Patron
OT -
Re - the regression of Charles Schwab, risk taker.
I write a wise ass monthly column in a local paper - it is pretty lame, but last June I wrote this one about that exact advertisement. You may find it amusing.
6/5/01 2:09 PM INSIDE THE MARKETS – Terry Davies
BORN TO BE MILD
I miss Stuart the day trading punk and that truck driver that owned an island. What happened to the lighthearted tenor of brokerage ads? A few months ago the chairman of a discount brokerage was in an ad whistling “Born to be Wild” while whipping around his personal portfolio. Now he is soberly addressing a room that is filled with an earnest, perfectly balanced multi-racial, all age groups and genders represented audience. They want to know whether to sell, buy or wind their watch. Mr. CEO tells them to relax. They chuckle appreciatively. RELAX? Peachy – but it isn't his 401K that has been Blodgeted (definition below) beyond recognition. Relax. Wonderful advice. They have to identify their retirement plans using dental records and he wants them to relax. Maybe the thought of working until 102 is not calming. Maybe they want to find the guy who explained the fool proof method of a diversified "plan" that entailed buying different mutual funds, with different names, that all owned the same stocks and beat him like a piñata. That sounds relaxing. And it would sure make for better television.
His parting comments are a ”few stocks, some cash, a couple bonds and you will be OK.” Two problems: 1. You absolutely have to have the correct stocks and 2. Bonds and cash were not mentioned very often in the past two years. The financial community spent a fortune on a barrage of edgy advertising that extolled the virtues of do-it-yourself investing. Nobody mentioned fixed income or money markets. Internet investors were portrayed as the new pioneers – role models of independence, doing their own research, washing their own boats, shaking every last dime out of the market and buying their own islands. Any fool could make money following the big celebrity analysts and most fools did. It is all fun and games until someone puts an eye out. Next was the deluge that no one foresaw – at least not any big brokerage analysts. First the profits were wiped out, then principal and finally long term plans. To paraphrase Hunter Thompson, looking back now you can see the high water mark, where the wave crested and fell back.
In 1999, Time magazine awarded its "Man of the Year" title to Amazon founder and one-man P.R. firm, Jeff Bezos. Amazon changed the face of retailing by losing money on each sale. Profits were an archaic way to value such a new concept. On Dec. 16, 1998, a young Internet analyst from CIBC Oppenheimer initiated coverage of Amazon with a strong buy and an eye-popping price target of 400. He understood the concept. Amazon reached the target just three weeks later -- a 96% gain. The analyst was Henry Blodget and he was on the map. He moved on to greener pastures at Merrill Lynch and became a financial star. Merrill got a bunch of lucrative investment banking business from Amazon and Blodget got stinking rich. He also never issued a public downgrade of the stock as it lost about 85% of its value.
On the other hand, Mr. Bezos warned small investors not to invest in Internet stocks. In a BBC interview he thought they were too risky. Unfortunately, his advice came out in March of 2001, when Amazon was trading near its low around 9, not 18 months ago when the stock was over 100. After his cautious comments, the stock went to 17, close to a double. Bonds and cash, anyone?
Terry Davies is a managing director at Westport Capital Markets, LLC. His analysis of the financial markets is based on information thought to be reliable and is not meant as investment advice. Westport Capital manages individual and institutional investment accounts. Mr. Davies welcomes your feedback at ************* |
