September 30, 2008


Yes, stock prices seemingly dropped off a cliff yesterday. But please remember that, unless you are selling, your losses are only on paper.

In fact, relatively few shares traded hands. Average daily volume on the New York Stock Exchange is 3.6 billion shares. Yesterday, only 1.5 billion shares were sold.

This is basic supply and demand: when there are more sellers than buyers, prices go down. When there are more buyers than sellers, prices go up. Right now, there are few buyers for stocks, so prices are going down.

If you're investing in a 401(k), don't panic, just stick with it. Dollar cost averaging is one of the most efficient ways to invest. Your 401(k) dollars will buy more now than they did last year.

If you're interested in getting into the stock market but don't trust yourself to pick companies that will survive the turmoil and come out ahead in five or ten years—-whatever your investment horizon is--then stick with ETFs and other mutual funds.

As an aside: I find it interesting that, although exchange-tranded funds, or ETFs, and bargain-priced financials dominated the high-volume list in the last few weeks, that changed yesterday. Yesterday, what few buyers were on the floor stayed away from financial stocks. Instead, they took interest in technology, with six of the top ten most-traded stocks being tech firms. Apple, Microsoft and Cisco all traded at higher-than-average volume. So there are some buyers out there. They are just being very picky, and rightly so.

September 16, 2008

Letting the market do its job

I was surprised recently to hear my favorite Republican stalwart declare that someone needed to stop all those speculators who were driving up the price of oil.

Wait, I said. What about the free market economy? What about "laissez-faire?"

While he admitted the need for government to stay out of business as much as possible, he observed that there was obviously something wrong with $150-a-barrel oil, because the stuff is not intrinsically worth that much more than it was before.

And he's right. Like the housing bubble, the dot-com bubble and, indeed, the 17th-century tulip bubble, the oil bubble was not inflated by true market forces. It was inflated by greed and wishful thinking.

Yesterday, Lehman Brothers filed for chapter 11 bankruptcy protection, the largest bankruptcy filing on record. Lehman is an investment bank, and it was among the big institutional investors behind the run-up in commodities prices during the last 12 months. Another of those investors, Merrill Lynch, was bought by Bank of America in a $50 billion deal.

Crude oil futures for October, meanwhile, have dropped to less than $93 a barrel.

Connection? Oh, yeah. That, my friends, is the free market in action.

September 15, 2008

Powerful insight

William Falk, the editor of The Week, combs through hundreds of news sources for each weekly issue of The Week. So, he says, he has a grasp of the usual party positions.

Or so he thought. But, he notes, "Conservative pundits who once disdained feminism are lauding Sarah Palin’s heroism in pursuing a demanding career while raising five kids. Liberal feminists, meanwhile, are suggesting that because of her unseemly ambition, Palin would be either an irresponsible absentee mom or a distracted vice president."

He also notes the conservative/liberal flip-flopping relative to teen pregnancy, in light of Bristol Palin as compared with Jamie Lynn Spears.

"One day," Falk writes, "Republicans say a lack of political experience is a fatal flaw; Democrats say it frees you to see things anew. Now it’s the other way around. It’s as if these strongly voiced opinions were simply debating points, chosen because they suited the circumstances—and candidates—of the moment."

In The Week's print edition, Falk has only a few inches to work with. In that small space, he makes the most concise, cogent observation about partisan posturing I have ever seen.

At the moment, the full editorial is viewable only by subscribers. It looks as if they free up the print edition content to non-subscribers after 90 days.

September 12, 2008

Straighter talk than most people care to hear

Because I do a daily stock report on the radio, I get asked questions like "can't the president or that Fed guy do something about the economy?"

People are not pleased when my answer is "no."

Neither the president nor the Fed chairman can solve our woes with the stroke of a pen. Nor should they.

The free market isn't perfect, but I believe history has shown that it's better than the alternatives.

The free market may look pretty ugly right now, but that's the result of individuals and corporations over-reaching themselves.

