Silence at the Water Cooler
wsj.com
David Gaffen: It used to be that when George Soros or Peter Lynch made a bet, Wall Street followed. Elaine Garzarelli's startling call on the October 1987 market crash turned her into something of a celebrity. For a time, there was no shortage of analysts and fund managers who inspired water-cooler talk about which stock was about to double or which IPO was a slam dunk. Not anymore.
Some names -- William Gross, Warren Buffett -- still have star quality. But thanks to blown trust after the dot-com meltdown and a confounding market of low bond yields and sideways stock indexes, most stars are dim. Legg Mason manager Bill Miller's 14-year streak of beating the Standard & Poor's 500-stock index is in jeopardy for a second year running. This year's big splashes are all wet: Kirk Kerkorian accumulated a sizable stake in General Motors in May at $28 a share; the stock buckled a day later when GM's bond ratings were lowered and hit an 18-year low under $21 at one point Wednesday. Financier Carl Icahn increased his stake in Blockbuster to 10% and won board seats in May because he thought the movie-rental company was being mismanaged. Since June 1, the stock is down 62%. Mr. Buffett still draws a crowd, but the investment seer's most important strategy of late involves sitting on a $40 billion pile of in cash because he can't find many attractive investments.
If there is a next generation of influential investors -- to be sure, some pipers have followers -- it hasn't yet coalesced. Former hedge-fund manager Jim Cramer is clearly moving stocks, says Barry Ritholtz of Maxim Group. Mr. Cramer's "buy" call in July on Symbol Technologies produced a one-day bounce (summarily eaten up when Symbol said its CFO resigned). He also predicted a market bottom in mid-October, and stocks have been reasonably strong since. Fred Dickson, equity strategist at D.A. Davidson, praises Raymond James strategist Jeffrey Saut for long ago spotting the market's inability to rise or fall significantly, and Mr. Saut's advice on playing it.
Meanwhile, Vornado Realty Trust took advantage of the real-estate boom by tapping the hidden value of land owned by big retailers like Toys 'R' Us, which it purchased earlier this year as part of a consortium, and Alexander's, which is up 27% this year despite being a failed discount retailer that Vornado owns strictly for its real estate. Vornado bought a 4% stake in Sears Holding in November 2004; since Dec. 1, the stock is up 14%. Vornado's annual letters to shareholders have become highly anticipated among REIT-holders.
Even so, their profiles are small compared with the likes of an Abby Joseph Cohen during the 1990s. Major brokerage firms shook up their research departments after being accused of issuing overly bullish stock ratings, and many well-known strategists like Ed Yardeni fled to smaller groups. Hedge funds and their nearly mute managers hold more sway over the market -- hedge-fund assets total nearly $1 trillion now, says Van Hedge Fund Advisors. Meanwhile, retail-brokerage firms are concentrating more on lifetime-planning and wealth-management services than the old strategy of having rank-and-file brokers woo clients with stock picks direct from the research department.
The absence of gurus can be blamed on the market itself. The Dow Jones Industrial Average has been locked in a 1000-point band for more than a year, hardly a breeding ground for gutsy calls. In the 1970s, when inflation laid waste to stock gains, "you couldn't find a guru if you were beating the bushes with sticks," says Kate Welling, who covers investment analysis for brokerage firm Weeden. That doesn't mean a few people aren't trying -- price targets on Google are leapfrogging their way to $500.
Parting Shot
Abby Joseph Cohen, Wall Street's most prominent bull, told investors to cash in some chips -- and the stock market survived Tuesday. Her call, publicized before the markets opened, was the talk of Wall Street. … One investor declared in 1997 that "the day Abby pulls the plug, the market sinks."
-- Cohen Backs Off Bullish Stance, 3/29/2000 |
