first majestic silver

The Astrological Investor

April 18, 1998

U.S. stock market bears, practically an endangered species these days, have been warning for a while about "overvaluation" and "euphoria." They point to historically astronomical PE ratios, and extremely low dividend yields as warning signals that a top is near, if not already forming. Others point to earnings growth and doubts that they can maintain their torrid pace. Those with an even broader outlook cast their gaze overseas and predict that the fallout from Asian financial turmoil will come washing, soon, like a great engulfing tsunami, upon American shores.

Folks with a decidedly technical bent, more inclined to look at the pictures than to study the text, find the virtually vertical climb of the major averages in an unsustainable ascent. And there are even a few, eschewing the more conventional methods of analysis, who look to the heavens and see portents of doom for stocks about to descend from on high. All these means of market divination are fine, it's true, and to each his or her own we say. But sometimes the most tried and true indicators of a market top catch the eye and illuminate the imagination when you're simply walking down the street.

It has long been held as an important "Anecdotal Indicator" that when hemlines on ladies' skirts begin to flirt with decorously unsustainable levels, the market is likely to be in the same condition as well. Despite the onslaught and aberrations of El Nino this year, the weather in most of the U.S. has not yet had a chance to encourage the ladies to expose very much leg. But perhaps that will come. We will certainly be watching for it, in our role as social and market observer, of course. We vividly remember one sunlit summer afternoon walking to a meeting on Madison Avenue in New York in 1990 and being particularly arrested (in our gaze) by a very presentable young lady in black wearing an unusually short mini-skirt. It hearkened us back to the late 1960's when the mini was King, or perhaps the better word might be Queen, of feminine fashion. This came after a bull run of a decade and a half and at a round-number record top for the Dow of 1000.

We couldn't help recalling those yeasty days of yesteryear when we saw that young lady in 1990, and we confess we did feel a bolt of trepidation concerning stocks. Sure enough, it was only a few weeks later that Iraq invaded Kuwait and the market tanked. Now we note a related phenomenon emerging that hearkens us back to that 1966 crest in the Dow - Carnaby Street. Those of you with sufficient grey hair may remember, along with your bell-bottoms, that in those days England's Carnaby Street fashions were all the rage for the men. The "Mod," if you recall, won out over the "Rocker" and fashion tastes amongst our up and coming were definitely led by that style. As Tony Caldaro, the brilliant technician who actually DID call the 1987 crash months before it happened in Barron's, once pointed out to us as we figuratively sat at his feet, history does indeed repeat itself, but never in exactly the same way.

Cleaning up the office one day recently, we came across this headline and article on the cover of the February 16th CRAIN'S New York Business, a very lively and vital Manhattan weekly: "Savile Row Suits Fashion Scene." The sub-head read "British style gives retailers a boost." A further blurb in the article sums it up: "All things English appeal to men across the age spectrum." Of course those of us who sit and watch computer screens in our bathrobes and cutoff jeans in the basement or on the porch or patio all day are not much concerned here. But out there in society, where real people are running the real world, "English-tailored clothing is not only good taste, but downright in vogue."

We take note of some other manifestations of the same general anecdotal activity. For instance, we observed, sometime last year during one of the innumerable times we were sure we were approaching a market top, how crowded the balcony at the New York Stock Exchange was getting each day at the close. As the market pierced ever higher and higher ground, knifing majestically into record territory, there was no end to the people who wished to crowd around the afternoon gavel-banger who comes out, like some dapper business-suited cuckoo in a clock every day, to symbolically bring trading to a close. One morning, watching the market review of the previous day on CNBC at coffee, we were struck by the crowd in the inevitable video clip of the market closing ceremony. The NYSE balcony looked like a New York City subway car at rush hour. We don't think there was room enough left for anyone's dog up there, let alone another person.

We were instantly reminded of another, classic Anecdotal Indicator - one of the all-time greats. During the 1634-37 tulip madness in Holland just a few centuries ago, bulb prices at the open air market were bid to ridiculous levels. The story goes that a sailor from some foreign port, just passing through and unaware of the context of the local madness, casually reached for a precious bulb at a market stall, and bit into it thinking it was an onion. One can simply hear the stunned silence as first wonder, outrage, shock, and then enlightenment came to the people gathered to trade these things. Reality set in, and, realizing this was really an "onion" that they were bidding to astronomical levels, everyone ran for the exit at once. The thought came to us that the day the overladen balcony comes crashing down (God forbid), the clerks, traders, and specialists on the NYSE floor will probably have the same reaction.

Finally, a recent advertising campaign from Fidelity spotlights its Utility Fund. The utes are looking to us like they are banging up against resistance in the 290's (which we originally saw at 280 but feel perfectly fine about revising due to the plus/minus vagaries of longterm chart aberration). Interest rates look like they've stalled and can't get much lower, unless business is going down the tubes. And here comes this young Fund Manager, just barely out of Economics Class, telling us on TV how now is the time to buy utilities. Well, perhaps there is some more life in stocks yet. In the go-go sixties, they were hiring literal kids, adolescents and teens, to clue the fund managers in on what to buy.

As more and more bulls supposedly are becoming converted, and the entire investment community is taking on the personality of those pod-people in "Invasion of the Body Snatchers," the tired mantras of "It's a NEW era," and "I'm in it for the Long Haul," seem to be acquiring a hollow and metallic drone. Perhaps the remaining skeptics among us are the freaks and outcasts, and we will be the ones to weep, wail, and otherwise gnash our teeth when we find the pearly gates closed in our faces at Dow 100,000 (with no correction).

Today there are mutual fund buyers, by and large, and those of us who hunt individual stocks and still structure our own portfolios according to our personal peculiarities, or acquire bullion almost, but not quite, as fast as the real people of the world dump it. In-between there are Microsoft, Compaq, Motorola, Coca Cola, and things of that ilk. Spiritually they are "mutual funds" masquerading as stocks if you ask us. The mutual hopes and dreams of the millions of new share buyers spawned by this bull are certainly invested in them, not to mention their money.

As for us, we still find astrological temptations in the horoscopes of a number of obscure corporations, and, barring severe downdrafts to come, there will always be such plays for our strange obsession. But as for the stock market in general, we think the clues are starting to mount up. We are not exactly ready to shout "Fire" in the theater just yet. But we are very close. And we don't expect to shout "Fire," even though we are starting to smell smoke, until that exquisite anecdotal moment when we see the whites of their thighs!


A medical study in France during the early twentieth century suggests that gold is an effective treatment for rheumatoid arthritis.
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