Something from WSJ about bull-market ennui...
September 8, 1999
Four Months of Gains and Losses
Leave Market Mostly Unchanged
By E.S. BROWNING
Staff Reporter of THE WALL STREET JOURNAL
Since May 7, the Dow Jones Industrial Average has gone up a total of 3422.94 points on 39 up days, a strong performance. Trouble is, it also has gone down 3420.40 points on 45 down days. After four months, that leaves it up exactly 2.54 points.
Despite all the recent records and sharp plunges, stocks have gone just about nowhere since May. Take last week. The Dow industrials plunged about 170 points on Monday, lost 80 more on Tuesday, rebounded 100 on Wednesday, fell 90 on Thursday and soared 235 on Friday. Net effect: The industrial average declined just 11.72 points for the week, a change of only 0.106%. Tuesday, the industrials fell 44.32 points to 11034.13; the market was closed Monday for the Labor Day holiday.
Here and there, signs are cropping up that America's much-touted love affair with stocks is losing a little bit of its fire.
"The pop is gone, the thrill is gone, and you kind of sit back and you reassess," says Peter Spano, 42 years old, a New York small investor who until recently was fixated on hot stocks such as initial public offerings -- to the point of missing family parties. Now, he says, he has pulled back from the stock market and started paying more attention to ... his wife. "IPOs will come and go, but I have a lovely wife, and I want her to stay."
'A Less-Exuberant Pace'
Wall Street pros call all this backing and filling a "trading range," meaning that stocks trade up and down but never leave a broad range. Abby Joseph Cohen, the Goldman Sachs Group investment strategist whose optimism has come to symbolize the great bull market of the 1990s, has begun warning clients to expect the market to be more sluggish: "Stock prices will be rising, but at a less-exuberant pace," she says.
Already, there are some signs of the change in the market's behavior. Mutual funds, those magnets for investor money, are getting less new cash than they did in 1996, 1997 or 1998. Internet stocks suddenly are obeying the laws of gravity. And some people are starting to move money into foreign stocks.
Pundits used to say that when taxi drivers and shoe shiners started giving stock tips, the smart money had sold out and stocks were ready to fall. That certainly hasn't been the case this time around; everyone from pushcart vendors to barbers has been giving stock tips for years. But what does it mean when people in barber shops get tired of listening?
Henry Herrmann, chief investment officer for mutual-fund group Waddell & Reed in Overland Park, Kan., went to get his hair cut last week, and found customers demanding that the barber switch the TV from the stock news on CNBC-TV to the ESPN sports network. ESPN was televising a tennis match, which the clientele found less tedious. "People sort of said, 'The market is down, let's switch it over to ESPN,' " Mr. Herrmann recalls.
Of course, love affairs can be rekindled. Stocks have gone into prolonged doldrums before, as recently as 1996 and 1997 -- not to mention last summer's near bear market. Each time, stocks pulled out and soared again, and they could do the same again this time. And while some stocks are suffering, others, notably some popular technology stocks, still are up 30% or more for 1999.
Certainly, plenty of people remain fascinated with investing. Mr. Herrmann says he still can't go to the gym or to a party without being asked about the market. Online trading continues to grow, although at a slower rate than before; in fact, per account activity fell in the second quarter, according to brokerage firm Deutsche Banc Alex. Brown. People continue to trade in and out of hot Internet stocks, staring fixedly at computer screens and buttonholing stock traders for advice when they run across them in airports or bars.
And yet, something seems to have changed in the market's tone, and in people's interest in it. The bull market of the 1990s has been dominated by increasingly savvy individual investors, and after nine years, some of them find their attention wandering. Stocks are becoming less a cultural phenomenon and once again more of a mundane pocketbook issue.
At a trendy New York restaurant and bar called Moomba, frequented by the likes of New York Yankees heartthrob shortstop Derek Jeter, the stock market was a big topic a few weeks ago. Now, says Chris Russell, the general manager and part owner, people prefer to talk about hot dates, politics or Scotch: "People come here to forget their worries and financial concerns. If the stock market has a horrible day, people will talk about it. But on a daily basis, 100-point or 200-point fluctuations have become pretty commonplace."
In Portland, Ore., portfolio manager Rex Wardlaw has noticed a similar shift.
"My wife and I were at a dinner party with some friends the other night," says Mr. Wardlaw, who manages money for Wells Fargo & Co.'s Wells Capital Management. "These guys are all getting closer to retirement, and all of them are investors, and normally the conversation drifts around to the stock market -- or is all about the stock market the whole evening. This time, we didn't talk about the stock market once."
Mr. Wardlaw's office building in downtown Portland houses several other bank departments, and until lately, he says, "there used to be steady streams of people coming by from other offices, asking how the market is." Now, the stream is drying up. "The fad thing goes by and people start looking for what's new, and this isn't new anymore," he observes.
