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David Callaway
May 10, 2011, 12:01 a.m. EDT
By David Callaway, MarketWatch
SAN FRANCISCO (MarketWatch) "” If Osama bin Laden could see us now.
Still dead after more than a week, the former baddest man on the planet would certainly be disappointed that the news of his discovery and swift execution after 10 years brought only a yawn from investors. Indeed, U.S. stocks rose for only about two hours in reaction on May 2.
While bin Laden coverage dominated news headlines all last week, investors realized right away what the Middle East had already decided this Arab Spring: that his time had passed. The world moves much faster today than it did in September 2001. A reclusive madman can't command the attention with occasional video outbursts that he could 10 years ago "” especially without an Internet connection and Twitter feed.
The sad, violent demise of the once-terrifying bogeyman was simply the latest of a series of wild news stories that could have captured the attention of investors but didn't. The Japanese earthquake, the revolutions in the Middle East and North Africa, the new war in Libya. All these would have been enough at one point to ignite market interest. What's changed?
Simply put, the investing world has already lived through the biggest scare of most of our lifetimes. With the dark days of the global financial crisis, with its fears of economic collapse around the world, now in the rear-view mirror, it's going to take more than turmoil in Egypt to shake investors intent on getting some of their money back.
"If you look back over the first quarter and you look at what happened in the Middle East, in Japan, and Europe, you say, gee, those things are bad things," said Marshall Berol, co-manager of the Encompass Fund, here in San Francisco. "Those are not going to be good for the economy or the stock market, and it didn't turn out to be the case."
Berol joined me last month for a MarketWatch live event for readers titled "Investing Insights: Global Investing in a Post-Crisis World," along with Michael Cuggino, president and portfolio manager of The Permanent Portfolio Funds, and MarketWatch blogger and newsletter writer Cody Willard.
All three were bulls as of that early April evening, though with different strategies. Berol and Cuggino were both firmly on the gold train, and indeed rode it higher for several more weeks to new records until the downturn in the past few days.
Willard is a gold bear, and hates financial stocks, alternative energy stocks and any other company that relies on government capital for help. His theory is that another crisis is coming that could be worse. Still, he's a bull on tech stocks and believes, like his colleagues on the panel, that this could be a good year for stocks.
"Any industry that is dependent on government subsidies for profits, for sustaining their business models," is in danger, Willard said in a lively debate about financial reform after the crisis.
For his part, Cuggino had a telling message about gold that investors should heed even now. Describing a period of weakness for gold in January, he said "it corrected 100 points and everybody acted like oh, the big gold run is over. They just don't know gold. Gold can go up a couple of hundred points and down again and nobody knows the difference. That's just what it does."
The one thing that all three panelists had in common, aside from their relative bullishness, was the conviction that money can be made in most any market climate, as long as investors play the main trends and ignore the noise from the increasingly speeding news cycle.
Not exactly music to an online news editor's ears, but as a basic investment strategy, it makes sense.
The U.S. dollar has been falling for 12 years, since George Bush took office for his first term and before bin Laden and al Qaeda struck. Gold rose pretty much all the same time, quintupling in value as the dollar became less attractive. Stocks, in general, fell for three years after the Internet bubble collapsed, then rose for five, then fell viciously for one-and-a-half, then rose for the past two.
Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl AAPL +0.27% shares rose for five of the past six years while Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft MSFT -0.15% shares, Cisco Systems Inc. /quotes/comstock/15*!csco/quotes/nls/csco CSCO +0.23% shares, and the Nasdaq Composite Index /quotes/comstock/10y!i:comp COMP +0.55% for that matter, banged around wildly but essentially went nowhere. Investors were more enamored by bonds and commodities.
Despite the increasing pace of headlines and global news events made more frantic by 24/7 coverage across many new mediums, investment trends tend to operate more slowly.
To be sure, there are always opportunities for smart investors. Berol, for instance, a big fan of uranium, used the selloff in nuclear power stocks after the Japanese quake to buy more shares of various uranium miners he likes. Cody picked up a few more tech stocks.
But macro trends still dictate the market and unless one really believes that a second leg of massive bank failures and derivatives losses is about to strike, based on the U.S. deficit or soaring oil prices or whatever, then the worst of the financial crisis is indeed behind us.
All three panelists said they expect to celebrate a third anniversary of the current bull market in March 2012, despite the latest swings this week, next week or this summer. Those are bets on a continued economic recovery in the U.S. and globally, and the pretty certain expectations that bin Laden will remain in hell for the long term.
David Callaway is editor-in-chief of MarketWatch.
"Where to invest in a post-crisis world: The financial crisis is over. Japan's earthquake, the Middle East r... http://on.mktw.net/jtwwlF" 11:51 p.m. EDT, May 9, 2011 from dcallaway
"Tech and bank stocks on collision course: The tech-stock rally on earnings this week removed a major obstac... http://on.mktw.net/hTlTBF" 11:53 p.m. EDT, April 20, 2011 from dcallaway
"Best Nasdaq day this year. 3,000 for the first time in a decade just around the corner. http://bit.ly/ef63ez" 5:31 p.m. EDT, April 20, 2011 from dcallaway
"What tech bubble? Tech earnings surprisingly strong last quarter." 9:11 a.m. EDT, April 20, 2011 from dcallaway
David Callaway is editor-in-chief of MarketWatch, responsible for the global news coverage of 100 journalists in 12 bureaus in the U.S., Europe and Asia. A financial journalist for more than 20 years, Callaway has worked for Bloomberg News, the Boston Herald, and assorted television and cable stations as a reporter, columnist and commentator.
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