economy

THE PRICE OF TULIPS

When I started trading in 1967 as an OTC Market Maker I would read anything about the stock market that I can get my hands on: Business Week, Forbes and of course The wall St. Journal and The New York Times.

I remember one Sunday going to my favorite local candy store in Rego Park, Queens N.Y., I would go there only because they had a large selection of newspaper and magazines, when I saw something called “Barron’s”. The front page had a column called “Up and Down Wall Street.” I had to try it at least once and the title read “The Price of Tulips” it cost only 75 cents at that time. Believe or not!

Well, it was the greatest lessons on things being underpriced and overpriced, plus a good lesson on Supply and Demand. It helped me to identify early The Dot.com bubble and the Real Estate bubble.

This weekend on the net CNBC had both Bullish and Bearish articles. The Bullish article claimed that the price/earnings ratio existing today where a little high but it says “Don’t sell stocks; the Bull Market is going higher besides it is the only game in town.”

What’s so bad about staying in cash even if it’s just for a short period? And what about the lack of quality of earnings. Most come from cost cutting, like selling off or closing loosing divisions resulting in large layoffs.

The Bearish article stated it that retail investor selling saw a nice increase in the last days of June and the shortened first week of July.

Do not underestimate the retail crowd.

The only Stock Market newsletter I ever bother reading was the “Professional Tape Reader”, the first couple of pages had a lot of charts with comments. The last page had about 20 internal market indicators. One of them was the odd/lot purchase to sales ratio. For those too young to know, an odd/lot is anything less than 100 shares.

Yes, most retail investors cannot afford to buy 100 shares of most stocks. Believe or not! But what amazed me was how often the little guy was right.

Let’s see if last week’s heavier retail selling is telling us something.

Thank you Stan Weinstein for teaching me early in my carrier the importance of charts and market internals. (Just remember the “Dow” is only 30 stocks)

I miss Alan Abelson.

And I wish my kids would call me more often.

Love from Peru.

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One thought on “THE PRICE OF TULIPS

  1. Thomas Isenberg says:

    Not bad Frank.  Nice and homey but with good commentary and back up. Your odd-lot indicator and calling it not a contrary indicator but instead a good direct one is a nice touch as it definitely goes against the common pundit interpretation of that indicator and I haven’t heard it referred to in quite a while anyway.  That’s how reputations are made, namely by spotting the straw on the donkey’s back that will come loose and bring it all down  (probably a few donkeys in Peru there or do you have cars by now?  LOL.)   Clean up the spelling errors.  Then send it to Gregg Ettin if you haven’t already.  Your letter has the makings of a Richard Russell type letter (he’s in his late 80’s or early 90’s now and still publishes).   Old Timer anecdotes are nice and sometimes can make up for bad market calls (not that you’ve ever made any of those).  As my Uncle Murray used to say, “You may not always be right, but you’re never wrong.”  Let’s just hope the Dow doesn’t go much higher than 17,000 and destroy your call (though I hope it does for the sake of my stocks, though I am selling as per your advice and for risk control).  Have a nice day.  Tom

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