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.
What with all the talk about a global slowdown the price of copper has been in the doldrums for so long now it took an 8.2 earthquake off the coast of Chili to provoke an upward move in price for the industrial metal.
Maybe some enterprising traders can come up with a future earthquake predictor and trade the bounces.
http://www.businessinsider.com/copper-production-by-region-2014-4
Corporations have been booking some nice profits of late. But much of those profits are going to buttress shares prices in stock buyback programs or hike dividend payouts or both.
But there another well-known activity inflated equity prices can be used for, merger and acquisitions. Low interest rates also make many deals easier. And from the look of the landscape their on the rise. http://soberlook.com
First quarter activity is the best since 2011. Nor is this corporate activity limited to the U.S. Here's how a piece in the Financial Times described it: "A pick-up in merger activity helped Europe’s main equities markets kick off the second quarter with gains."
For more here's another link.
http://www.mergermarket.com/pdf/MergermarketTrendReport.Q12014.Global-
So what kind of recovery has it been? Here's an interesting graphic from CrestmontResearch.com.
http://www.crestmontresearch.com/docs/Economy-Recoveries.pdf
Not that long ago voters in France elected a president. At the time it was viewed by some as a mandate. But given France's economic woes, so much for mandates, real or imagined, as recent local elections seemed to suggest. Voters breathed new life into the center-right UMP. And President Hollande's party lost more local elections than it won
France has overshot the debt restrictions imposed by the Maastricht Treaty more than once. Now Hollande will be pushed to ask for more time, not a good thing when you're trying to get other countries to abide by the agreement when you can't do it yourself. That's called EU leadership.
http://www.marctomarket.com
This time it about the economy. Once a quarter the big firm gathers its big hitters to discuss what's up on a global scale. Here's the latest.
http://www.minyanville.com/business-news/markets/articles/Pimco-Cyclical-Outlook-for-the-Americas/3/31/2014/id/54398
Who doesn't love a big market?
An article in today's WSJ, "New Drugs Emerge To Cut Cholesterol," states the size of that market: 50 million Americans.
What about them, what do they have in common? Well, they are all, according to some, candidates for the "most widely used and most lucrative drugs ever developed by the pharmaceutical industry," statins.
These are what some refer to as Wing-and-a-prayer announcements or priming the pump. To be sure, as one physician who was not connected with these new studies, noted: "There's not a shred of doubt that this is a very efficacious way to lower LDL (bad)" cholesterol.
But that's the wrong question getting answered. There is even less evidence that these findings will translate to preventing heart attacks and strokes, the so-called end point or reason for their existence.
With recent patent expirations popping up like spring flowers, a cynic might argue along with the aroma of spring flowers the odor of new patents is also in the air. And it's a very lucrative one.
http://online.wsj.com/news/articles/SB10001424052702303978304579471072404353460?mg=reno64-wsj
Signs don't precede they follow.
Now that seems like a paradox if there ever was one. How many recognized the sub-prime mess after the fact? Or the dot.com bubble? Think tulip bulbs or a couple of generations ago the Nifty Fifty.
In the Good Book it says there's not much new if anything under the sun. What that means is there are only variations of past things or events. That doesn't make them new, only garbed in different clothing or packaging.
Investors usually learn this, if they learn it at all, over time. But by the time Hollywood gets around to parading it before the great unwashed masses it's older than all those glaciers climate-change folks worry so much about preserving.
Bernie Madoff and Bernie Cornfeld shared more than just the same first name. Both sported a certain code, a DNA hardly unique to them. Some call it greed. Others humanness. Being recent, the Madoff saga is still fairly fresh. Not so Cornfeld.
A former social worker, Cornfeld was a Columbia University product. The stars, however, seldom fall on social work. But mutual funds, we'll, that's a whole different stage. After some success selling mutual funds in the U.S. in the early '50s, a period when the investing public was finally warming up to them after a 25-year drought caused by the great 1929 Crash, Cornfield moved his stage to Paris where he sold shares, often going door to door, to American servicemen and anyone else who would buy.
Success breeds success. And by the early '60s during a bull market--who doesn't love them--he launched a new fund in new packaging called Fund of Funds, buying shares of other mutual funds inside his own.
Like all great pitchmen, Cornfeld had his own catchy oneliner: "Do you seriously want to be rich?" And he called it "people's capitalism."
His new fund was a trailblazer and he set out to find hot mutual fund managers to load up on to put the alpha in his new concoction. One of them was a guy named Fred Alger who became famous in his own right.
Cornfeld became rich himself and did his best to live up to the role, hanging out with celebrities and beautiful women and traveling the world. By 1969 his firm, Investors Overseas Services, Ltd. (IOS), employed 13,000 salesmen, had 750,000 clients in 110 countries and was called by one well-known magazine "the world's largest sales organization."
But, like an unwanted visitor, a bear market one day knocked at the investment door and his firm started losing capital. Three hundred employees filed a corruption complaint accusing him of pocketing money that belonged to them as shareholders. He was arrested and spent nearly a year in jail only to be acquitted a few years later.
By then, however, his best years of fame and fortune were behind him. Sooner or later everyone becomes prey including Cornfeld. Plagued by cries of wrongdoing, IRS woes and a flamboyant life style, he was forced to liquidate his fund. But that's another part of the story for another time.
Cornfeld died in London in 1995 at the age of 67. In his obituary the New York Times described him as "a Brooklyn-reared salesman who became one of the most flamboyant and controversial figures ever to streak through the American mutual fund industry..."
The key word here is streaked for, like it or otherwise, streaks can run both ways.
