The Cal Ripken of Stock Market Streaks

While growing up as a kid in Miami, we didn’t have a professional baseball team that called south Florida their Home. We had the Dolphins of course, and the Heat came along in 1988. But no baseball franchise to speak of. So as a kid, I would go watch the Baltimore Orioles play Spring ball at Miami Stadium. We were an O’s family: my father was a huge Brooks Robinson fan, my mother always had a crush on Jim Palmer, and Mike Cuellar grew up in my grandfather’s home town. I was a shortstop growing up, so of course my favorite player was Cal Ripken Jr. How could he not have been? The skills, the work ethic, the character…

For those of you who aren’t baseball fans, in 1995 Cal broke Lou Gehrig’s record for consecutive games played. This is a record that had stood for over 50 years. So when Cal hit 2,131 straight games, he was nicknamed, “The Iron Man”, a title that will likely last forever.

The New York Times has a great piece out this weekend comparing Cal Ripken’s record to the current winning streak in the stock market. According to Paul Hickey of Bespoke Investment Group, each day in 2012, as well as these early days of 2013, the S&P500 index has closed in positive territory for the calender year. In other words, the index never had a daily close below the closing level for 2011. We haven’t seen anything like this in over 30 years. And just think about all of the negativity we’ve had to sit through between Europe and the fiscal cliff and on and on. You see why it’s important to ignore the noise and focus on what price is telling us?

I’ve read a lot about how 2012 was such a great example of how we shouldn’t pay attention to headlines, and just focus on price. And as much as my knee-jerk reaction would be to agree, I think we can probably go back and cite every year as a great example. Remember how financials were “cheap” all through 2008? Remember how the economy was in shambles and Obama was going to destroy everything in 2009? I don’t think we need to go out on a limb to bet we’ll have plenty more examples this year as well, on both sides, positive and negative. Remember, it’s still not “cool” to be bullish.

As far as price is concerned, the bull market that got started in March 2009 remains very much intact. Small-Caps and Mid-Caps made all-time highs this week. And the leadership has been coming from Financials, Industrials, and Transports. All positive check marks for stocks as an asset class. But there is some bad news. The likelihood this stock market streak will continue through a second calender year is actually quite low. Since 1928, it’s happened only once – in the 1975 and 1976 period. We are also close to 4 years into a bull market, where the average one historically lasts just 2.5 years.

So at some point this year, we’ll probably get a pretty hard correction in the stock market. And I can only begin to imagine what sorts of stuff we’ll hear from the blame-gamers. My guess is Congress, Europe or some clever combination of the two. But we know that it’s only math, it’s normal. We’ll do our best to be disciplined and try to take advantage of it, either by taking profits and increasing cash positions, or going outright short some of the more vulnerable areas. Remember, the only one you can blame for losses in yourself. You can’t control how high a stock you buy will go. There isn’t any amount of research you can do on a stock that will help it go higher. The only thing we have control over is how much we’re willing to risk. So let’s pay attention to what we can control.

The work ethic of a Cal Ripken Jr., and the discipline he brought to the game showing up to play every day should serve as a valuable lesson. As long as we show up and do the best we can to manage risk, the wins will come. We shouldn’t be worried about picking winners, everyone has them. It’s the discipline in avoiding the big losers that we need to focus on. Remember, all big losses start out as small ones.

Thanks Cal.

Cal Ripken



A Stock Market Streak That Has Drawn Few Cheers (NYTimes)