The Holiday Party Indicator
Having lived and invested through multiple market cycles, with the scars and gray hair to prove it, there are certain rules of thumb that have become part of my investment toolkit. One in particular comes in handy at year end: the holiday party indicator.
In 1999 I was fresh out of college and working in New York City as the internet boom was ramping up. The company I worked for was doing well, but also losing talent to startups seemingly every week. The markets were ripping, and the sense of possibility was palpable among young people.
As the holidays neared, we were treated to a string of vendor lunches and dinners that more often than not started with the seafood tower and got better from there. The kicker was the holiday party at the Rainbow Room, a black-tie affair with tuxes provided for anyone who needed one. Needless to say, a good time was had by all.
Fast forward two years and the dot-com bubble had burst, New York was reeling after 9/11, and our team had been whittled down to a skeleton crew after multiple rounds of layoffs. Most of the folks who had left for startups were back to the drawing board. The holiday party had gone from the Rainbow Room to the lunchroom.
The next lesson came in 2005 and 2006. Now working in portfolio management for an institutional real estate team, happy days were here again. Our properties were performing well, the transactions team was busy, and clients were eager to invest.
We celebrated 2005 at the Museum of Natural History, with drinks, dinner, and music under the watchful eyes of the giant blue whale hanging from the ceiling. Out-of-towners were flown in and put up at a hotel nearby, and after the party the various business groups broke off to keep things going on their own. The good times kept rolling into 2006, which saw the festivities move to a bigger venue with music provided by Maroon 5 on their way to stardom.
And the next couple of years? Residential and commercial real estate were both in big trouble, economies and markets were in free fall, layoffs and reassignments seemed to never end, and clients were furiously trying to rebalance their portfolios through redemptions. The holiday gathering – certainly no party - was a subdued lunch in the break room. At least there was pizza.
Looking back, the best holiday parties arrived just as the market party was ending. And the worst parties coincided with some great times to invest.
There are hundreds of anecdotal indicators like this one in every cycle and hundreds of market strategists whose only job is to use them to make predictions. Some indicators are useful, and some strategists are better than others. But while hindsight is 20/20 and the sample size is small, the holiday party indicator is one that sticks with me. When you find yourself at an amazing bash, by all means load up on crab legs - and make sure your emergency fund or capital reserves are topped off. When the party is terrible, load up on investments.