Vol. 22, No. 5,514 - The American Reporter - September 7, 2016

by Mark Scheinbaum
American Reporter Correspondent
Angel Fire, NM
June 27, 2008
Market Mover

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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

  • The McBama Factor: THE McBAMA FACTOR: The victory of Obama or McCain is the election sizzle. Short-term Wall Street analysis and headlines. The actual election is the "steak." Old Adage: "Sell the sizzle not the steak."

    My Adage: "Hey how's you're steak?" U.S. Presidential elections, even the protracted 2000 vote, reaffirm political and economic stability and peaceful transition in a troubled world. Investors in Dubai like this. Investors in Frankfurt like this. Investors in Sao Paolo, Tegucigalpa, Osaka, and Singapore like this. Portfolio managers in Atlanta and Albuquerque like this. Usually the post-political convention period, accelerated by the November Election, and up to January inauguration signal global confidence in U.S. equity markets and a nice rally. If you snooze you lose.

  • The Summer Factor: The best news from a talking head on CNBC-TV was "traders are telling us they are going away for summer vacation, not putting any new money at risk, and we'll see you in September."

    Good. Bye-bye. The mini "Crash of 1987" was in October but the DJIA peaked during the third week in August. The New York and Boston Boys were in the Hamptons, the Jersey Shore, and the Traverse Stakes at Saratoga. The DJIA peaked at 2722.

    Market veterans who stayed cautious but attentive, who did not panic in October, and held their ground and their quality positions, actually celebrated New Year's Eve with a gain for the year. Go back to August of 1982 and after more than a decade of doldrums the biggest market boom, in retrospect, was launched. That Bull Market even with speed bumps ran into 1999-2000.

  • September 11th:: For as long as you and your kids live they will get chills on the date 9-11. Smart money managers might deny this publicly but no one wants to be "long" speculative trades on September 10th.

    Anything can, and will happen in the world. This fear spreads to investment amateurs and turns to long-term investment advantage. People who believe my election thesis might still wait until 9-11-08 passes quietly before dumping sideline money into the equity markets.

    To my mind, railroads and cereal, and heavy equipment operators, and companies selling record amounts of "stuff" to India, China, Brazil, Bahrain, Panama, and even Canada will be no different on September 12th even if there is some "tragedy."

    You take the slight chance that you might pay a few bucks more in case of a terrorist act, but the odds are more likely that you will pick up quality stocks in July and August at 60 or 70 cents on the dollar compared to where they will trade a year from now. You decide.

  • Cyclical Considerations: Econometrics firms tell us that since 1880 anecdotally and 1926 statistically, one year in every four is terrible for investment grade stocks. In 2000 we launched almost four lousy years. To be sure four bad years in a 12 year period, and two poor years in an eight-year cycle, still maintain that 4:1 ratio.

    Most real estate experts do not see a plateau (remember we can't pick "bottoms") in the lagging real estate market until late in 2009. If we are wrong on all of the above and your Summer of '08 investments are actually down at the end of the year, you might still have made a prudent investment to catch the market reversal and economic recovery.

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.

Copyright 2016 Joe Shea The American Reporter. All Rights Reserved.

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