by Randolph T. Holhut
American Reporter Correspondent
June 30, 2008
MAKING THE TRAINS RUN ON TIME
ANGEL FIRE, N.M., June 26, 2008 -- The Wall Street Bull Market Express is leaving the station and you have two months, maybe three to run down the platform, take the leap, and latch on to the caboose.
Deep into a third decade as an investment professional gives me the poetic license to call the start of the next big, generational bull market, when the Dow Jones Industrial Average at this writing is down 232 points and a number of important technical support indicators have been shattered on the downside.
It takes huge contrarian confidence to even entertain my theory, but I find historical similarities to the embryonic starts of other rallies, some of them long term. Also keep in mind that General Motors (GM) is not only at a 50 (cq) year low, but anyone who socked away GM stock two or three decades ago for retirement actually lost money on the deal.
Usually conservative investors should also consider that certainly for the last five years, and mostly for the last decade (adjusted for rising inflation rates, not to mention your gasoline bill) investments in such blue chip names as Microsoft (MSFT), Walmart (WMT), Intel (INTC), Ford (F), Pfizer (PFE), and even the world's largest private land owner International Paper (IP) either went nowhere or backwards in stock price.
Although the legendary investor and presidential confidant Bernard Baruch "always bought" his straw hats "in December" he also knew he could never pick the exact top or bottom of any market cycle. Although the Oracle of Omaha Ole Prof. Warren Buffet himself is well diversified and a famous contrarian, he will tell investors that he basically never invests "in companies and products" he "doesn't understand."
Ask me to tell you in five minutes how Microsoft or Google makes money in good and bad times and I probably can't do it.
Ask me the same question about Kellogg's (NYSE: K), three dollars above its 52-week lows, and I would offer: "Well, they sell breakfast cereal.
When oats and wheat and corn go up, the raise the price and/or shrink the size of their boxes. My Grandma ate Kellogg's Corn Flakes and my kids and grand kids eat them. If people stop buying cereal and eating cereal because times are tough, well, I made a bad bet. If Kellogg's does not go out of business I might hit a home run here."
Ask me about McDonalds (MCD)?
"Umm, the stock still trades near the high range of its trailing 12 month price, it is almost universally understood by analysts to be a fundamental 'defensive' stock, and they have an international footprint in times of a cheap U.S. dollar.
More important is the reality that mom, on her way home from work, still gets a better bang for her buck with a couple of "Happy Meals" at the drive-through on the way home, instead of starting to cook a meal at home, from scratch, after a hectic school and work day. Smart management now gives me a Starbucks (SBUX, down more than 30% in a year) quality cup of java for about $1.29."
Okay, the typical long-term investor is no longer an individual stock picker, so let's review some "macro" market factors
It's just one man's opinion, but you now have some ammunition for decisions of your own.
As a final thought, consider a Christmas where because of high gasoline prices no one goes to a store and no one buys anything, anywhere. Money is tight, so people don't even shop online. J.C. Penny (JCP) fires every worker in every store in every city and goes out of business, followed by every other retailer in America.
If you don't think that is likely, consider the fact that with the same towels, dresses, cufflinks, dishes, and perfumes as last year, JCP is trading $40 cheaper than its annual high, and at less than 50 cents on the dollar from its $76.99 trailing 52-week high.
Call me in, oh, 2012 and tell me if JCP at $36 a share was a bad deal.