When no one cares any longer how the market is doing, it's time to buy back in

By DAVID MOON, Moon Capital Management
February 24, 2002

A couple of years ago, I walked into a local sports bar ' Julios's Between the Buns (I love the name and the pizza) ' and half of the televisions in the place were tuned to stock market coverage on CNBC. That should have been my first clue that the stock market was grossly overvalued. When Willie, the downtown shoeshine guy, asked me about the stock market, that was my second clue. When two-thirds of my UT students wanted to be investment bankers, even though they didn't know what investment banking actually was, I should have sold short the S&P 500.

I wonder if we are beginning to see a bit of that change right now?

I thought about it this week as I watched the CNBC weather guy, Joe Witte, interviewing Tony the Tiger (of Kellogg Frosted Flakes fame) from the streets of mid-town Manhattan, a la the Today Show and Willard Scott. Later that week, the CNBC morning show, Wake-up Call ' the self described 'first news in business' ' interviewed some new teenybopper boy band whose members (this is the amazing part) actually play their own instruments! These guys are going to be bigger than the Back Street Boys and 'N-Sync combined. A week ago, I thought I had inadvertently stumbled to E! Entertainment, when CNBC featured a fashion show and a live update of the Oscar nomination announcements. I kept waiting for Joan Rivers to appear. The in-depth CNBC piece about the Westminster Dog Show was the straw that broke the poodle's back.

What happened to the stocks? Where are the discussions about takeovers and interest rates? How can they seriously expect me to watch an interview with legendary fund manager Peter Lynch, if I have to wade through stories about a new, more realistic, heavy set, Barbie-type doll first? It's like eating breakfast at Shoney's, hoping someone will slip some filet mignon and lobster tail on the buffet bar, in between the French toast sticks and fried mystery meat chunks.

The reason for CNBC's change of focus is simple: there are fewer people glued to the stock ticker these days.

Last month, the ratings for Fox News' morning show increased 109 percent from a year earlier. CNN increased 51 percent. But CNBC experienced a 23 percent decline. Unless your are a General Electric shareholder (GE owns CNBC, as well as NBC, MSNBC and a bunch of other stuff), this is a good sign. Stocks will be their cheapest when people no longer care about stocks. Remember, the opposite of love is not hate; it is indifference. The same is true with the stock market. The opposite of irrational exuberance is not panic. It is investor capitulation. As long as CNBC is re-targeting their supposed news shows at a lower common (investment) denominator, we are moving in the right direction.

This is the flip side of what I used to call 'the Bryant Gumbel indicator.' The Gumbel indicator worked like this: by the time any investment idea or trend was so popular that it was being discussed or touted on the Today Show by Bryant Gumbel, it was too late. The profit potential was already gone. (I guess I will have to rename this the 'Matt and Katie indicator.')

I cannot forget that P/E ratios are still grossly high. It is hard to imagine that interest rates have any direction to go but up. The economy may be coming out of recession, but excessive consumer debt was not corrected in this recession and will eventually deliver another wallop to the economy. These real threats to the economy and the stock market will not easily disappear.

But as long as CNBC is interviewing dog handlers instead of goof ball internet mutual fund managers, we are moving in the right direction.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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