August 28: The Week That Was

One should avoid the temptation to read too much into Market action so late in the Summer, but I think its safe to say that this monster "not the end of the world after all" rally is starting to show its age. Which, by the way, is not quite six months. Stocks in general were weaker than the indices would suggest. Not by a lot, but with very few exceptions things were looking pretty wilted as Friday wore on. They got a boost from that little bit of reassurance coming out of Boeing. (The 787 will fly, and Boeing will make a lot of money from it, but the well-situated suppliers will do even better. The serial reassurances out of the Technology supply chain kept coming, but did you notice that however scintillating the news from Dell and Intel (late Thursday and early Friday) was, a whole lot of stocks that opened up sharply on that news could not hold their gains for the day? The reals "news" in these "better than expected" announcements has been completely discounted, which is to say that a lot of companies that were priced as if they were going out of business are now priced as if back from the dead. 

It is going to get unpleasant in the weeks ahead, but not in the way that the Bears and other doom mongers want you to think. What I have mind are the agonizing choices investors sometimes have to make with stocks that have outstanding long term potential. In my case, most of my holdings are tied to what I believe are two super cycles affecting certain suppliers to Aerospace and Information Technology. The near doubling of my IRA account off since 2/28/09 suggests that some of these are probably ahead themselves and ripe for a bit of a pullback. The age old conundrum is this: Do I try to be right twice (sell some and then try to buy it back lower) or do I suffer through an inevitable rough patch on the way to the realization of much higher prices, which are based on premises which will probably, not necessarily prove to be correct? A lot of investors, particularly of the value school, are already starting to suffer this form of Agita. It will get worse in the weeks ahead.

This week also saw the passing of the senior Senator from Massachusetts. Long time Musings readers will not be surprised to know that there was not much about this man that I found admirable. Conventional wisdom, enamored as it is by the trappings of wealth and celebrity, would be that he was blessed with every possible advantage (except, perhaps, truly superior intellect). I would submit that life dealt him a very tough hand, the youngest son in a family so riddled with "issues", and that he could have played that hand a lot less creditably than he did. I also suspect, though, that talk of renaming H.R. 3200 as some kind of Kennedy memorial bill has probably already died at the hands of focus groups. This is Beltway hubris at its worst. (If it does go forward as such, it will be a testimony to the stark obduracy of said hubris.) Not many voters old enough to remember 1969, or 1987, when he famously slandered an eminently qualified Supreme Court nominee, are going to regard his memory as a reason to change their mind and trust the government on this issue. Like the rest of us, he has much to answer for as to what he did with his not inconsiderable talents. I pray that like his long time adversary who in the end became his friend, Robert Novak, he found it in his heart to make peace with his Maker.