Nov. 14, 2003
Bridge, Ants and Grasshoppers
Jack Tierney, the rural Tennessean who presides
over the Old Speculators' Association (the shadowy, semi-mythical body behind
this Web site), responds to a plea from Vic: "Most of all, Mr. President,
please tell us where the market's going in 2003."
Alas and alack, the pres has been blinded by the market's ongoing pyrotechnics
and his foresight is badly impaired. But the Mistress' performance has pleased
so many it would seem bad form to add to the incrementally larger number of
bearish posts and point out that, despite her recent generosity, she is still a
whore. So, rather than spending hours culling tales of doom from the Prudent
Bear and similar such sites, I have taken up oil painting, read an inordinate
amount of old fiction, and spend my evening hours at Yahoo Games playing bridge
with the
same partner I had 30 years ago.
Our partnership broke up over continued participation in duplicate bridge tournaments...he wanted to continue, I wished to withdraw. It would never have happened but for one of those flukes that condemn the enthusiastic dilettante to a lifetime of frustration. The first tourney we entered was the annual April Showers get-together at the Palmer House in '71. Despite the presence of hundreds and hundreds of highly ranked players we placed 3rd East-West and received a google of master points. In the following two years, playing against similar opposition, we were regularly sliced, diced, roasted, barbecued, clubbed, and mugged. At the end of each tourney as we watched the scores posted I noticed that not only were our names consistently among those at the bottom, but the same names always appeared among those at the top. I did some research and found that in 95% of the tournaments, the same 5% of the players were among the top finishers. Most of them had been playing bridge before I was born and despite the passage of years and in some cases, serious infirmities, still managed to carry the day. On occasion we would whip one or more of these big-name pairs but in the long run (20 or 25 tables with three or four hands per table), they would prevail. I found myself a new partner and enjoyed playing at a level more appropriate for my abilities.
Now I find myself in a partnerless game called "Beat the Market" desperately wanting to ride this giant wave of prosperity. I really want to buy. But, after numerous bloody beatings at the bridge table, I learned to check out my opposition before bidding a chancey 3 No Trump. So, too, in the market my interest is in who is willing to sell to me. And there they are all lined up. A host of insiders who, sadly, must sell for reallocation purposes, or a pending divorce, or to cover the latest tuition bill. In back of them, smiling like used car salesmen are Templeton, Soros, Buffett, Rogers - another bunch of old guys who, despite the passage of time and frequent rumors of their deaths, continue to putter on, canes in hand. Do I want to buy from these guys? Just about as much as I'd like to get into a dollar-a-point bridge match against Goren and Sharif or Jacoby and Sobel.
Unlike
Brother Smith I'm not adverse to reading, studying, quoting, and, if it seems
appropriate, expounding the ideas of "Great Names." I have too little
time and an insufficient intellect to start at square one and replow fields
that have been tilled for centuries by sharper blades than mine. Undoubtedly
there have been geniuses who have been persecuted for an original thought.
Equally certain there have been millions of blockheads who, neglecting the
lessons passed on by Great Names, have gone bust repeating mistakes that have
been
made over and over again.
These mistakes and other reasons for my reluctant bearishness have been covered more than adequately by the four gentleman named above as well as Mike Buchsbaum (though I'm a little puzzled by his wish to view the return of each and every bodybag; but in a society where Time-Life still successfully sells the tapes of Walter Cronkite announcing the Viet Cong "victory" during the Tet Offensive, nothing should surprise me.)
One final thought and one I've touched on before: this bull market has been created for the debtor class. Those who have saved and as Clinton would say "played by the rules" are getting screwed. The Greenspan/Bernanke axis has given us three choices: keep your cash in the money market and lose through inflation, spend it now before the greater inflation we're planning eats it away faster, or invest it in bonds or equities. The Argentinians, faced with the same problem, threw their money into equities; of course, few know what, if any, value these equities had or have. But the equity market has boomed and it is being hailed as some kind of miracle. These "investors" aren't interested in the discounted sum of infinite earnings...they're just trying to save their butts.
In a like vein, hundreds of thousands of Americans (perhaps millions) with
several hundred thousand dollars put away, and upon which the interest would
supplement their pensions and other savings, find themselves strapped. They
have no choice but to put their savings at risk. And voila, a bull market is
created. But if the hoped for returns don't materialize or are less than
needed, no problem. Take out a mortgage on that home you own
free-and-clear...and refinance at will.
This is
not investing nor is it speculation. This is a buying panic among individuals
with little or no market savvy (I
wonder how many bought AMAT because their earnings were down 90% rather than
91% or F because although their debt rating was lowered it was still considered
stable); they're not motivated by greed but by hope - the hope to live out
their years as they planned, worked, and saved for. But they're being taken
down by the grasshoppers who neither spun nor sowed, but who brought down upon
everyone a debt crisis which cannot but end badly. Hoping for a Santa Claus
rally? I think it came way early this year and lasted through all those months
when you're not supposed to be in the market. I'll stick with silver, gold, and
China. -- Jack
P.S.: You mentioned Dow 10,000. In 1966 with the market pushing upward, I bet a
Trib salesman, Joe Franza, a nickel the Dow wouldn't close above 1,000 that
year. It never did and Franza never paid me - despite constant reminders
through 1973 when he retired. I offer you the same nickel bet that 2003 passes
without a Dow close above 10,000.
Note: Vic, Chief Speculator, took the President up on his wager this year.