I was stunned to find a bunch of blabbermouths on TV late at night on Sept. 16, spewing nonsense about how losses in the stock market were likely to be mitigated by waves of patriotic buying. These guys were talking until they were red, white and blue in the face, and none of what they suggested made an iota of economic sense. You know the type: If a bear bit them in the butt, they would still mistake it for a bull.
Of course, when the
New York Stock Exchange
reopened the next day after a four-day break prompted by terrorism, quite the opposite happened. A selloff of near historic proportions occurred.
I thought the analysts were merely remarkably optimistic windbags until I read Ben Stein's musings on
So Much for All That Good Cheer.
Responding to speculation that some folks got together to prop up stock prices in an attempt to avoid a bloodbath, Stein points out that would have violated securities law and common-law fiduciary duty.
"But the Pollyanna conspiracy is fascinating for at least two other enormous reasons," Stein writes. "One is that while analysts were on
saying everything was great, someone was selling stock in gigantic blocks while the little guys were buying in a lot of small blocks. Were the trading desks of the same investment banks that were reassuring the retail side simultaneously selling into the artificial confidence? If so, they were defrauding customers and betraying their trust, and that's almost terrifying."
Stein doesn't offer whether he believed the speculation was true. Instead, he shows that the good cheer was a bunch of baloney. In fact, Stein says, we are in the worst profits depression -- way beyond recession -- that we've been in since the Great Depression.
There was one possible piece of good news: Profit drops in the postwar era have never lasted more than two years, and snap back fast. Stein says if history is a guide, and Osama bin Laden has nothing more evil up his sleeve, we may be ready for a big bounce.
But that is a big if.
Don't Mince Words, Jim
Almost since the beginning, Jim Seymour has been
skeptical about the proposed merger between
Now, Seymour is beginning to doubt that Compaq can even survive.
Little Hope Left for Compaq, Seymour picks apart numbers from the company's earnings report on Tuesday -- and hates what he found: business sinking across the board.
And just in case one believes its problems are shared sectorwide, Seymour goes out of the way to point out that they are specific to Compaq. In fact, Seymour says,
market share has been climbing as Compaq's has declined.
Further, Seymour questions the truthfulness of Compaq Chairman and CEO Michael Capellas' claim that losses could not be attributed to the pending merger with Hewlett-Packard.
Seymour, who calls Compaq, at best, dead money, writes this in response: "On that one, I'm skeptical. Compaq customers with whom I've spoken during the past month and a half generally report dismay, confusion and worries about the merger -- exactly what you would expect and exactly what some of Compaq's bigger, stronger competitors said when the deal was announced.''
No question, economic news has been bad -- and despite the raging of the ever-obstinate bulls -- seems only to be getting worse.
Well, here is some good news. OK, potentially good news.
Insiders Unfazed by Terrorist Attacks, Paul Elliott reports that preliminary numbers show corporate insiders started
in September. So much so, that the ratio of sellers to buyers dipped below one-to-one for the first time since December 1999.
Further, Elliott says the insiders, who usually accumulate shares of mostly small- and medium-cap stocks, bought not only across sectors, but breached the size barrier and invested in big fish like
Concluded Elliott: "Clearly, September was no ordinary month. Only October can tell us whether what insiders showed us was capitalism at its purest or patriotism at its finest, or both. My gut is that we finally got the whoosh that brought the bargain hunters out of hiding. Either way, it makes me proud. And a little less nervous."
Baby, You Can Drive My Car
I drive a 1989 Cherokee Jeep Laredo, and at this point it has logged about 4 million miles. I am exaggerating, but not much. It has a rebuilt engine, a rebuilt transmission and seems nearly indestructible. It was stolen once, but the NYPD found it 28 days later, abandoned in a gritty neighborhood in Queens. I would have been eligible for an insurance check two days later. Darn cops.
Despite my obvious attachment to this vehicle, I have been considering buying a new one. Automobile dealers are discounting cars and offering them at no or ridiculously low interest rates, and it seems like a good time to make a purchase.
That may be true, but Odette Galli says it is a
time to buy stock in an automobile company. In
Autos Face More Steep Downward Curves,
columnist says car sales may just be at the beginning of a long, winding downhill ride.
After conferring with a senior auto analyst at Merrill Lynch, Galli expects grim news from the Big Three automakers, and expects their stocks to stay cheap for some time. So you might want to hit the brakes if you were thinking of making an investment.
If you are looking for a beat-up old Jeep, however, I know where you can find one.