Task's Turkeys: While Readers Go With Gurus, Our Man Chooses Greenspan

Bird Is the Word

NEW YORK -- I know it's looking bleak out there, both on the political and market fronts, which both worsened today. Regarding the latter, stocks skidded into the long holiday weekend in yet another session that left those looking for a rally with a bad case of road rash.

The Dow Jones Industrial Average fell 0.9%, the S&P 500 shed 1.9% and the Nasdaq Composite lost another 4%.

Yet there are plenty of reasons to be thankful. In addition to the genuine and thoughtful list produced by Gary B. Smith, you can also be thankful because you're not a recipient of our annual Turkey Awards, as selected by you, dear readers.

And the Winners (?) Are...

The gurus received the most votes (before the pending recount, of course), from readers as this year's biggest turkey. The desire to see the gurus stuffed and roasted isn't really shocking, given their track record.

Do I really have to name names? You know the main culprits -- the big-time Wall Street strategist types who said all year that all you have to do is buy stocks, preferably growth stocks, and all your dreams would come true. To me, the worst part was the recidivism and refusal (inability?) of these folks to even contemplate that perhaps the optimism was misplaced. As one reader emailed:

Assume you had $50,000 at the beginning of the year in cash and bought $10,000 worth of S&P (SPY) every time [Abby] Cohen or [Jeffrey] Applegate or [Thomas] Galvin said 'buy.' How much would you be left with at end of the year? And compare that performance against investing in, say, a one-year CD.

My only addendum would be to add folks such as Joe Battipaglia, Al Goldman, Robert Robbins (among others) and a slew of sell-side analysts to that list.

Of course, the gurus weren't all bad. Folks like Alan Skrainka, Ned Riley, Don Hays, Ralph Block and Thomas McManus warned us repeatedly not to overeat this year.

Ed Kerschner also made a great defensive call before the big selloff and Galvin a similarly timely bullish one after. But recent bullishness seems to be putting them solidly in the gobble category.

The Runners Up

Margin trading was the readers' somewhat surprising pick as the second biggest turkey. Then again, it's not so shocking when you consider the devastation margin wrought on investors caught in its grip this year.

I defer to Jim Cramer on this one, but if you haven't heard: Please get off and stay off margin. The risks far outweigh the rewards.

The Federal Reserve took the No. 3 slot in the turkey poll. Being that this column isn't a democracy, I'm going to overturn the will of the voters and say Alan Greenspan and crew are the top turkeys for 2000.

Why? Because the Fed's eases in the fall of 1998 -- however justified by currency crises in Asia and Russia and the accompanying Long Term Capital Management debacle -- created a belief among investors the Fed would always bail them out if the market got really dicey.

Similarly, Greenspan's repeated paeans to the salutary effects of technology on productivity in recent years helped foster a subconscious notion among investors that he was making a de facto recommendation to buy such stocks.

Then, after helping create a nation of growth stock junkies, Greenspan effectively made them go cold turkey this year. The Fed's series of tightenings in 1999 and 2000 derailed the gravy train of liquidity and made growth-stock valuations even more outrageous and unsustainable.

The point is not that the Fed's policy initiatives were unjustified, but that the central bankers failed to fully understand the power of the "cult of Greenspan." How else to explain how the man who brought us "irrational exuberance" still became the patron saint of the Gospel According to Growth Stocks?

Rather than GARP (growth at a reasonable price), many investors sought GAAP (growth at any price) in 2000, and ended up feeling like they'd spent all night drinking Wild Turkey. Following Wednesday's session, the Nasdaq is down 45.4% from its peak in March.

Despite that and even more egregious percent declines for a host of former growth favorites, the "growth gospel" was a distant fourth pick in the poll. There are still a lot of believers in growth stocks, and not just the gurus, suggesting we may have not yet have seen the sector's tail feathers.

Speaking of bottom pickers, they too deserve an honorable gobble for their repeated, persistent wrongness this year.

Honorable Mentions

The gold bugs kept scampering about, even as the price of the metal and funds tied to it kept heading south in 2000. The last few days have revived some hopes of the gold mavens -- today the Philadelphia Stock Exchange Gold & Silver Index rose 3.4% -- but they have become the boy(s) that cried "turkey" to most investors.

Finally, for those curious/unsure: Peter Angelos (a poll choice last night) is the principal owner of the Baltimore Orioles, a once proud baseball franchise that enjoyed great success for decades by developing fundamentally sound ballplayers through its farm club (i.e., organic growth). The O's have become a disgrace under Angelos, who seems to be following George Steinbrenner's model from the early 1980s of paying big bucks for free agents regardless of their character, age or fit with the ball club (i.e., "growth" through boneheaded acquisition).

The only thing Angelos' Orioles have proven of late is that having a bloated payroll is no guarantee of success.

Happy Turkey, one and all.

>To order reprints of this article, click here: Reprints