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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe Now“Google will close down for the year, but it may begin its fall from higher levels.” I wrote that on Jan. 10, with Google at $465 a share.
“If you bought Google last year for $250 a share and still own it, this may be the time to cut and run.” I wrote that on Jan. 31, when Google was selling for $430 a share.
On the morning of Feb. 28, the stock was up a little, to $397. Then the chief financial officer dropped a revenue-slowing announcement at a conference, and all hell broke loose. The stock tumbled to $350, down 10 percent for the day.
The fact that Google has become a stock of massive speculation is only part of the story here. The real juice is the part where the stock falls 10 percent in literally one minute on news everyone already knew.
This is a reflection of the weakening state of the market. But there is one thing I see hasn’t changed on Wall Street. Analysts stay way too bullish on the way down. Even now, of the 38 analysts covering Google, 30 have buy recommendations on the stock. Seven have hold recommendations, and one has a sell rating. I don’t know who the sell is, but he should win analyst of the year.
Market tops are long, drawn-out affairs. The last bull market top was almost two years in the making. This one is not testing the bears’ patience nearly as long (and I don’t expect it to) but it has its own frustrating personality.
The S&P 500 closed at a rally high of 1,295 on Jan. 11, and has yet to eclipse that mark. The NASDAQ also has been pulling back slightly from the Jan. 11 high. But the Dow Jones industrial average reached a four-year high last week.
I guess everything is hunky-dory then, right? Well, there are 30 stocks in the Dow and only four of them reached a new high. More than half of all Dow stocks are down more than 20 percent from their own highs.
On Feb. 27, I went to a seminar sponsored by the Indiana Economic Development Corp. called “India as a Strategic Partner.” It was almost three years ago that I wrote about a stock called the India Fund, which is a basket of the top 50 stocks traded on the Bombay stock exchange.
The stock is up about 150 percent since then, but that is beside the point. The seminar was a confirmation of something I have felt for a long time-that India will be a great place to do business the next several years.
There are so many ways this is going to work it is ridiculous. And that is why I get concerned when I read about another company announcing another stock buyback program. At first look, you think this is good news because it takes supply off the market, which can allow stocks to move higher.
But over half of all buyback programs don’t come near completion, and the companies usually put the stock right back in through a takeover. But the message is clear: These companies don’t have any better ideas about where to invest their money. How about India?
These stock buybacks could have the temporary effect of holding off some of the heavy selling I expect in stocks later this year. But a check on Intel’s recent past might prove to be a more accurate foreshadow. The company announced a $25 billion stock buyback in November, and the stock is down more than 25 percent since.
Hauke is the CEO of Samex Capital Advisors, a locally based money manager. Views expressed here are the writer’s. Hauke can be reached at 566-2162 or at keenan@samexcapital.com.
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