MARKET HITS NEW HIGH

A lot of people remember exactly where they were when something big happens like 911 or the assassination of Kennedy or October 19,1987, when the stock market crashed 508 points, taking nearly a trillion dollars and 20% of the value of the Dow down with it.

Newly appointed Fed Chairman Alan Greenspan wasn't Sir Alan yet. Nor was he dubbed the "Maestro" yet by Bob Woodward the Washington Post reporter of Watergate fame. He was just a wanna-be Woody Goodman former clarinet player who ran an obscure New York economics consulting firm who as luck would have it occasionally consulted with presidents.

Just a couple of months earlier in mid-August President Ronald Reagan appointed Greenspan to replace then chairman Paul Volcker whose term was expiring.  The economy that summer many believed was getting ahead of itself. Though tame by most indicators some were beginning to openly worry about the big I word.

In early September under somewhat unusual conditions Greenspan hiked interests 50 basis points, less than three weeks after taking office. The stock market hardly blinked over the next few weeks, but the long end of the bond market told a different tale, one that posed a threat to equities.

Greenspan boarded an airplane that afternoon headed for Dallas where he was scheduled to give another one of those boring Fed speeches to the American Bankers Association. It was just another routine chore in the routine life of a newly appointed Fed chairman.

The market opened that morning slightly down but rallied before fading again toward the afternoon. One needs to keep in mind back then wall-to-wall, 24-7 financial news didn't exist. Many of the someday-to-be Wall Street television celebrities were just that, someday; and someday hadn't arrived yet.

In Los Angeles a local VHS station broadcast financial news from the time the market opened until it closed. And driving the freeways one might catch, if one were lucky, a five minute update every hour during market hours by some guy named Jerry Laird at the Pacific Stock Exchange in downtown Los Angeles. So financial news was scarce. Some people, members of the hardcore school, would go nearly everyday to the local library on their lunch hour to read Value Line.

People often talk about situations they've been in where all hell breaks loose. If you wanted to make a trade, you had to call your broker. Then you had to be lucky enough to get through. And if you did you'd better damn well know what and if you were buying or selling. Quotes changed faster than a friend of mine in college used to change girlfriends. Stability was just another word politicians use when they have no idea what's up, which is most of the time.

 When I reached the office a colleague and I commandeered the phones and started buying everything we could. But it wasn't like we had unlimited resources. That was the first time I learned the importance of having some dry powder. Lots of dry powder to be exact.

Hall of Fame hockey player Wayne Gretsky, asked what made him a great player, stated he always tried to skate to where he thought the puck would be, not to where it was. And that's just another, more aggressive way of saying better keep some powder dry.