"Common stocks had not lost their allure; every speculator who had not been utterly cleaned out in the panic sought eagerly for the hair of the dog that bit him."
- Frederick Lewis Allen, 1931
If Abby Joseph Cohen is the poster girl of the greatest bull market of our time, maybe investors should save a small corner of their display wall for Bill Fleckenstein.
Cohen is Goldman Sachs' chief investment officer. Through thick and thin the past decade, Cohen has issued constructive announcements about the market. To saddle her with a Pollyanna moniker would be unfair. But to say she almost always sees the glass half full, or even fuller, is fair.
If all an investor hears is the upside, then the complete picture is missed. The investor can't prepare for the worst without knowing what's there.
Enter Fleckenstein, one of the market's great entertainers. He operates Fleckenstein Capital in Seattle, writes an almost daily online column for Go2Net's Silicon Investor and helps the little people--those whose net worth isn't in the millions or billions--figure out what could happen.
The other day, with only minimal coaxing, Fleckenstein mentioned 1930. As in: The latest stock-market rebound, after a big March/April crash, is doing a fine imitation of 1930. After the 1929 crash, stocks fell 48 percent to a November 1929 low. They then rallied for five months, up 48 percent, by mid-April 1930. They then entered a two-year decline that left them 89 percent behind their 1929 high. A classic sucker rally had snagged big money.
"You might say this is the time to get back in as an investor," Fleckenstein said, parroting the more bullish side. But you wouldn't include Bill Fleckenstein, either the Paul Revere or Chicken Little of today's investment community.
Some bull markets come along that are obvious, only no way exists to play them. This may be one of them.
A year ago, seven brokers offered bonds for sale online, according to BondResources.com. By this year's end, as many as 80 will be selling bonds online. By the end of next year, as many as 160. That's a growth industry. But many of these are start-ups, or subsidiaries of bigger financial companies, and even if you could invest, how would you isolate the survivors?
One who dearly hopes he can pick a survivor is Tom Evankovich, chief executive of BondHub.com, housed at the base of Queen Anne Hill.
BondHub.com is not designed to sell individuals one or two corporate or municipal bonds. It is for investment advisers, brokers, money managers and mutual-fund outfits with less than $100 million under management. They might have 70 percent of the assets they manage in active stock or mutual-fund portfolios and not have the time to scout bonds.
BondHub.com would offer a trading site, ostensibly with better-priced bonds. The bond market is notorious for building wide spreads into bonds, meaning the seller and/or middleman rakes off a much bigger chunk than a stock investor would tolerate.
A fascinating element is that BondHub.com won't be fully operational until December, even though Evankovich launched his business in July--of 1999. The complexities of developing systems to handle 4½ million corporate, municipal and government issues, setting up reporting links to regulators and others, arranging systems to respond to consumer requests is, in a word, unbelievable.
BondHub.com has gone through two private fundings, and plans a third soon, Evankovich said. Already, 30 people are working full-time to get it all together. Evankovich said employment will rise.
It is quite an undertaking, mushrooming on West Mercer.
And if you're interesting in bonds and prices and ratings and other detailed information, www.bond resources.com, unrelated to BondHub.com, is an interesting place to go. More financial advisers are recommending consideration of bonds to offset some of the stock market's volatility.
The reach, the absolute power Wall Street Recap wields never has been so evident. Remember the epic column in early July, when Recap mentioned the book "Richest Man in Babylon" and inveigled all readers to save at least 10 percent of their income?
The results are in, and they are mind-boggling. The government reported the U.S. savings rate was negative 0.2 percent--the lowest since the 1959 onset of record keeping.
Meanwhile we spent twice as fast as we earned money from our jobs in July. We apparently believe that the 20 percent to 30 percent stock-market returns of the past several years are an entitlement, an automatic dividend devoid of the whims of the investment world.
The thought of 1930 never even remotely entered anyone's mind. It would be irresponsible even to raise the topic.
The Dow Jones industrial average last week rose 46.15 points to 11,238.78.
The Nasdaq composite index added 191.65 points to 4,234.33.
The Seattle Times Northwest index of more than 200 stocks rose 37.46 points to 1,165.98.
The WM Group Northwest 50, 50 stocks weighted by their regional economic impact, rose 236.76 points to 8,453.75.
The 10-year U.S. Treasury note lost ground early in the week. But when more economic evidence of a slowdown arrived, the bond roared back to end the week at $1,005, up $3.75 to yield 5.68 percent. A slower economy erases chances of higher interest rates. Higher rates diminish the market value of bonds already in investor hands.
Municipal bonds mirrored Treasuries, reported Judith Cochrane, Banc of America Securities senior municipal-bond trader.
"What saved the week was economic news... showing that very desirous Goldilocks economy--not too hot, not too cold, just right," locally and nationally, with bond issuance about half the norm, Cochrane said.
The market continues to be plagued by lack of supply. The end-of-week rally enabled the Bank of America Northwest Muni index to end unchanged at the year's low of 5.62 percent.
Wall Street Recap appears Sunday in the Business section of The Seattle Times. Greg Heberlein's phone message number is 206-464-2267. His e-mail address is: firstname.lastname@example.org.