered, two-teared market -- seems to have had a quixotic effect on the investing multitudes. Instead of furthering fear and intensifying depression, it has prompted visions of higher prices and a return of the glorious bull market.
This touching expression of faith by unreconstructed bulls transfigured the long awaited and cruelly delayed relief rally that began Thursday afternoon and continued somewhat bedraggedly on Friday into the perception of the start of Something Big. We hope so. But, chances are, the only thing big it's likely to prove the start of is disappointment.
As we've noted many a time and oft, bear market rallies are the rule, not the exception. They're not infrequently sharp and powerful. And they serve to discipline the bears and suck in the still solvent bulls who had fled to the sidelines. Not infrequently, too, the fuel for these rallies is short-covering, which probably played more than a little role in last week's rebound.
Honest, we're not being our old ornery self. One reason we don't think we've hit bottom is that so many other people are certain we have: bottoms aren't made when everyone is eagerly looking for them. Which leads to another reason for our doubts: despite trillions that have gone up in smoke, there's still too much complacency, not to say optimism, abroad in Wall Street and Main Street alike. Further, we don't believe the market has yet taken anywhere near the full measure of the trauma wracking the economy.
It just don't ring true, moreover, that the greatest orgy of excess in investment history is purged by a such a wimp of a correction. Or even that the longest and most powerful bull market on record is followed by so lopsided and abbrieviated a bear market. The investment esthetic -- and history -- call for a rise and fall that are much more symmetrical.
And, finally, there's this: As Warren Buffett observes, stocks still aren't cheap. |
