[...]... utterance The typical postwar economic cycle comes in stages: 1 2 The existence of the recession becomes apparent The Fed slashes interest rates and expands the money supply 20 THE NEW REALITY OF WALL STREET Chart 1-6 S&P 500 (January 1, 1979 to September 1, 1982) 145 140 135 130 125 120 115 110 105 100 95 Jan-79 May-79 Sep-79 Jan-80 May-80 Sep-80 Jan-81 May-81 Sep-81 Jan-82 May-82 Data courtesy of Bloomberg... 1955 to December 31, 1955) 48 46 44 42 40 38 36 34 Jan-55 Feb-55 Mar-55 Apr-55 May-55 Data courtesy of Bloomberg Associates Jun-55 Jul-55 Aug-55 Sep-55 Oct-55 Nov-55 Dec-55 12 THE NEW REALITY OF WALL STREET The market’s brief bout of panic produced the biggest stock market trading volume since 1933 The “reasoning” behind this emotional outburst was the fear that if Ike died, Vice President Nixon would... At the time, I was a portfolio strategist for Wertheim, a leading Wall Street research shop (I recall the anguish of that day vividly, 16 THE NEW REALITY OF WALL STREET CHART 1-4 S&P 500 (July 1, 1987 to December 31, 1987) 340 320 300 280 260 240 220 Jul-87 Aug-87 Sep-87 Oct-87 Nov-87 Dec-87 Data courtesy of Bloomberg Associates and I’ll come back to it in Chapter 7, in the section “Eurodollars and the. .. portion of their possessions, they didn’t give their wealth to the poor They gave it to a new class of new rich The beneficiaries, with exquisite timing, exercised stock options on companies they managed whose period of earnings gains was about to turn into a period of earnings collapse 1 Copyright © 2003 by The McGraw-Hill Companies, Inc Click here for Terms of Use 2 THE NEW REALITY OF WALL STREET. .. that the inflation phobia of the 1970s had been vanquished That was the sea change in belief that was needed for the unfolding of the 18-year disinflationary bull market in equities and the 20-year disinflationary bull market in bonds When Nasdaq lost more than three-quarters of its value, it was convincing evidence that the New Era euphoria of the 1990s had been crushed, tak- 22 THE NEW REALITY OF WALL. .. © 2003 by The McGraw-Hill Companies, Inc Click here for Terms of Use 10 THE NEW REALITY OF WALL STREET The Street is like lodge operator who avoids frightening customers by talking of bear risk The Street has euphemisms for falling markets: They begin as “pauses,” then become “pullbacks,” then “corrections.” The Street forbears saying “bear.” When Nasdaq was plunging in April 2000, the Street was... recalls the prescient observations of John Kenneth Galbraith, in The Atlantic Monthly of January 1987: 18 THE NEW REALITY OF WALL STREET History may not repeat itself, but some of its lessons are inescapable One is that in the world of high and confident finance little is ever really new The controlling fact is not the tendency to brilliant invention; the controlling fact is the shortness of public... economy.) CHART 1-2 S&P 500 (January 1, 1962 to December 31, 1962) 75 70 65 60 55 50 Jan-62 Feb-62 Mar-62 Apr-62 May-62 Data courtesy of Bloomberg Associates Jun-62 Jul-62 Aug-62 Sep-62 Oct-62 Nov-62 Dec-62 A TAXONOMY OF BEARS 13 Within days, U.S Steel boosted steel prices 3.5 percent, which was swiftly matched by most other steel companies Kennedy’s response was to unleash the FBI on the industry, sending... but it was not the Beginning of Something Big 14 THE NEW REALITY OF WALL STREET CHART 1-3 Ling-Temco-Vought (June 1964 to September 30, 1969) 200 150 100 50 0 10/7 1965 1966 1967 1968 1969 Data courtesy of Bloomberg Associates That conglomerates could have threatened the American business establishment and become the glamour stocks of Wall Street would seem absurd to today’s generation of investors,... economy—than most members of the Wall Street old-money elite He was the author of the tax cut that got the economy moving, and his intellectual rationale for it would be later used by Ronald Reagan in gaining congressional approval for his more ambitious tax cuts, the key component of the “Reagan Revolution.” Although leading Wall Street voices warned of a major new bear market, it was, of course, a splendid . alt="" THE NEW REALITY OF WALL STREET This page intentionally left blank. THE NEW REALITY OF WALL STREET An Investor’s Survival Guide to Triple Waterfalls and Other Stock Market Perils Donald. without the prior written permission of the publisher. 0-0 7-1 4363 1-6 The material in this eBook also appears in the print version of this title: 0-0 7-1 4175 3-2 . All trademarks are trademarks of their. millions of people also divested themselves of all or a substantial portion of their possessions, they didn’t give their wealth to the poor. They gave it to a new class of new rich. The beneficiaries,