The Day Ahead: In Search of Euphoria

 | Mar 07, 2013 | 8:45 AM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

jcp

The hot-button word in the market this week is euphoria. The bulls say euphoria is nowhere to be found. The bears try to win their argument by noting that the stock market is higher, which of course is a bad thing, as it's a step closer to ruin.

Those who pontificate on the topic of euphoria should open a dusty Merriam-Webster, because the stock market being at record levels does not immediately imply tulip-bulb mania. While I have been cautious during the Fed-fueled rally, I have certainly not been afraid to recommend a stock or two for fear of having the call blow back in my face. As long as the market can shake off bouts of weakness and hold near support, being invested is a wiser decision than sitting with hands in pockets, wondering if the masses are in a euphoric state of mind.

Want a great example of euphoria? Let's take a trip down memory lane with Alan Greenspan, since Wednesday was his 87th birthday. The Dow smashing through its record on Tuesday sent me on a mission to dig up a list of quotes that I made from October 2007. Boy, was I such a dweeb, talking gross margins and free cash flow. Who cares about that stuff? (I'm kidding, but I have evolved since those days!)

These quotes from prominent economists and government figures concern certain peaks in various stock exchanges. The goal is to compare them to what is being heard today in the attempt to determine if we have reached a maximum point of euphoria. Where there is a maximum point of euphoria, there is the potential for a swift pullback on the littlest of news.

The focal point here with Greenspan is his change in his long-held opinion on equity values. If you follow public finance folks like a hawk (I do), you should know their outward positions on stocks and other markets. On March 6, 2000 (his 74th birthday), Greenspan stated:

"Lofty equity values and declining prices of high-tech equipment have reduced the cost of capital. The fact that the capital spending boom is still going strong indicates that businesses continue to find a wide array of potential high-rate-of-return, productivity-enhancing investments. And I see nothing to suggest that these opportunities will peter out any time soon."

On March 10, 2000 ... the Nasdaq peaked!

Personal Note on Euphoria

While I was in a car ride to a TV appearance, a WCBS report came on the radio discussing the Dow record. The driver turned to me and said: 1.) The Dow is at a record, I still thought it was going lower from a couple years ago; and 2.) Will my weekly paycheck increase as the Dow is at a record? So has stock market fever intensified or even spread? Nope. If it did, this driver would be having grand visions on profiting from stocks, circa 1999.

J.C. Penney, the Truth

Since I have this pulpit to speak, why not voice serious displeasure with the two J.C. Penney (JCP) downgrades that hit the wires on Wednesday? Both Oppenheimer and Citigroup reiterated strongly their Buy ratings the day after the company's report of a quarterly loss sent the stock plummeting; I kept a Sell rating that has been held since January 2012. As someone who was on the sell side and busted my tail so that I could tell it straight in order to help people make money, let me say that these actions on J.C. Penney only give stock research that much worse of a name.

Research, in my opinion, is the pursuit of information that the market has overlooked, and then conveying bold, ahead-of-the-pack information to those who seek to build wealth. If one is going to stay up all night to build a 10,000-step, multi-factor model that they could brag on to the fella seeking an associate position on the team, why not complement it with a wicked combination of conviction and common sense?

Stay away from J.C. Penney's stock, plain and simple.  

Columnist Conversations

Lang:
We waited a bit on this one but still banked a nice winner. SOLD AAPL MAY 525 CALL AT 41.65 (in at 12, so 247%...
No slowdown in cyber attacks and using the pullback to add to the KEYW position at Thematic Growth
General Electric dipped down to key nearby support during the early stock sell off. GE filled the high v...
Apple (APPL) has been trading for over a year within the parameters of a set Fibonacci retracement levels. The...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.