12 March 2009

BUY STOCKS? HMMMMM--FIRST, TAKE STOCK

BUY STOCKS? HMMMMM—FIRST, TAKE STOCK
By Andy Weddington
Friday, 13 March 2009

Before turning to today’s business—last week I was asked to consider a commentary on “The Bachelor.” Of course I’ve heard of the program but do not watch—never have and never will—so was unaware of the recent hoopla I found while doing a bit of research. Sorry, no commentary. It’s dumb. That the woman scorned turned up on ‘Dancing with the Stars’—dumber. The long shot to win Dancing with the Stars: Steve “Twinkle Toes” Wozniak. Yep, it’s a high risk bet but the payoff is huge—just like the stock market—and Bernie Madoff investments. Yeah, right.

Speaking of the stock market,

Question: How do you make a small fortune in the stock market?
Answer: Start with a great big one and give it time.

A comment from President Obama last week caused me (and no doubt many others) to pause and wonder two simple questions. First, does he have a clue what’s going on in this country? Second, does he have any idea what he’s doing? When scripted and rehearsed, he usually says the right things—and is skilled emphasizing his words with complementary facial expressions and body language. But when caught impromptu the president comes across as hesitant, gropes for words, and in a moment or two out comes something absolutely ridiculous. Last week he urged Americans to buy stocks. Huh? What? As Slim Pickens, playing a sardonic cowboy, exasperatingly queried in Mel Brook’s cult classic ‘Blazing Saddles,’ “What in the wide, wide world of sports is going on here?” Why would the average investor buy stocks now—while the market is flailing, by all appearances is being manipulated, and, despite a few days worth of a paltry rally—comparatively speaking, is moving south—without a bottom in sight? The market is no more stable or heading in the ‘right’ direction than the House Speaker known as Pelosi. You may as well flush wads of cash down the toilet—you’d have just as much chance of seeing some sort of return.

But, what else is the president going to say? He made grandiose promises to fix our country’s troubles. Now he’s amidst a mess, is uncertain what to do—as are his advisors, at times appears frustrated, and likely understands there’s not much he really can do except wait—time heals. Oh yes, time. How long will it take for the economy to recover? Who knows? Undoubtedly much longer now that the government is coming to the rescue. If too long, he has no chance for reelection. If time works in his favor maybe he comes out the winner—and can and will claim responsibility—count on it. In the meantime, his oft repeated reminder that he inherited a basket full of problems is tiresome. He offered no such disclaimer while making promise after promise when running for office. Quit whining. Work the problems and, like the rest of us, wait.

To date, we’re all victims of a mugging and a robbery. We’ve been mugged by criminal politicians and businessmen—who wiped out decades worth of hard earned savings, investments, college funds, and sundry retirement accounts. Much of that “wealth” was in the stock market. Poof! Gone. David Copperfield could not have made so much cash vanish as fast. Old Robert W. Sarnoff (1918-1997) whose claim to fame was Chairman, RCA had it right when he said, “Finance is the art of passing money from hand to hand until it finally disappears.” You got that right, Bob. Our money sure disappeared—after it went hand to hand to hand to hand to the hand that stuffed it into the pockets of the irresponsible and crooked now standing around with dopey looks on their faces claiming, “Not my fault.”

Then, while all were (and still are) in shock and weeping over shattered piggy banks, the government steps in and robs us—wasting hundreds and hundreds and hundreds of billions of our tax dollars on people, banks, and businesses that were the root cause of the mugging. To add insult to injury the robbery is still in progress as additional “stimulus” talk percolates. Our economy is in chaos; jobs are disappearing faster than Obama cabinet nominees; people are losing jobs; overextended delinquents get to keep their homes courtesy of our nickel; businesses are closing their doors; credit markets are constipated and proving enema resistant; and on and on and on; and our tax-evading Treasury Secretary, we could not possibly do without, has yet to field a plan. Don’t confuse effort with results, Mr. Geithner, and by all means don’t forget the Democrat’s official mascot is the donkey not the magical unicorn.

Buying stocks is about the last, if not the last buy, anyone with brains and money is going to do these days. Honest mistakes are one thing--Americans can be forgiving. Lie and cheat them out of hard earned money and you are done. Don’t expect the burned to go running back to the market. What the president and the financial markets folk do not seem to get is that many of the people who lost their shirts in the market then sold what little was salvageable did not panic sell. They sold out of anger. Angry customers are lost customers—they do not go back. And furthermore, angry victims tell their children, grandchildren, nieces, and nephews and anyone else who will listen to stay far away from the stock market.

Of course no one can predict exactly what the stock market is going to do but many experts believe we’ve not seen the worst and some suggest the index could drop to 4000—or lower. The past few days of small gains means little—sooner or later you win playing the slots and roulette too. Are we to believe a couple of banks—Citigroup and JP Morgan Chase—announcing they made a profit is the truth? Smell a rat or a trap? Particularly when some now out-of-business respectable financial outfits also declared stability and profit—in writing to their customers—only weeks before failing at the front end of this economic catastrophe. With a tsunami behind us and an avalanche looming, why in the world would anyone jump back into the market now? Furthermore, the collapse to date has left many with the perception the market is rigged. Reality or not it does not matter. Perception is reality. If the average investor believes a fair shake is not possible, you won’t see their money. Corruption on Wall Street and in D.C. violated public trust to the core. Why, when many of the same people are still in power, would anyone in their right mind say, “Oh, okay, the president said buy stocks so I guess I’ll get back in the game?”

I find it amusing investment firms are bombarding my mailbox (yours too I bet) with promotional garbage and teasers touting, “We are the experts to turn to for sound advice during these turbulent economic times.” What are these folks thinking about? If “experts,” why did they not foresee the debacle, preempt the thieves, and warn us? It's too late. Therefore, save your time, paper, and postage—your material either goes straight in the trash or, if accompanied with a prepaid return envelope, is happily returned after being rolled into a tight cylinder and marked “for deposit only.” Detailed instructions and illustrations provided. Figure it out.

To all in the hinterland opening the junk mail and contemplating their offers, remember, all internal alarms should sound when someone—especially a stranger—offers “good ideas” for your money. Of course those in the financial arena are going to tell you, “Now’s the time to invest”—that’s their business—that’s what they do. As Henry Ford (1863-1947) said, “It’s not the employer who pays the wages. Employers only handle the money. It’s the customer who pays the wages.” Of course a broker wants your money—you’re the customer and paying the wages.

There was a day when investing in America paid dividends—figuratively and literally. Times have changed—it’s a different day. Americans have been violated. Gaining back their trust will take time—how ironic and yet oh so fitting that trust, our interest, will have to be earned—my, my, new meaning for “earned interest.” And it will take a lot of time to “earn”—for the American psyche is short on patience and long on memory. These days and hard times will not soon be forgotten. That you can bank on. It took decades for the market to recover after the 1929 collapse. This one may take much longer.

Mark Twain knew a little something about investing when he wittingly said, “October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February.” At least for now, the stock market, like slot machines and roulette wheels—as professional gamblers well know, is for suckers. CDs, mattresses, and holes in the ground are safe. The surest way to comfort without worry—true “wealth”—is to spend less than you earn. “Buy stocks? Now? Uhhhh, no, Mr. President, I don’t think so!”

1 comment:

ckruggieri said...

Good post Andy. Very frustrating and difficult time - Obama is clueless as are his people.