In Alaska, people suffer through a long, dark, isolated winter. The so-called “Denali divorce” gets accomplished with the aid of a handgun. When the sun finally breaks through, the denizens of Juneau, Anchorage, Fairbanks, Homer, and the smaller burgs break out in a four-month party — except that “party” doesn’t do justice to the bacchanal that ensues.
Of course there’s trouble, too. You don’t plunge a young, horny, prosperous, mobile, and armed population into cities of saloons without there being trouble. But man, what a time!
That’s kind of what it’s like in the stock market these days. We’ve been through a long dark winter night, starting with the dive off the market top of March, 2000, when the NASDAQ started coughing blood, to the near 700-point collapse in the Dow when the markets re-opened following the September 11 attacks. (I count that Monday, by the way, as one of America’s proudest days. We aren’t scared of prices. We work with them. And we handled it.)
Enough, already. If the news doesn’t always delight, so what? It’s time to make some money. People hunger to make money, everybody: individual investors, institutions, pension funds, trust officers, everybody. Even hedge fund managers have gotten tired of grinding out straddles. Let’s go long, dammit! Equity mutual funds registered inflows of $13.1 billion in May, according to AMG Data Services. That follows a similar flood of cash invested in stock funds in April. Mutual fund managers can’t sit on all that money. Their rules require them to invest.
Of course, just like summertime revelers in Anchorage, the markets suffer occasionally from overindulgence in high-octane spirits. As I write today, for example (Wednesday, July 16), my small cap list is getting hammered despite good earnings reports from some leading big caps, like Intel. But for months, stocks making new highs have outnumbered stocks making new lows by ratios of better than 100 to 1. The leading groups of new highs include finance, banks, medical, savings and loan, semiconductors and computer software (this courtesy Investor’s Business Daily).
Not that it’s easy to pick stocks. You’ve got to craft your buzz, to quote Spicoli, from Fast Times at Ridgemont High. But you also have to know when to sober up and go home. I just successfully avoided taking a bath on a high-flying generic pharmaceuticals firm. The company had done a singularly clumsy job of managing its earnings announcement, which should have come in mid-June. They delayed, they fudged, and when they finally issued the info, it was bad. That stock dropped more than seven dollars today, and I got out yesterday.
Unpredictable elements dominate the summer scene. Markets get distorted by the exodus of top investment professionals to the Hamptons from July 4 through Labor Day. You can never quite tell what the underlings might do, and the big bosses don’t want to worry about anything, so they’ll trim their portfolios for the sake of piece of mind on the beach. That makes for wild Mondays and Fridays. When the big boys are around, Tuesday through Thursday, they turn hyperactive. Fun, fun, fun. It all adds up to a loss of leadership in trading, and sure enough, there is a kind of headless chicken feel to many a day’s market action.
Since the first dawn of the new springtime, in about mid-March of this year, the major averages have advanced between 12 percent (the Dow) and 25 percent (the NASDAQ). And right now, the party needs a break. The market has displayed several days of aimless churning, lots of trade with little price action, and that probably pre-figures a correction of a fairly substantial sort. I start each day figuring I might sell everything.
If I do, I’ll be waiting on the sidelines like most of the other traders, anxious to find any excuse to jump in and try to ride a winner. That’s the dominant emotion.
Like everybody else, I’m happy that at least it’s not dark anymore.
Lawrence Henry is a writer in North Andover, Massachusetts.