Macro Economics
Another August

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By sonnypage
August 21, 2009

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In August, 1982, I was a rookie stockbroker with Merrill Lynch. I had been in the business only a few months. Wikipedia reminds me that the great bull market began that month from a bottom of 777 on August 12th. Actually I have only the faintest memories of that August itself but what I do remember very clearly was going to lunch with two very senior brokers in early September, right after Labor Day. These were two of the guys that I thought could walk on water so for them to ask me to lunch made a very vivid impression.

We walked down the street and around the corner to a very popular deli. I remember that I was feeling pretty good. All the stocks I had been recommending to the few clients I had as a rookie were going up, my clients were making money. What stands out in my memory of that lunch was those two brokers, one of them in particular, cautioning me. They had heard me, out in the "bullpen", calling clients and urging them to buy stock. It's "only a bear market rally, Sonny, just be careful". We were in the worst economic contraction since the great depression and they rattled off all the reasons it was not going to get better any time soon. Public and professional opinion at the time was almost uniformly deeply negative.

Wikipedia reminds me that from that August 12th, 1982 low of 777 on the DJIA the market was up 35% by year end and over 1200 by the following summer. I recall a long sideways consolidation in 83-84 but then a high of 2800 by August, 2007, before that year's October crash.

They say that bull markets "climb a wall of worry" and if that is true, this should be one heck of a bull market. We truly have much to worry about. I am all in, 100% long, all in the materials and hard commodities I prefer. As is true for 1982, we will be able to look back in years to come and clearly see what we cannot see now, which is why we will go up.