About this time last year, “The King of Queens,” the CBS sit-com, aired an episode about a bungled stock market foray by the two lead characters, a parcel service delivery man and his wife, a legal secretary.
She convinced him to use his holiday bonus to play the market. They spent Christmas arguing about it. Whipsawed emotionally by every Internet report about their chosen stock, they ended up buying high and selling low.
The Internet has proven a mixed blessing, providing a continuous and voluminous barrage of information that cannot, by itself, substitute for sound judgment. It seems to have overstimulated or overwhelmed many, creating a collective mind-set of impatience about corporate performance.
For whatever combination of reasons, including Alan Greenspan and the peace dividend, the past eight years have been a “wonderful anomaly,” an economist for The Yankee Group said recently. Deregulation of the wireless industry began right smack dab in the middle of this, and telecommunications certainly contributed to it.
Like any gold rush, this one had to end, but I believe there can be some silver linings. The capital markets have taken on the demeanor of the Grinch this season. Still, to my way of thinking, the real problem is an affluence hangover, the result of too much money, not too little. Hoards of inexperienced people poured money into everything, then fled with equal lack of discrimination between sound and unsound companies.
I have read that humbled individual investors are starting to return for guidance to professionals better able to transform raw information into useful knowledge about companies. I have heard investor relations professionals and older generations of securities analysts call for a return to the days not so long ago when forecasting and meeting a narrow range of quarterly share price estimates was considered normal and acceptable. Today, a penny off and you get thrashed. Worse yet, there goes the whole sector.
This breather, reality check and attitude adjustment are well in order after such a long and exuberant sprint.
