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Letter to the Editor
This article originally appeared in the August 2002 Issue of INSIGHT
Do Bears Ride Rollercoasters?
If last month we were seeing our glass half empty, these last few days must make us think that the whole pitcher spilled. Well, as the saying goes, there’s no use crying over spilled milk. Things are definitely jittery in the Market this month, and my advice is to carry neither glasses nor pitchers on rollercoasters!
The bears, and everyone else in the Market, were surely hanging on with both paws while the Dow Jones coaster went up and down some big hills and flew around the turns. Within one 24-hour period, the Dow experienced its biggest rally in 15 years AND its largest one-day drop in the last five years.
The animals to watch out for are not bears or bulls - they’re wolves, among them the notorious Enron executives and other high profile corporate higher-ups, under scrutiny for corporate accountability, highly questionable accounting practices, and general ravaging of both their companies and their shareholders.
All hope is certainly not lost, by any means. As I write, the situation seems to be calming down.
A big bump for me in July was caused by one of our most reliable stocks, Automatic Data Processing. After issuing a warning of slower profit growth for the rest of 2002, ADP watched its stock value plunge more than 22 percent, erasing nearly $6 billion in its market value. The company, the nation’s largest payroll services provider, has been cutting costs diligently, but evidently not enough to overcome the problems caused by rising unemployment and corporate bank-ruptcies in the slowing economy.
Based upon ADP’s steady history thus far, I am betting that the company will emerge better than ever. By then I expect I’ll be recovered from that "left my stomach on that last hill" sensation!
Collision Repair Industry paint manufacturers are hanging in there pretty well, with only DuPont down a bit and the others showing small gains. In the current Market, where losers outpaced gainers five to one several days in July, these stocks are really holding their own.
CCC Information Systems is still a big star in our industry stocks, and may even double in stock value by year’s end.
Employees who, up until now, had been counting on early and comfortable retirements, are discovering that they will have to add several years onto their careers to make up for the hits many investment funds have taken this year. All of us would be wise to do careful readings of investment portfolio statements. Now is the time to get a handle on the best way to invest, considering our own age, income, and retirement goals, with a reasonable dose of good common sense.
No one ever said the Stock Market is a tranquil little merry-go-round!
-Charles Baker-
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