After years, of negative commentary, I promised to lay out the positive case. The promise was lucky because the events of March indicate that we may be looking at a fresh bull market.
Bush showed a bit of independent activism in his first eight months, then came the war. The only outside interest shown since 9/11 was when the Enron revelations threatened his sponsoring corporate chieftains. Enron demonstrated how the management of many publicly held companies had become corrupted by an orgy of bonuses and options. Corporate heads needed to cut short the resulting reform movement. They awakened Bush from his war fixation and distaste for new proposals. He announced support for, first a limited restriction on the ability to cash in shares received in 401K plans, and, second, against a plan to penalize management that makes off with huge option awards only to see their stock crash. Bush’s efforts are an attempt to limit reform to something his mentors can swallow, although they have already reneged on the company stock holding time limitation. The Enron situation has the potential to correct the accounting problem and the excessive option awards that led to the cheating. Bush is trying to short circuit reform by putting soft proposals on the table.
My work tells me the market is not going anywhere, and if it does the direction is likely to be down. We are probably in one of these extended flat periods that can serve as an alternative to a gut wrenching bottom. I hope so, but what is the evidence we may go down?
In trying to figure out why George W. Bush bothers me so, I may have found the answer in the book, Founding Brothers. Adams and Jefferson had years of correspondence after retirement and in discussing the differences between the U.S. and Europe they got into an argument over aristocracy. Both believed that superior people must provide leadership, but Adams leaned toward the idea that ability was inherited and Jefferson thought the cream would rise to the top in a free society regardless of inheritance. Of course, Jefferson’s view is the heart of democracy and it made this country, but in their day the ability of a common man to rise from nothing had not yet been demonstrated.
Having progressed about half way through the quarter’s earnings reports, I am altering my view that the market remains severely overpriced. That judgment is true as determined by the price earnings ratio on the S&P-500, still about twenty-eight times earnings, but the reported number is skewered to the high side by many companies with losses … Continue reading Market Commentary – February 2003
“Anesthesia, no matter how well administered, eventually wears off”- Frank Rich, N.Y. Times I have had an eerie feeling about George Bush from the beginning. He seemed a spoiled brat of no accomplishment who must be a poor president. That his vision did not extend below his own social level has been confirmed by his … Continue reading Adolph Bush – February 2003
Free flowing propaganda about the pressing need to get Saddam, in which kernels of truth are built into wild imaginings as to his intent, worries Americans, and frightens the rest of the world. It took me a while and some study, but I am leaning to the idea that kicking out Saddam is the right move, that he really is dangerous, and that Iraq is a reasonable next step in the war on terror. The case is plenty good enough not to have been spoiled with exaggerated rhetoric. The American public could easily have been convinced, and, more significantly, foreign support was there for the asking, by making a straightforward case, as father Bush did in 1990, instead of sounding off like spoiled brats and bashing anyone offering resistance.
Despite fair strength in recent months, and what appears to be a January effect in the most beaten down stocks, I think the evidence is that the bear market remains in force. If so, in another month the length of the decline will match the 1929-1932 bear market, though it is much milder in severity. That mildness may not be good, for despite the long decline stocks remain high priced. In the spring the bear market would enter its fourth year, which would raise the question, are we in a Japanese style decline, now in its thirteenth year?
One of the most confounding aspects of the bear market is the collapse of stocks that were seen as safe. I am not referring to GE, which was known to be playing games with its accounting and was selling at much too high a price, but specifically to utility stocks. The collapse would not have been a great surprise if investors had understood the extent to which utility companies had turned away from their conservative past and gone off in speculative directions. The stocks are down so much that they probably offer one of the best opportunities in the market, but figuring out how to act on the opening is difficult because the condition of the companies is up in the air.
Figuring out where we are going in the war on terrorism is extremely hard because the Bush administration has chosen to keep us in the dark. What do they have to hide? From what we know of the Bush program, a lot of sobering questions need asking.