July 10th, 2006
Congratulate me, I’ve just passed my First Anniversary. I can’t believe a year has gone by since my inaugural posting on July 5, 2005. Unfortunately, in many ways it feels like we’ve been running a treadmill over the past year. Sweating, heart pounding and yet we seem to be pretty much in the same place we were a year ago.
Watching the major indexes feel like riding a roller coaster. Over the past year (June 30, 2005 to June 30, 2006) the S&P 500 increased by 6.62%, the Dow 30 by 8.52% and the NASDAQ by 5.60%. Had it not been for the market’s action since the beginning of May, it might have been much better.
I have CNBC turned on most of the day (although muted because I can’t stand the repetitiousness of both the ads and the “news”) and I’ve come to realize how little long-term impact the various “news” stories and “alerts” they continually hype actually have on the actual market trends. True, when taken in their totally, they cumulatively drive the market’s
action but, individually, they’re meaningless beyond instantaneous, reflexive reactions. It probably has much to do with the short attention span most of us have in this world of the 30-second sound bite, podcasted enteratinment and the 30-moments of fame.
For example, a preliminary jobs report came out on Wednesday higher than expected but was dashed by the actual report that came out on Friday below expectations. We’re entering second quarter’s “earnings season” and the guys on CNBC try to make every report sound ground-shaking. And every Monday there’s the weekend movie box office results. But there are
been box office results every Friday and there are quarterly earnings seasons 4 times a year (one of them, of course, being annual earnings season). And what do we remember about any of those past “flashes”.
There have been hurricanes (wrote about it August 27, 2005), oil and gas shortages and the resulting price run-ups at the pump and the stocks of companies in the industry group.
There were shortages of industrial materials and precious metals so stocks of those companies increased by orders of magnitude. Those stocks have tumbled by 25-40%; so what happened
to all that new demand from China and India? We’ve survived several months on the CNBC Squawkbox Fantasy Portfolio Challenge. And, who can ignore, the dramatic about face the market made a couple of months ago since the beginning of May.
And, of course, Fed watching has been raised to a spectator sport. We went through a change of the guard, 18 rate increases monthly, and continued anticipation about their move at the next meeting (“Will they or won’t they stop?”). I’ve gotten caught up in it somewhat having written about it 5 times during the past year:
So the big question is “where to from here?” The whole period August-November, 2005 was a truly boring period in the markets. Much sideways motion many stocks verging on breakouts but little action. I don’t believe we’re there yet in this phase of the cycle. We haven’t yet
hit a bottom consolidation. There’s still insufficient support and too many stocks are still declining. Let’s hope that as the summer wears on, that bottom will begin being formed.