Mr. Spano, the former IPO devotee, says it is a good thing that people like him are stopping to smell the roses; he owns a small personnel-recruitment business and often works from home. Until July, he says, he was so fixated on buying and selling IPOs that he spent hours glued to his online-brokerage service. "I definitely didn't put a lot of time into family and personal relationships -- or reading, or even bathing," he says.
The low point came in June, when his sister hosted a joint birthday party for the two of them -- and he skipped it. "She didn't want me to tie up her phone with my laptop," he says.
He still follows the market, but as some of the new IPOs started to stumble, he began switching to longer-term investments that he watches less closely. This summer, he says, he took his wife on long weekends to jazz and blues festivals in New Orleans and Memphis, ignoring the market.
Some of the people he used to talk with incessantly online seem to be lightening up, too: "All of a sudden, there are less and less people in the chat room, less and less interest. People would say, 'My son has a Little League game.' "
One big difference between the current bull market and past ones is that people in the 1990s have had time to become surprisingly sophisticated about stocks -- time, even, to become satiated.
'Roughly at Fair Value'
In many ways, the great American bull market is simply looking a little gray around the temples.
After four straight years of double-digit gains in both the Dow industrials and the Standard & Poor's 500-stock index, many stocks have been cooling off. The industrials do show double-digit gains so far this year. But even after Friday's big gain, the S&P 500 was up just 9.9% for 1999, less than half of last year's 26.7% gain.
"The market we think is now roughly at fair value," says Goldman's Ms. Cohen. "That doesn't mean the end of the bull market, but it does mean that the bull market moves at a more moderate pace." Stocks may not advance any faster than do corporate earnings and the overall economy, she and many other bullish analysts believe.
The bears, of course, see disaster lurking, and they could finally be right. But investors don't seem to be feeling fear of a crash as much as simple languor.
The number of U.S. investment clubs affiliated with the National Association of Investors Corp. fell slightly this summer, after having grown steadily since 1989. Why? Despite recent market-index records, only a limited number of high-profile stocks are really soaring. Out of a database of 7,736 stocks maintained by Ned Davis Research of Venice, Fla., only 26% have climbed back to their levels of April 21, 1998, when many stocks topped out amid continuing concerns about the world economy. The average stock still is down close to 20%, Ned Davis says.
The dollar volume of stock trades in lots of 500 shares or less, often considered a reflection of individual stock-trading activity, more than doubled in the nine months through March, according to ITG Inc., an institutional electronic-brokerage firm based in New York. But since then, the volume of small trades has declined slightly, suggesting that small investors are pulling back.
Shifting Attention
Some clients at Fidelity Investments, the nation's largest mutual-fund group, have begun turning their attention away from U.S. stock funds and toward foreign stocks, which are suddenly exciting again as once-depressed overseas markets rebound. "Definitely in August we saw that a good portion of our net sales was into international funds," says Fidelity spokeswoman Anne Crowley.
Little wonder. Since early January, Tokyo's Nikkei index has risen more than 30%, and Brazil's Bovespa index has gained more than 50% -- far outpacing U.S. indexes.
Several firms say they also have been seeing big shifts toward money-market funds. Richard Cripps, chief market strategist at Baltimore brokerage firm Legg Mason Wood Walker, says he thinks baby boomers have reached an important milestone in their investing, which could help explain their cooler passions for the stock market. Since the third quarter of 1990, Federal Reserve data suggest, people have been transferring money out of other investments such as real estate and bank accounts, and into stocks and stock mutual funds. Now, Mr. Cripps believes, people are starting to run out of other savings that they want to transfer into stocks, meaning there simply is less money available to pump into the stock market. Most new investment in stocks now has to come from new savings, notably money that is automatically funneled into retirement accounts.
Ned Davis Research, using the Fed data, says that holdings of stocks and stock mutual funds more than doubled from 16.1% of household financial assets in the third quarter of 1990 to 38.8% today, the highest level of stock ownership since data began being kept in 1952. It is hard to imagine that level of ownership going a lot higher. And although more money continues to go into stock funds than is coming out, the withdrawals are accelerating, be they for retirement spending or for home remodeling.
During the first seven months of this year, for example, stock funds received 29% less money than a year earlier, according to the Investment Company Institute, a mutual-fund industry trade group. In July, they received 36% less than they had the previous July. Barring a sudden surge of money, 1999 will be the lowest year for inflows since 1995.
Some of the manic fascination that propelled hot stocks to nosebleed heights certainly seems to be fading. "I told my wife one day, 'We got an IPO at $24,' and she said, 'Yeah, yeah,' " recalls Mr. Spano, the online trader. "I said, 'Listen, we sold it at $96,' and she just wasn't interested.
"Short of $10 million, I wasn't getting her attention. There comes a point when you can't live your life that way. You can't tell your friends, 'I'm not going to your child's confirmation, your graduation, your birthday,' " Mr. Spano adds.
"I made a few dollars, and it is going to help pay some tuition. But in retrospect, I'll never do that again. People say, 'What if you could make a million?' " Here Mr. Spano pauses, and thinks it over. "If I could make a few hundred grand, I wouldn't do it. I don't care. I do not care," he insists.
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