Word: cooperman
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Shaken by skidding prices and economic misgivings, many investors are wondering whether the bull market, which saw the Dow Jones industrial average go from 776.92 on Aug. 12,1982, to 1287.20 on Nov. 29,1983, has run its course. Last week the Dow Jones closed at 1148.87. Says Leon Cooperman, chairman of the investment-policy committee for the Wall Street firm of Goldman, Sachs and a guest at last week's meeting of the TIME Board of Economists: "Unless we deal with the budget deficit and can get lower interest rates, the odds are that the bull market...
...Cooperman maintains that investment managers "move between greed and fear." Until recently, he said, "greed had outdistanced fear." Reason: "I think people believed that interest rates were going to decline." But then President Reagan's budget convinced investors that deficits will remain huge and help push the cost of borrowing higher. To frightened stock-fund managers, that signaled not only slower economic growth but, more important to them, brisker competition from the markets for bonds and other interest-paying investments...
...sure, it has been quite a rally. The latest running of the bulls, says Cooperman, has "substantially outpaced any market rise in the postwar period." The rate of increase in the first nine months was about 2½ times as great as the postwar average...
...Cooperman feels that the rally has been displaying signs of age for almost six months. Investors, fretting that the recovery's "sweet spot," or most vigorous phase, had already passed, were becoming less eager to buy. Wall Street was also growing fussy about corporate profits, which traditionally serve as benchmarks for prices. Says Cooperman: "Stocks have been performing in a mediocre manner when earnings were as expected. They performed poorly when earnings were only modestly below target. And they have been devastated when profits were significantly off the mark." Even IBM, despite record 1983 income and good prospects...
Many portfolio managers, meanwhile, have been concluding that stocks are overpriced in relation to investments like bonds and have begun to dispose of some holdings to trim their risk. Cooperman noted that stock mutual funds now have just 7.3% of their assets in cash, compared with 12% in August 1982. The low current figure suggests to Cooperman that the funds are almost fully invested and will now be taking money out of stocks...