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The Waiting Game

Wartime isn’t the worst thing for the market—the uncertainty leading up to it is. Which is why sometimes it pays not to wait before jumping back into stocks (but only in certain sectors).


If you think the worst time for a stock market is wartime, think again. The worst time is the wait, as in right now, when you know there will be one, but you can’t predict when it will occur. That’s what’s ailing this stock market—not corporate earnings, not dishonest bookkeeping, and not the imbalanced budget. It’s the waiting for Iraq War II to begin. Most people involved in the stock market now weren’t too focused on the Dow Jones averages the first time we were about to go to war against Iraq. I, unfortunately, was running a hedge fund, and I can recall the constant rally-decline-rally-decline moments leading up to the confrontation. Every rumor of peace brought buying, every thud of disappointment brought selling, until the market simply caved in as even the longs figured, You know what, I will have another chance to buy after the war begins.

You didn’t, though. There was no chance to buy. Not for a moment. It was straight up once the shooting started.

Don’t I know it. At the time, I was trading with my wife, Karen Cramer, formerly known as the Trading Goddess but who now insists on being known as a homemaker—Homemaking Goddess? (Oops, taken by Martha Stewart.) Tired of my endless buying ahead of every Tariq Aziz meeting and my endless selling after every disappointing James Baker press conference, she finally banished us to the Hyatt at St. Johns with a vow not to return until right before the war began. “Apply No. 4 liberally and wait for the day before the war,” she would say each time I pestered her to do some buying from the Caribbean, harking back to a moment when we actually used No. 4 instead of No. 52 SPF sunscreen.

“We haven’t dipped all the way back to where we were in those bear days of summer, something that happened right before Iraq War I in 1991 when we plunged back to our 1990 lows.”

Back then, we had a clearer timetable than this go-round, and we were able to arrive back in New York a couple of days before so we could buy with both hands. Why were we so certain that the market would go up? Because the market had discounted virtually everything negative before the war began—and had not discounted swift victory.

We aren’t exactly in the same position these days. We haven’t dipped all the way back to where we were in those bear days of last summer, something that happened right before Iraq War I in 1991, when we plunged back to our 1990 lows. But we did come tantalizingly close to it a couple of weeks ago, and I bet we get there again on the eve of battle. And we can’t be sure that this time we will have closure. In 1991, the world was united against Saddam and we didn’t have a holy war against us to contend with, replete with internal terrorism. At the completion of the war, we didn’t have to fight another one; we can’t be so sure that Iraq won’t be the first of many, as we will have taken out only a third of the evil troika. And there are just enough grizzled players like me around to remember that it was foolish to sell ahead of the war and think that you could get back in. In other words, there are too many bulls right now for my liking. The washout simply hasn’t been great enough. Yet.

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