Wednesday, July 18, 2007

Steffy: Pre-eminent Stock Market Psychologist

The Houston Chronicle's Loren Steffy is such a brilliant business columnist. Much stock market insight can be gained by reading his column. Please share in the brilliance:
Financial milestones don't, from the standpoint of market dynamics, mean a lot. They are, after all, just a number like any other.

But the markets have a psychology to them, too, a deeper human meaning. The Dow passing 14,000 means something because we want it to.

"The relevance of Dow 14,000 is psychological only," said George Ball, chairman of Houston-based Sanders Morris Harris. "To the bulls, it shows there's staying power in the marketplace. To the bears, it's simply a sign of the market becoming more overvalued."
Wow! Could we get any better analysis than that. on:
Technically, because the Dow didn't close above 14,000, the milestone hasn't yet been achieved, but that distinction is almost as irrelevant as the milestone itself.

A retreat just before Tuesday's close was spurred by renewed concern about higher gasoline prices, but the Dow still could set the record in the next few days.

What's behind this? We are.
Wow! And here I thought aliens from outer space were responsible for the stock market rise. But there is more....
"What's driving the market is the economy, and what's driving the economy is people have jobs and they're spending money," said Joseph Birkofer, a principal with Houston-based Legacy Asset Management.

In this, too, my son serves as a useful anecdote. He joined the work force last month and is suddenly awash in discretionary income.
Oh please, not another Loren Steffy "It is all about me and how I feel moment." But of course, Steffy just cannot help himself with the sappy analogy:
"Yet amid our caution, the Dow hits 14,000. It's just another numerical measure, a nice round integer, and yet a strangely comforting one. The child of Dow 3,000 is now a young man, and during his short lifetime, the market has surged 11,000 points.

It's been an uneven advance, plagued by setbacks, but it reminds us why we invest.

Because over time, our markets rise.

Dust off the Pulitzer Prize for Steffy. This is one for the scrap book (more like scrap heap). Steffy does not even know the history of the stock market which has long periods of declines and long periods of sideways actions. If my dad looked at the same analysis from my birth to age 16, he would have seen 13 years of a sideways performing Dow followed, finally, by 3 years of a bull market. So the market does not always rise. Hell, we spent four years just getting the Dow back to pre-crash highs. The Nasdaq is a little more than 1/2 of its pre-crash highs. The S&P 500 is barely over the same benchmark.

The truth of the matter is that Steffy does not have a clue. If you want to know what is going on, tune in over at Business Radio AM1320 from 4 pm to 6 pm. Daniel Frishberg has the most insightful guests on his radio show every single day. If you don't believe me, go to the podcast archives and check out shows going back several months, if not years.

They explain what is really going on in the global economy which is driving the stock market higher. I have been listening now for more than five years and they have been right the vast majority of the time including major market turning points. And when they have been wrong, they have no qualms about admitting it and changing strategy. That is the mark of financial professionals: more right than wrong and when wrong, change course quickly.

As to Steffy, well, he is so anti-business and anti-capitalist that I cannot understand why he continues to be the premier Houston Chronicle columnist.


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