[img]470|left|||no_popup[/img] Do you play the ponies?
If you don’t, I’m sure you know someone who does.
One day, in a moment of weakness – maybe you’re having a couple of beers – your buddy tells you he’s got the inside dope on a horse. He assures you the fix is in.
He’s betting the farm. He tells you it’s a sure thing.
You’re tempted. But then your better angels snap you into sobriety. You beg off.
You run into your pal a few weeks later. You saw the race results. You know he took a shellacking.
You ask him what happened.
He spins a tale of woe that makes you thankful you stayed on the sidelines. Without skipping a beat, he tells you about another race, another bet that’s sure to hit.
You tell him you’re late for the church social and bid him a hasty adieu.
Sound familiar?
The Recent Good Ol’ Days
From the summer of 1982 through the spring of 2000, we were in the midst of a huge bull market. Stocks were returning 20 percent a year. This led to the widespread notion the stock market was a sure thing.
All you had to do was plop your money into an index or mutual fund and, voila, instant wealth. Everything was possible because the stock market would provide.
For seven years after the bull market ended, this fantasy persisted. Now, it’s gone, and most of are as leery about the stock market as we are about playing the ponies.
According to Fortune magazine, during the past year stocks have lost $4.1 trillion in value. The average portfolio is down a stunning 43 percent.
You may have loved your stocks. But they didn’t love you back.
Almost, but Not Quite
Through Thursday, the S&P 500 had its steepest six-week gain since 1938. The S&P surged 29 percent from the12-year low it reached on March 9.
Profits at Goldman Sachs and J.P. Morgan Chase & Co. ignited gains in bank shares and other financial issues. It almost looked like the market was back on track.
This morning, the Dow is down nearly 200 points, and the S&P has followed suit.
Even though Bank of America reported huge net earnings for the first quarter, its shares fell $1.37 to $9.23. Reserves for future loan losses at the nation’s largest lender increased 57 percent, to $13.4 billion since the end of December. Charge-offs for uncollectible loans more than doubled, to $6.94 billion, from the same period a year earlier.
Likewise, the stock value for Citigroup fell despite that fact that the bank reported first quarter earnings of $1.6 billion last week. While historically low interest rates and the infusion of federal monies may have stimulated new borrowing, investors fear that the new earnings will not be able to overcome the growing mountain of credit losses projected for Citigroup.
Yesterday, Exxon Mobile overtook Wal-Mart at the top of the Fortune 500 list of America’s biggest publicly traded companies. Yet Exxon’s stock hit a 52-week low as oil prices fell $4.01, to $46.32 a barrel, on projections that decreased demand will lead to a bigger inventory surplus. Oil fell the most in seven weeks as a stronger dollar reduced the appeal of commodities on speculation that the persistent recession will sharply reduce demand.
So if the stock market isn’t a sure thing, what is?
Sadly, nothing.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
