September Song For A Snowbird Stock Market

(DAYTONA BEACH, FL) - The lament that Walter Huston commissioned for the 1938 Broadway musical "Knickerbocker Holiday," and which Sinatra crooned as late as 1946, is an apt metaphor for a stock market laboring out of Labor Day and a foreshortened hurricane season. The factors that have been dragging on the Dow, and the portents – according to a growing number of portenders – signal that the half-assed honeymoon since Obama's first State of the Union speech is being pelted with autumn leaves falling in the narrow canyon east of Trinity Church. As the leaves turn to flame, it's evident that program traders and hedge funders, with heavy hearts, not to mention even heavier derivative inventories, "haven't got time for that waiting game."

September in the "mocket," malheureusement, more often than not represents not only a hangover from the dog days of summer but a breathing space before the thanksgiving-Christmas-New Year's hustle, featuring a Santa Claus rally, a retail bonanza, ecstatic car dealers and fund managers' year-end balancing acts. All of which climaxes that joyous season, despite the fact that, as Chico Marx noted, "there is no Sanity Clause."

It's a commonplace that on average September is the market's cruelest month. Over the past 50 years or so, the three leading indices - The Dow, the S & P 500 and the Nasdaq - have each averaged at least a 1% decline. Lots of reasons.

In the summer, most investors defer selling because they're either at the beach or too hot to care, so they tend to reduce portfolios to pay the bills until they're back on eight-to-five. Many mutual fund managers clear the decks in September for a fiscal year-end. And frazzled parents after Labor Day are in need of cash to finance the back-to-school equipping of every grade-schooler with the mandatory luxury backpack, cell phone, Kindle, other indispensable hand-held devices, and of course a credit card. Ergo, selling pressure in the financial markets is generally unconfined.

This year we can add the malaise of a world out of joint, and when uncertainty is rampant, people clutch at cash. Oil is stagnating a tinch over 100, gold is stirring out of its 18-month slumber, and the ink-stained wretches have something with which to stuff their news cycle. China's economy is a near-tragedy, growing at less than 10%, the Euro community is a mess, see-sawing between austerity and inflation, and here in la-la land, earnest conservative economists (heedless of voices such as Paul Krugman's crying in the wilderness) are urging spending cuts in useless frivolities like safety, education and health care, with a view to making the grudging recovery even grudgier.

And coming up of course there looms the almost-annual exercise by cautious conservatives in Congress not to pay our bills and therefore produce the fiscal precipice that the late Alan Abelson metaphored as a venue for right-wing lemmings. In other words, if enough lemons are lobbed across the aisle in Congress, the result is sure to be lemmingade, rather than real aid, wherever it's required, in job creation, infrastructure and the sub-millionaire sector still deprived of a piece of the action.

Earlier, in the course of Greece's economic Thermopylae, the people were demonstrating in the streets of Athens against the imposition of austerity measures, proving that sometimes the mob is right. The macroeconomic savants are still duking it out over that one, with recent gems such as the proposal to allow banks to pilfer their depositors in order to achieve a government-friendly bail-in. Like a Vegas casino owner wondering whether to cut off the vagrant's comps and credit line or to take him on board as a pit boss.

On this side of the polluted Atlantic, a preponderance of Senators and savvy right-wing think tanks are champing at big government while realists point out that it was big banks that created the problem, and continue to – at least until we dig ourselves out of a tranche that's too big to dig any deeper.

The well-regarded Liscio Report fortunately agreed with the Congressional Budget Office, another island of sanity in Washington's mainstream of spending aversion (except on billion-dollar defense against chimeras and much-needed corporate subsidies), when what is still indicated is much more spending. The Liscio Report concluded: “There's no need to lurch toward balance overnight... with the U.S. economy still vulnerable and much of the outside world in even worse shape.”

It's heartening to hear more think-alikes like Paul Krugman, the Prophet of Princeton.

Fortunately, Krugman has this habit of not writing like a professor. He understands that access to a good job with decent wages is the most important measure of prosperity for 99% of the population. He sees that a lack of demand for products and services freezes the mild recovery at a time when record bank profitability and corporate cash reserves are going boots and saddles.

Which of course is one of the current economic enigmas, the growing divide between what Al Capp used to describe as General Bullmoose versus the ordinary Shmoos. One of the factors accounting for the rich getting richer and the poor getting pregnant is the growing percentage that the financial sector occupies in the total economy. This mushrooming trend has been evident since World War II, but has accelerated over the past three decades. The financial stats are showing modest improvement, while growth in the economy as a whole has slowed to a walk.

Since the big bail-out, the banks, instead of reducing toxic inventories and expanding consumer lending - which was supposed to be the deal - have profited by the big de-reg by turning Wall Street into a casino.

Meanwhile, with all markets heading south instead of leading to Rome, Barcelona or Athens, there are still a few good playthings to attract investors. Warren Buffett has observed that the stupidest reason to buy a stock is because it is going up. Au contraire, I prefer to heed Rudyard Kipling rather than Buffett, Sir John Templeton or Suze Ormond: Kipling, in his classic "If," didn't say, but perhaps should have, that the best time to buy is when all about you are losing their shirts.

Diamonds are currently a plunger's best friend. And, as the late night hosts DIDN"T sign off during World War II but should have: “Bye-bye; buy gold.”

If the precipice is nigh for us lemmings, hard metal could produce the softest landing.

Bill Annett grew up a writing brat; his father, Ross Annett, at a time when Scott Fitzgerald and P.G. Wodehouse were regular contributors, wrote the longest series of short stories in the Saturday Evening Post's history, with the sole exception of the unsinkable Tugboat Annie.

At 18, Bill's first short story was included in the anthology “Canadian Short Stories.” Alarmed, his father enrolled Bill in law school in Manitoba to ensure his going straight. For a time, it worked, although Bill did an arabesque into an English major, followed, logically, by corporation finance, investment banking and business administration at NYU and the Wharton School. He added G.I. education in the Army's CID at Fort Dix, New Jersey during the Korean altercation.

He also contributed to The American Banker and Venture in New York, INC. in Boston, the International Mining Journal in London, Hong Kong Business, Financial Times and Financial Post in Toronto.

Bill has written six books, including a page-turner on mutual funds, a send-up on the securities industry, three corporate histories and a novel, the latter no doubt inspired by his current occupation in Daytona Beach as a law-abiding beach comber.