by Mark Scheinbaum
American Reporter Correspondent
Lake Worth, Fla.
May 2, 2002
RATTLING SABERS SPOOK MARKETS
BOCA RATON, Fla. -- Stock markets can deal with negative and positive trends; they don't like uncertainty.
Whether it's election results, a war on terrorism, or interest rate fluctuation, surprises mean volatility and decline and deter sensible institutional equity planning. The past few weeks have only proven the rule. Both the economy and the large-cap U.S. equity market were showing slow signs of recovery from cyclical downturns, the death of dot-coms, and the attack on America last September, when Washington jawboning interrupted the momentum. The catalyst for a fast drop in the Dow Jones Industrial Average below 10,000 and 9,900 was the White House "leak" that 250,000 American troops might be needed for Gulf War II next year.
"I supported George Bush, but I'm supporting a war to finish what his father messed up the first time around," a veteran insurance executive told me this week. He echoed almost a universal disdain, sarcasm, and eye-rolling from those usually firmly in the GOP and the President's corner. I spoke eye-to-eye with a half dozen seasoned Wall Street veterans, and no one felt that the current administration has a firm grip on U.S. foreign policy.
"What happened on September 11th is cause for strong retaliation. But it doesn't give us the right to send my sons to war against a sovereign state -- not matter how corrupt -- whose own people won't overturn," a CEO whose financial support of George W. Bush goes back to his days as Texas governor told me.
"We have limited resources and limited abilities. I don't want to hear U.S. threats and more threats against Saddam Hussein. If we have evidence of his continued plans against America, strike hard and fast. Don't pre-announce an all-out war which our shaky allies won't support," he added.
Veteran institutional stock trader Ron Karlin of Delray Beach, Fla., said, "We could keep cracking key numbers on the downside here, down to 9,600 on the Dow or below. It's become hard to identify one single, good, positive story in the telecom sector, for example, when big institutions are worried about the international situation. The news each day does not give us the confidence to sustain any rally."
Historically, Ibbotson Associates in Chicago, reports one down year in every four in major markets since 1926. Depending upon where you started your bearish clock, we are finishing up negative year number three. Three bad years in a row in a 12-year window maintains that 4-to-1 ratio, but turnaround signs I predicted for the end of 2002 may have tobe put on hold.
Mark Scheinbaum is chief investment strategist at Kaplan & Co., a former UPI newsman, and political scientist who taught at the University of Florida and University of South Florida.