Dueling Fools
1999
December 30, 1998

1999 Rebuttal
by Rick Munarriz ([email protected])

Kudos, Bill. Macbeth was a nice touch. It brings back memories. Shame over gory excess. Trying to wash away the truth. Trying to rewrite history by skipping over past indiscretions. Lady Macbeth? Nope. The stock market. Two can play the Macbeth game...

By the pricking of my thumbs
Something wicked this way comes

Bill's trying to rinse the market clean of its bullish glory. A bit counterproductive towards his case, no? I think, deep down inside, he might be expecting a breather over the next year, too. Why else would he keep trying to set the S&P 500 apart from the rest of the market? Is the implication here that this is the year money managers finally beat the unmanaged index? If his point is that there is value in the small caps, sure, though it's all relative to historically high blue chip valuations. Bill noted that the 500 stocks that make up the standard yet not so poor index have averaged 23% annual gains over the past five years. That means that a flat S&P 500 over the next five years would still produce historically high results over the entire ten year period.

So, please, let's not dismiss the S&P 500. There's nothing rotten in benchmarks. The Dow Jones Industrial Average is selling at 25 times earnings. Even the sleepy Dow Jones Utility Average is fetching 22 times earnings!!! So it's not just the S&P 500 showing investors love. Those high flying Internet stocks? They're not in the S&P 500. America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> won't log on to the index until tomorrow night.

Bill brings up presidential cycle data to support his case, though, c'mon, next thing you'll know is that he hinges his entire case of a bullish 1999 on Randy Moss. The rookie Vikings dynamo has given Minnesota the inside track to yet another market coincidence -- an upward bias on years when NFC teams win the Super Bowl. Then again 1998 wasn't too shabby with the AFC Denver Broncos winning it all. So will the year ahead be the year of Moss or the year of moss?

It might all boil down to interests. The 30-year bond is yielding 10% more than it was when it bottomed out just three months ago. Overseas, the emerging markets look ready to live up to their moniker. Clearly the global realm of financial alternatives is opening up again. So, yes Bill, Phantom Menace cometh. Darth Vader. Obi Wan Kenobi. Folks who were introduced to us during the bearish 1970s are back. Young. Ready to relive history. Yoda man Bill, but again, please be careful this coming year. The dark forces will be out there.

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