Monday Morning: Can the bulls outrun the bear (market)?

You know the old story. Two campers are out in the woods when they see a bear off in the distance charging toward them.

One camper starts to panic while the other calmly sits down, flips open his backpack and pulls out a pair of sneakers.

“What are you doing?” the panicked camper screams. “You know you can’t outrun an angry bear!”

“I know,” the other replies. “I only need to outrun you.”

I’m seeing this old adage told and reprinted more and more these days as the stock market gains of 1999 slowly ebb. If you are a buy-and-hold investor, like me, by now you must be sharing the same thought.

I want to put on a pair of sneakers so I can run faster, too – away from Abby Joseph Cohen, the chief strategist for Goldman Sachs. She has been one of Wall Street’s most relentless bulls and like a sweet siren to me.

Her relentlessly optimistic pronouncements on the market kept my hopes up through the wildest swings of the Nasdaq Composite Index and the slow, painful hemorrhaging of the Dow Jones Industrial Average.

Now that the Nasdaq has given up almost all of the gains it’s posted since the beginning of 1999, I have begun to wonder just how repentant those stock market bulls have become.

You may recall that Ms. Cohen caused quite a dust-up in the market last March with her decision to reduce her recommended allocation in equities to 65%, from 70%, and sock the difference away in cash. It was enough to help push the market over the edge.

But only last October, she was still wildly bullish on stocks. In an interview with Fortune magazine, she had a one-word answer when asked if the bull market would continue.

“Absolutely,” she confidently replied.

These days I turn that word over and over in my head. Is there any way that “absolutely” can mean anything less than Webster’s definition of “unconditionally”?

It felt good when she said it back then. It was like a slap in the face. Don’t be silly, she scolded. This bull has legs. Of course, she was no longer predicting 20% to 30% gains in the Standard & Poor’s 500 stock index, but hey, I could have lived with her estimates of 10% to 12% growth.

Investors, she told the magazine, “were increasingly comfortable with the idea that 2001 will be a period of more economic and profit growth, and that will give us a rise in stock prices.”

Hello?

Forget the bull market. Now, all I say is, “Bull.” It’s like a bad dream.

As I said, as a buy-and-hold investor, I was feeling kind of lonely until I was pleasantly surprised to see that, as of last Tuesday, Ms. Cohen was still maintaining her 65% equity position. In fact, she’s not even the most bullish on stocks.

CSFB’s Tom Galvin is recommending a 90% position in stocks and no allocation in bonds, and Lehman Brothers’ Jeffrey Applegate has an 80% position in stocks, as does Morgan Stanley Dean Witter’s Peter Canelo.

Two weeks ago, in fact, Mr. Canelo was still urging investors to get aggressive.

Ms. Cohen was also still her famously bullish self. “We think the overall market is undervalued,” she told BusinessWeek magazine the same week. Her year-end target for the S&P 500 was 1,650, a 21% gain over recent levels.

The week before that, Ms. Cohen said in an appearance before the American Association of Publishers that despite the lowest consumer confidence in four years, there was no need to worry about the economy.

eye on consumers

The risk, she said, was that consumers “conjure up a story in which the economy is going into a dark, deep recession. We don’t think so.

“But we do know it is important that consumer confidence not erode further. We do not think that it will do so, but we all have to wait and see what happens,” she added.

So it comes down to this: You’ve just gotta believe.

So click your heels together three times and repeat after me: “I’m a long-term investor – nothing bothers me.”

Just keep your sneakers handy.

Keith Girard is the editor of InvestmentNews.

Related Topics: Just Thinking