The free market, generally speaking, repairs itself over the long term.

Bob Barr, the Libertarian candidate for president, brings this issue up in a press release issued this morning. He says he will not promise economic prosperity. "Presidents do not control the economy and could not be trusted to do so even if they had that ability," he writes.

Barr's observations on the role of the federal government are so cogent, I'm going to excerpt several of them for you:

“I won’t promise to ‘invest’ in new energy technologies. That is the job of the private sector. The government has no money of its own and has an awful record in choosing economic ‘winners’ and ‘losers.’ ”

“I would not, as president, ensure that every child has an education, make sure every American has health insurance, or provide job retraining for every worker. No president can honestly make those guarantees. And none of these are the responsibility of the federal government.”

“The president takes an oath to preserve, protect, and defend the Constitution. ... The president’s job is not to run America, or the American economy, or any particular industry. The president’s job is to be the chief executive of the federal government."

Barr's position, and that of many of the country's founders, is that the federal government's role should be limited to truly national matters, e.g. foreign policy, defense, international trade and interstate commerce.

Remember that, at the founding of our country, the union was seen as a confederation of independent rebublics. Right up to and through the Civil War, a subject of frequent debate was whether one's primary allegiance was to one's state or to the union.

The Libertarian party seems to be taking the old anti-federalist stance, calling to minimize the federal government and leave most matters to the states.

As for myself, I'm rather a Hamiltonian Federalist. But I do agree that some matters—education and health care are among them—cannot be solved by the free market. I also agree, as Mitt Romney pointed out repeatedly, that states need more latitude in dealing with such matters.

The federal government cannot remain totally aloof from adressing problems in the economy, health care, and so on. But the electorate would do well to remember that the federal government's power in such matters is limited, and rightly so.

September 8, 2008

Fun with homophones

English is so flexible, it can be bent until it breaks.

One common breakage occurs when various homophones—words that sound the same but are spelled differently and mean different things—have to be written down. Hair/hare, there/their … you get the idea.

People often know what to say, and if they said it, there would be no problem. But if they write it down, and put the wrong spelling, it's an error.

Most recently, I got a congratulatory message from a co-worker that said "yea."

I'm fairly certain she meant "yay," because she finished with an exclamation point instead of "…though I walk through the valley…"

Yea = adv. yes (archaic)
Yay = interj. an exclamation of approval.

These are related, obviously, since they both indicate approval. But the first is formal, and only connotes agreement or affirmation. The second connotes excitement. Cheerleaders do not jump in the air and yell "yea, team." They yell "yay, team!"

A related word, "yeah," is pronounced differently but also connotes agreement.

Yeah, grammar geeks really do fret over whether you mean yay! or yea.

September 4, 2008

Spelling lesson from Pogo

The Republican Party has been getting on my nerves a bit this week, blasting out more than a dozen press releases a day from the convention, none of which are relevant to my day job.

But last night's missive "Remarks by Alaska Governor Sarah Palin" was a delight, and not just because of her amiable anecdotes about taking Alaska's "good-ol' boys network*" down a peg or two.

In addressing energy independence, her prepared text stated that a McCain/Palin administration would "…build more new-clear plants…." Later, there's a reference to "new-clear weapons."

Thank you, thank you, to the speechwriter clever enough to spell "nuclear" phonetically. Apparently I am not the only person sick to death of hearing people talk about "nuke-ya-lur" power.

I suppose that means I'm also not the only one who remembers the Walt Kelly comic Pogo, in which the denizens of the Okefenokee Swamp knew how to pronounce "nuclear" because their creator spelled it "new clear."

This mnemonic of Mr. Kelly's was well-used in Ms. Palin's text -- except that someone really should have corrected the phonetic version before it went to the media.

Oh, well. I appreciated the chance to reminisce about good ol' Pogo.

* — For a discussion about whether "good-ol' boys network" is an apt phrase, see Bill Walsh's Blogslot.