May

2

Ultimately, in the game of musical chairs, there is only one chair available for the final two participants and whoever claims the final chair is the winner.

In the late 90s the stock market went on a very impressive run beginning in 1995 and continuing through the end of the century. As 1999 progressed the stocks that were making new highs began to get thinned out and the indexes, most notably the NASDAQ, had fewer and fewer stocks making new highs. It was being carried by a few big names such as Cisco, Intel, Microsoft Yahoo, JDSU and some others. Stocks were described by money managers as being "priced to perfection" and every growth manager owned the same names. This was code for "You better watch out, a day of reckoning is on the horizon." Analysts like Jack Grubman and Mary Meeker were still beating their war drums however and making strong cases for their companies using very creative reasons for owning the stock.

One public poll asked investors what return did they expect on their money going forward. The most popular responses were in the high teens. Some people thought they could expect more than 20% annual return on their money for the next 5 to 10 years through their investment in mutual funds.

This all came to a bitter end in March of 2000 and the market went into the worst slide since the great depression. Ultimately, this nadir was achieved in fall of 2002 and the market began to recover in the spring of 2003. By then major damage had been done and those who came in very late to the securities party suffered greatly. Some had lost 80% and more by investing in high-risk mutual funds like the Van Waggoner group, which bought many of the dot.coms of that era.

Now we enter a new phase of the stock market and the market has been on a 4-year climb. In the 2006 year, the S&P index was up 10 months out of 12. In 2007 it has been up 3 months out of 4 and in April the market was up 18 out of 21 days.

Where do we go from here? This question becomes more and more interesting. Unfortunately, I am not Professor Marvel and certainly not an oracle and I cannot consult a crystal ball to provide this answer. I honestly do not know. What I do know is that the music is playing in the background, and chairs are beginning to be taken away as seen by some very disappointing numbers by the homebuilders and retailers to name two.

In the business of buying and selling stocks, sometimes it makes sense to take a "Schnitzel" off the table and keep some cash on hand for the next buying opportunity. There always is another stock to by somewhere and cash just isn't necessarily a bad thing to have at times.

Somebody once said, "Money isn't everything." My response is "It is if you don't have any."

And like the old Cowboy once said, "Talk is cheap, it takes money to buy whiskey."


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