But, as in 1991, we always underestimate how horrible the waiting for war is on the psyche of the market and on the world economy. We tend to think that the decline in our market is happening in a vacuum, perhaps as some sort of punishment for the weak earnings of the likes of AOL Time Warner and McDonald’s, or the incredible chicanery of the WorldComs and the Enrons. Lest you think it is our economy’s woes that are driving the Dow’s red ink, you should know that the overseas markets have fared every bit as badly—and in some cases, they have been worse. Lots of major decisions have been put on hold in America and the world because of the waiting for war. Big buying decisions both on the corporate level and on the consumer level have been shelved pending the outcome. Anticipating war is not the optimal scenario for strong retail sales anywhere in the world; in fact, the Christmas we just went through had more in common with the Christmas of 1990 than any of the retailers would like to admit.
But I am betting that once the war is over, the pent-up demand to buy stocks connected with consumer spending—the group that rocketed after Iraq I—astounds even the great optimists of the time. Yes, a well-fought victory can be that bullish, more bullish that most of the younger folks in the market can imagine.
“I’m betting that once the war is over, the pent-up demand to buy stocks connected with consumer spending will astound even the optimists.”
So what to do? For me, I have been committing my cash into this market, buying stocks as they come down in anticipation of the worst but keeping a small amount of powder dry for the last gulping decline before the shooting. I’ve been buying some Masco, the big cabinet- and faucet-maker, some Newell Rubbermaid, and some USA Interactive—consumer plays all—as well as a few bet hedgers like Royal Dutch and Raytheon. These have all been crushed as sales have paused worldwide in their industries, waiting for the war. As in 1991, many younger traders seem so confident that they will easily be able to get back in once hostilities break out that they have dumped these solid companies to levels that would normally seem like absurd bargains to even the perma-bears who live in cash at all times.
Somehow, though, as in 1991, we won’t get that exquisite moment to buy once the shooting begins. The cautious buyers won’t triumph now any more than they did then. Which means the time to buy is, alas, upon us, just as it was twelve years ago.
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