At the Ingram’s celebration
of Kansas City’s Best of Business event on Sept. 16, Herb Kahn, the managing
partner of Bryan Cave, and I hatched a humble scheme. We called it “Bullish
on America.” On this, the day before the New York Stock Exchange reopened
for business, we proposed to reverse the expected crash of the market on the
following day. Using the power of the Internet, we would chain mail all of
the relevant people we could reach with the following message:
“I am one of an ever-growing coalition of concerned Americans who have
vowed to buy 100 shares of stock, any stock, on Sept. 17 or as soon as possible
thereafter. We have also vowed to avoid any other transactions that would
depress or panic the market.
“I ask that you do the same. If we cut and run, they win. Our strength
has always been our willingness to do the right thing at crunch time. Freely.
This is the part of our experience that unfree people do not understand. This
is one good, non-violent way to teach them a lesson.
“If you would like to participate in Bullish on America, rather than
forwarding please copy the following, paste and send to 10 significant people.”
A portfolio of American Insurance Group (AIG), Travelocity (TVLY) and Delta Airlines (DAL) stock purchased Sept. 17 would have increased in value by 20 percent a month later.
Not all defense stocks reacted equally on Sept. 17. A portfolio of Lockheed Martin (LMT), Raytheon (RTN) and Northrup Grumman (NOC) would have gained 8.7 percent in the next 30 days.
Keep The Faith
The response was heartening. A good percentage of the people we reached promised
to participate. Several radio stations called for interviews. And as to the
stock market, well it did what it was going to do. It yields to no man, let
alone two guys in Kansas City.
In our Canute-like endeavor to hold back the tides, we did retain our humility
on one key issue: we did not presume to tell people what to buy. And just
as well.
The conventional wisdom (CW) of the moment, which had had nearly a week to
fester, was bullish on energy, defense, and pharmaceuticals and positively
bearish on airlines, travel and leisure, cruise lines, and insurance companies.
To be sure, logic drives the conventional wisdom. But the real lesson I learned
is this: at least as important as logic is timing. The conventional wisdom
had exhausted itself by noon of Sept. 17. In other words, American markets
had more or less absorbed the massive shock to it system in three hours, and
then it was back to business as usual.
Those brave souls who received our missive and plunged into the market with
a patriotic inspiration to reverse the CW may have done pretty well by themselves
if they missed the first few hours of trading.
Consider, for instance, the fate of the Bullish on America crowd who did not
get in to make their purchases until the end of the day of Monday, Sept. 17,
the first day the market reopened.
For the sake of argument, let’s just say they bought 100 shares of American
Insurance Group, 100 shares of Delta, and 100 shares of Travelocity. This
would have meant an overall investment of $10,420. For the first month of
ownership, they might well have shied from checking the proverbial ticker
for fear of seeing just how much they had lost in this noble endeavor.
Energy stocks like Exxon (XOM), Shell (SC) and Duke Energy (DUK) reached a trough in the two weeks after the Sept. 17 reopening of the NYSE, but rebounded by Oct. 17.
Imagine their surprise, then, a month later to discover that they now owned
$12,553 worth of stock, an increase of more than 20 percent, quite possibly
the best month of investments these people ever made.
Compare their fate to the Me-First crowd who ignored our humble patriotic
plea. Let’s presume these investors followed the conventional wisdom
and bought 100 shares of the best performing defense stocks—Lockheed
Martin, Raytheon, and Northrup Grumman. Let us presume, too, that they did
not get in until the end of the day on Sept. 17.
These folks would have invested $17,025 and would have owned $18,517 worth
of stock, an increase of only 8.7 percent. What this means is that by the
end of the day on Sept. 17—in fact by mid-day on Sept. 17—the conventional
wisdom no longer had any real meaning. A new logic had replaced it. It’s
just that, like the war itself, no one was quite sure what it was.
I asked Gary Krings of Morgan Stanley—a firm whose workers escaped the
horror of the World Trade Center in miraculously high numbers—for some
insight on the paradoxical pattern of life post-Sept. 11. He responded that
“it demonstrates the tried and true principle of maintaining a diversified
portfolio across industries.”
Krings’ comment reinforces what we at Ingram’s have been
saying from day one of this brave new era: the best way to deal with threats
to our freedom is to live our economic lives as if those threats did not exist.