NEW YORK ( Real Money) --
Take me out to the ball game,I have learned over my career that history is instructive -- it rarely repeats itself, but it often rhymes. That said, we must all recognize that the past is not immutable. Back in the summer of 2007 -- just before all hell was about to break loose -- I penned a column entitled "Take Me Out to the Ball Game for a Sense of History." Because this week marks the beginning of Major League Baseball's spring training, I wanted to repeat the essence of that column from nearly five years ago, which has some bearing on today's markets. As a cousin to Sandy Koufax, I grew up immersed in the game of baseball. I watched numerous games with my grandfather, Harry Koufax (Grandma Koufax's husband!) at his home in Mount Vernon, N.Y. I used to watch the peaceful look in Grandpa Koufax's eyes when he sat watching the games in his big cushy chair, cigar in mouth. I have never forgotten that look: He was in baseball heaven. I think I have that same look today when I watch ballgames. It's a look of contentment. It wasn't only the Koufax connection that drew me to baseball; it was the purity of the game. Baseball is an untimed contest. The home run records, perfect games, the tar on the bats, the spit in the mitts all combined to create an almost genteel tradition among today's sports. And that song. Take Me Out to the Ball Game is played during the seventh-inning stretch of every Major League Baseball game, with Harry Caray getting the credit for singing it first at a ball game in 1971. Call me sentimental or old-fashioned, but to this day, every time I am at a baseball game and I hear Take Me Out to the Ball Game, I well up in tears. When I think of the game of baseball, the first thing that comes to my mind is a sense of historical perspective -- a respect for Roger Maris' (non-steroid-aided) record 61 home runs in one season (1961), Hank Aaron's 755 career home runs, Pete Rose's 4,256 hits, Joe DiMaggio's 56 consecutive games with a hit and Nolan Ryan's six no-hitters and 5,714 strikeouts.
Take me out with the crowd.
Buy me some peanuts and cracker jack,
I don't care if I never get back,
Let me root, root, root for the home team,
If they don't win it's a shame.
For it's one, two, three strikes, you're out,
At the old ball game. -- Jack Norworth, " Take Me Out to the Ball Game"
Where have you gone, Joe DiMaggio?It is the same perspective and respect and sense of history that seems to be missing in the analysis of today's stock market by many of its participants -- most of whom, in the mounting competitive landscape (and given the outsized remuneration in the management) of hedge funds, invest/trade at the altar of momentum.
A nation turns its lonely eyes to you. --Simon and Garfunkel, "Mrs. Robinson"
Yer blind, ump,To some degree, fear and doubt have been driven from Wall Street today. Certainly in 2007, the line between domestic economic progress and reality became almost completely blurred. But, as was the case four and a half years ago, there is no negativity bubble today but rather a bubble in complacency and in economic and stock market extrapolation. One would have thought that lessons would have been learned by the unthinking speculation of daytraders in the U.S. equity market in the late 1990s, which resulted in a 70%-plus schmeissing of the Nasdaq or in the horrendous stock market during the two-year period following my original column in 2007. But nothing has been learned. The same mistakes are being made over and over. Other errata -- such as marking to market (collateralized debt obligations), trusting credit agencies (remember Enron, Tyco, etc.?), the use of margin debt (in 2007 at record levels) or even the buying of the crap that Wall Street packaged (again, collateralized debt obligations) -- will be buried and lost to history, and I guarantee that these mistakes will be repeated in the future. The availability and price of credit in 2005-07 facilitated the housing bubble, which in turn followed the technology and Internet bubble of 13 years ago. It was a bubble that fed the private-equity boom and that, for a period of time, created a put under the market, which served to reduce fear and produced the aforementioned bubble in optimism (and the concomitant use of leverage, such as the carry trade, by hedge funds and the aggressive use of debt worldwide).
Yer blind, ump,
You must be out of yer mind, ump. -- Damn Yankees, "Six Months Out of Every Year"
Joltin Joe' has left and gone away?My advice? Similar to Major League Baseball records, be mindful and respectful of the history of credit and stock market cycles. This certainly does not mean that anything close to an economic Armageddon or stock market crash lies ahead (similar to what occurred in 2008-2009); it does mean that the economic ride will be increasingly lumpy and that the stock market ride will become increasingly bumpy. Similar to 2007, in 2012 the era of free and easy money is coming to a close at the same time as our recovery is growing increasingly fragile. But 2012 doesn't rhyme with 2007 - it's different this time, with secular challenges that present unique headwinds to a self-sustaining domestic economic recovery. Consider that today's challenges, in some ways, are more problematic than those that were encountered in the last cycle. The problems in 2007 were patched up by bailouts and massive easing, and it took only two (very painful) years for the wounds inflicted by the early 2000s to appear to heal.
Hey hey hey, hey hey hey. -- Simon and Garfunkel, "Mrs. Robinson"