Sunday, August 12, 2007

Ben Bernanke at the Starbucks

What a summer.

I just came from Broadway on the Beach, a new-made boardwalk/mall/lake near my mother in law's in Myrtle Beach. The boy had fun playing ski-ball, feeding the fish, eating funnel cake and going on the pirate ship. And I enjoyed a nice break without thinking about the markets.

But he's in bed, so here we go. First, where the heck are we?

I mean, what are we to make of the markets now, and what direction should we take for the future?

Well, we're in a period of market volatility, obviously. I remember reading awhile ago that watching the mortgage market fiasco unfold would be like watching a train wreck in slow motion.

That's precisely what it has been like this summer, no?

The big thing now is whether Bernanke will lower interest rates. I believe he will not - not at the next Fed meeting anyway.

Despite being volatile, the broad market - as measured by the S&P - is still near an all-time high. It's probably somewhat normal for a market smashing through to new highs to make people jittery.

The happiest guys in the world right now are the doomsayers. With every "see I told you so" they finally get the rush of being right - not about the future this time, but about the present!

Must be a refreshing change for them.

But alas, don't expect this far-ranging pullback to last forever. These poor devils will have to resume their auld post as "guys who are so smart they are always right eventually."

I think Bernanke's handling the Fed just right, by the way. He is apparently a non-interventionist and far less the egomaniac than his predecessor - the hang-dog puppet master Greenspan.

Greenspan was like the kid who got bored with his toys too easily - so eventually he kept trading them in for bigger and neater toys and finally received a whole economy to play with - and made the most of it. He even tries to play with his old toy now, long after it has already been handed down to his little brother. And each time he does, something bad happens because it is violating nature to play with your little brother's toys.

My point is this: Let's not get too carried away. Bernanke's playing it cool not because he's in denial - I really don't think there's anything fundamentally new going on with the economy or the markets that would require us to flee. The credit crunch is worth being concerned about obviously - and we'll monitor closely.

But I learned from a master investor, Alex Green at The Oxford Club, that market timing is - in the end - a sucker's game. We won't do that with this portfolio then.

In fact, this pandemonium will certainly allow us to find some bargains - some stocks that get mauled for no good reason - and we'll try to pounce on them. Actually we might have already found such a stock: Starbucks.

Last week amid the "Home by the Sea"-like spookiness (remember that old Genesis song?) that was the Wall Street scene, Starbucks snuck up a few points. As LDK nosedived, good old Bucks was clawing its way by inches, further away from our TS. The stock has been buggered by the markets for so long, it's ridiculous.

There is no reason this rapidly expanding, well run and strong company should have been tarred and feathered for the better part of this year - other than some garden-variety profit taking, and perhaps some hedge funds exploding like Dave Barry cows on the horizon.

Earnings are growing, expansion into the Chinese and world markets is proceeding as expected. And once again, regardless of how the markets get, we all need our caffeine do we not?

Already Starbucks is beating the market since our entry. My bet is that this ride is just beginning.

Good investing (and get out there and play with your kids, or your dog, if you got 'em),


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