Week on Wall Street

Kai Ryssdal Aug 11, 2006


KAI RYSSDAL: It’s that time again on a Friday afternoon when we take a turn down to Dallas, Texas and a guy we know down there, David Johnson. Hello David.

DAVID JOHNSON: Kai Ryssdal, good to talk to you. I’ve been waiting for you. I’ve been waiting, I’ve got an ‘I told you so’

RYSSDAL: Oh yeah? Go ahead.

JOHNSON: Yeah, you know I told you this is a great business. And I told you that the only reason somebody can stay in this business for over 30 years like I have is because it’s never the same, they always change the rules and just when you think you get it figured out, you know, something like yesterday happens.

RYSSDAL: Well give it up, explain yourself.

JOHNSON: Well it was a terrible day, it was a horrible day, acts of terrorism, there could be more to come, we worry about a plan B, maybe there’s something else out there and the stock market goes up. I mean the transportation average went up . . .

RYSSDAL: I saw that.

JOHNSON: Oil prices went down $2. I mean none of this makes any sense and anybody who tries to tell it does has probably tried also to sell you land in Florida.

RYSSDAL: Yeah they probably are but what gives? I mean I don’t understand how it goes up when bad things happen and today it goes down when nothing happens.

JOHNSON: Today doesn’t count. Look at the volume. Nobody’s out there. $1 billion, 300,000,000 shares, nobody was there. Yesterday was interesting. It may well be that Wall Street looked at the trend and saw that what happened after every other disaster-like thing we’ve had here over the last several years, the market went down very sharply the next day and then the day after that it went up and it went up more than it had lost the prior day and so watching trends it may just be that they said ‘Look, we know everything’s going to be fine the day after tomorrow, so we’re not even gonna bother with selling, we’re going to go out and do some buying.’ That’s a possibility.

RYSSDAL: Is this the David Johnson rule of the market, always know something that the rest of us don’t?

JOHNSON: Well that’s part of it but also it’s just that whenever you think you get it figured out, they change the rules. And I don’t mean this in a dastardly way, but I mean it’s true, it’s always just a bunch of people, and it’s a bunch of money and it’s everybody trying to figure out what everybody else already knows or don’t know. And like I say they change the rules but this is really what makes it interesting. Now, there’s another possibility

RYSSDAL: And that is?

JOHNSON: And that is they looked at the story that we didn’t yesterday which is, this economy is still humming and the consumer is alive and well. Brinker, the people that own Chili’s and Macaroni Grill, stock went up 10 percent yesterday because earnings were so good. We were all worried about gasoline and you know high gas prices would keep everybody away? No they went up. Same thing, good sales, good early summer sales at Target. Federated said Macy’s, Bloomingdales sales are great, they’re going to raise earnings estimates . . .

RYSSDAL: I’m so confused though, because didn’t the fed just tell us that the economy’s slowing down and that’s a good thing?

JOHNSON: Well yeah and presumably it is, they said there’s going to be a lagging impact. But the fact is, it doesn’t look like they killed the consumer. So you’ve got a situation here where the pessimists can look at this and say, ‘Look inflation’s going to reignite, those guys are going to come back’— they’re not by the way, they’re not, well not for another 3 or 4 months.

RYSSDAL: Alright.

JOHNSON: Or the other side is, this thing is slowing down but we didn’t completely kill off the consumer, and everything looks great.

RYSSDAL: Alright so I’m going to guess, you know, which side you’re on. What do you think?

JOHNSON: I’m on the side of, I’m a student, I will sit back and I will — see that’s the great thing about the market: You can be long and you can be short. You can buy puts and you can buy calls.

RYSSDAL: All at the very same time. David Johnson down in Dallas, Texas, thank you David.

JOHNSON: Good to be with you Kai.

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