PART 1
September 6, 1999
Crazy, Man!
By Alan Abelson
It must have been a time very much like this glorious epoch that inspired an
anonymous old Quaker to remark, "Everyone is crazy but me and thee, and
sometimes I suspect thee."
Indeed, if he were with us today, he might well add "and there are even times
when I suspect me."
For the world, pure and simple, seems to have gone totally wacky.
Wall Street these days is the site of more than a smidgen of bizarre behavior, so
it's tempting to wonder if some of the mania that has long been raging through
the canyons of capitalism hasn't leaked out into the real world.
But we're talking something that's even bigger than Wall Street, hard as it may
be to imagine that there is anything bigger than Wall Street. We're talking
loopiness of monumental scale.
A scale, in fact, that can be explained only by a cosmic cause like global
warming's little-known side effect of baked brains or the onset of millennium
madness.
Lest you despair, let us assure you we are not about to embark upon a
sweeping inventory of mankind's mental tics and quirks. Our purpose is merely
to awaken awareness of the phenomenon by citing a few of the more beguiling
recent examples.
For instance, it is now evident that the overriding issue in the first Presidential
election for the 21st century will not be Social Security or Medicare or a tax cut
or who lost Russia (or, for that matter, who found it in the first place). Instead,
the great debate between the Democrats and Republicans will focus exclusively
on whether it is worse to be a sex maniac or a dope fiend!
It's downright
bonkers to make it
the centerpiece of
so historic an
election, and one,
moreover, that
could well prove
critical to the
future of the
Republic. For the
average citizen is
simply not
equipped to decide
which is the more
egregious -- a bad
apple or a rotten egg. Only years of close association with rotten eggs and bad
apples would prepare him for making such an incredibly difficult choice -- in
other words, he'd have to be a professional politician.
Or take the case of the Harlem man who's suing his landlord for $7 million
because he scalded his private parts while taking a shower. The man's wife is
also suing the landlord for loss of her husband's services (presumably, he has
difficulty taking out the garbage).
The suit is wild on several counts. For one thing, it implies that a landlord in
Harlem supplies his tenants with hot water.
But placing an even bigger strain on credulity is that the foreman of the jury is
Mayor Rudy Giuliani. Any objections the opposing lawyers may have had were
cast aside on the incontestable grounds that there's no one as qualified as Rudy
to render a verdict in this particular case since no one has been in as much hot
water.
The mayor's likely opponent in next year's senatorial race, Hillary Clinton, can't
sit on a jury in New York because she's not a resident of the state. She can run
for senator, but she can't be a juror -- which, itself, is mildly insane (yes, yes,
we know there's precedent, but there's precedent for any psychosis under the
sun, and that doesn't make it any the less psychotic).
Hillary has been busily seeking shelter in the state to establish proper residence.
Our understanding is that she was intensely interested in the apartment that had
been occupied by the plaintiffs in the scalding suit. A powerful attraction was
the now legendary shower, which she thought would suit Bill fine.
To choose at random other symptoms of the growing epidemic of derangement:
The mass resignation of major league umpires and their subsequent excuse
when the owners took them at their word -- they were only kidding, having
inadvertently confused September 1 with April Fool's Day.
The nurturing of moles by the Russian mob, Manchurian Candidate-style, to
infiltrate U.S. money center banks to facilitate laundering loot (a really nutty
idea since any mole, after even modest exposure to a money center bank,
couldn't run water, much less a laundering operation).
The auction on eBay (which the company finally put an end to) of a human
body part. Can you think of anything loonier than shelling out millions of dollars
for a used body part, without even getting to try it out?
The launching by Daytona Beach International Airport and Delta Airlines of
what might be called a frequent die-er program -- offering local funeral
directors 500 frequent-flier miles for every body shipped.
And last but not least, Wall Street staging a booming rally on Friday in
celebration of Wall Street's bum consensus forecast on how many new jobs
were added in August. Its guess was off by 90,000, good enough for a
200-or-so-point gain. Too bad: If it had missed by 180,000, we'd have hit a new
high.
All so crazy, man -- you can't help but love it.
To our hopelessly jaded eye, lunacies abound in the stock market. But let's
put it less contentiously: Even those of a bullish persuasion (only about 99% of
the investor population) are apt to concede there's no shortage of oddities. The
accompanying chart points up one of them: the market's lopsidedness.
That the winners' circle has not been all-encompassing is rather a commonplace
observation (it must be, if only because we've made it so often). But quite
clearly, for quite a spell now, the number of stocks that have been enjoying the
advance has been steadily diminishing. And recently, breadth fell below the
nadir reached during the worst of last fall's panic selling.
For all that, we still think we're in a bull market. It's just, to state the obvious, a
very narrow one. Maybe Friday's burst upward will prove the start of a more
embracing upswing. If not, trouble's a-coming.
However, Alan Newman, of HD Brous & Co., creator of the chart, flat-out
feels this is NOT a bull market. And he is quite unequivocal about it: Too many
issues are going the wrong way for this market to warrant the bull label.
Besides the plunge to new lows in breadth, he notes that since May of 1998, the
majority of stocks trading on the New York Stock Exchange have been below
their 200-day moving average roughly 80% of the time.
Which leads us to another, related oddity of this market, the extraordinary
influence a handful of stocks exerts on the indexes. For example, three stocks,
Microsoft, Intel and Cisco, account for nearly a quarter of Nasdaq's total value.
Astounding! What makes it a bit disquieting as well as astounding is that the
trio's average P/E is around 65.
Graybeards (we're glad we shave) can recall past instances when a relatively
few favorites monopolized investors' passion. The early 'Seventies, for example,
when the Favorite Fifty held undisputed sway. A fellow named Christopher
Bloomstran, whom we don't know personally but quite evidently is not a
graybeard, is the chief investment officer of Semper Augustus Investments
Group (semper augustus translates into something like "forever hot"). He sent
on some data on past instances of bull market concentration and their aftermath
that we think worth passing along.
Breadth, he recounts, was extremely negative in the two years leading up to the
1929 Crash, a tailspin that, by the time it finally hit bottom in 1932, wiped out
89% of share values. "Most investors crowded into stocks that continued to
gain in the larger stages of the advance. Those same stocks experienced the
brunt of the decline when the leaders became losers."
Up and Down Wall Street, Part 2
|
