Just like the Yankees, this market refuses to give up.  Down two games to none, the Yankees faced the possibility of a sweep by the upstart Arizona Diamondbacks as they came back to New York for game three of the World Series.  But with faith, determination, and more than a little luck, they homered their way back into the series, winning all three of their games in front of the home crowd.  In the last two games, the Yank hitters overcame the Diamondbacks in the ninth innings as they capitalized on the weakness of Arizona’s relief pitcher staff. 

One of the rituals of autumn is setting back our clocks to return to standard time (2:00 am this Sunday morning).  That extra hour of sleep in the midst of such a busy time is welcome indeed.  Fall, so often, also brings a falling stock market.  The tragedies of September moved that event forward this year. 

Wednesday’s market opened with much promise.  Our president said there were indications that our efforts against the Taliban and Al Qaeda were showing success.  IBM and several other notable companies reported earnings that were better than expectations.  The DOW and NASDAQ opened up 100 and 30 points, respectively, above their Tuesday close.  Investors seemed to ignore the news that terrorists had crossed yet another line by assassinating Israeli Tourism Minister Rehavam Ze’evi outside his hotel room.  Later in the morning, though, the weight of two events finally began to drive the resilient market down.  The first was a lack of financial inspiration from Mr. Greenspan followed by a steady flow of new anthrax letters cropping up in places of high visibility. 

“If you look at life one way, there is always cause for alarm.”  -Elizabeth Bowen, Irish novelist That the economy is ailing is no surprise to anyone.  Unemployment statistics, additional corporate layoffs, and earnings disappointments are part of every news segment.  While there is plenty of support for the negative case, there is also cause for optimism.  Many strategists are now saying that the market is at or near the bottom.  They say that it is too late to be defensive in portfolio makeup, and that the risk/reward ratio now favors being more invested in equities than bonds.  Even the mostly pessimistic Morgan Stanley strategist, Barton Biggs came out last week in favor of buying stocks now.  The economists at Credit Suisse First Boston make the following points;

To wish for something with the expectation of its fulfillment Our expectations for a market recovery were growing stronger in the days before the attacks as factory orders began showing improvement.  After the markets’ week long close investors sold stocks with renewed fears of recession.  The theme among pundits was that we were probably in recession before the attacks and that likelihood seems almost certain now.  Experts further agree that the recession will be deeper than before, but of a shorter duration.  There are several rationales for a shorter, deeper, or “V shaped” recession.   The consumer, credited with holding this economy afloat for months, is undoubtedly shaken by recent events and will likely slow his spending.  In effect, consumer confidence dropped in moments instead of grinding down slowly, over a period of weeks under the constant drone of layoffs and disappointing corporate profits.  So, we have reached lower consumer confidence numbers much faster than we would have before the tragedies.

Have they won?  Not if you listened to our President last night and believed his resolve to win this war.  They have not won if you believe in the resolve of the American people.  They have not won if you believe the world leaders will be “with us” and not “with the terrorists.”  Indeed because of strong leadership by President Bush, his able cabinet, and a united Congress, as well as strong support from our allies, we hold the hope that the grip of terrorism on the civilized world will be broken and eventually eradicated.   

While our flags fly at half-mast and our dollar tumbles to six-month lows at the hands of foreign investors loosing confidence in this country, a new resolve is galvanizing Americans.  New Yorkers’ tough persona has been betrayed by an extreme outpouring of emotion and volunteerism.   Americans are coming from all over the country to the aid of their countrymen in Manhattan and Washington. 

Bear markets remind us just how devastating market forces can be to individual companies’ stock prices, regardless of their individual merits.  The degree to which pessimism and doubt gripped this economy and market surprised most market followers.  But with all this attention on the markets and the economic numbers one might miss the trees for the forest – COMPELLING VALUES have been created in the wake of the market’s (NASDAQ) crash.  While it is generally agreed that the values of information and communications companies in March of 2000 were unrealistically high, an equally strong case can be made that they are now unrealistically low. 

Ignore the pessimism on CNBC, Bloomberg, CNN, or me the last few months.  Ignore the analysts and strategists on Wall Street.  Did they advise us to get out when things were so ‘great’ in 2000?  A few did, but they were the ones who were perennially negative.  Listening to them would have kept one out of the greatest and longest bull market in history. 

For years investors took comfort in the statement above.  Contemporary investors, including this one, took comfort on Tuesday when the automotive giant affirmed its third-quarter profit outlook and production for the year, four days after rival Ford Motor Co. lowered its earnings forecast.  That prediction shocked investors who had been reassured by stronger-than-expected first-half U.S. auto sales as the economy slowed.  GM’s confidence on Tuesday gave investors a glimmer of hope that the economy‘s trend might be improving.