by Wendell Cayton

It is a call I will never forget… a stockbroker friend of mine in Denver called me in Oregon where I was fishing to tell me the markets were beginning to move. It was around the middle of August 1982. On August 12, 1982 to be exact, the greatest Bull Market in history began its run.

I was reminded of how far we have come when I visited the office of a patent attorney friend. As we talked, one of his firm’s IT technicians fixed a minor problem on his laptop computer. We laughed about the changes since we have known each other. When I met him in early 1985 in his small office in San Francisco, there were fewer lawyers in the office than he has IT technicians working for him today.

Today, his entire 28,000 sq. ft office is layered with networks of computers. PDAs, scanners, and video conferencing are the rule. Yet only 15 years ago, the IBM Selectric typewriter was the height of productivity. When his office first started with word processing, only a select few were authorized to touch the Wang Word Processor. When the firm finally allowed personal computers, the staff was allowed to use any model they wanted… as long as it was an IBM. Portable cell phones created huge suit case affairs with limited range and usefulness. Only 15 years ago!

I glanced around his office and admired his collection of antique patent artifacts.
A model of the very first Mercedes Benz automobile, manufactured in the 1880’s, caught my eye. Next to it was a small rectangular device of many computer chips and complex circuitry. Extruding from the front of the device was a chip and circuitry protrusion shaped like a small weather vane. He asked me if I had any idea what this was. I correctly guessed that it was the core element of the Mercedes ignition switch and the Mercedes optical key.

This key system works on an optical signal from the key to the circuitry. It not only starts the car but it enables the car to customize itself for its driver and who knows what else.

It is incredible to look at the model and the switch and realize how far we have come. Are we there yet, you might ask? Is this the end of the trip… the end of the Great Bull Market of 1982? I tend to think not.

The catalysts for the start of that market such as falling inflation, falling interest rates, a work force that was just beginning to become productive, a wave of innovation just taking off, all contributed to the growth of the Bull.

According to a report published by CSFB economist Tom Galvin, these elements combined to provide free cash flow and liquidity. Despite today’s anemic market, the mutual fund industry takes in more dollars each month than it did on an annual basis in 1982. The top two stocks in the S&P 500, GE and Microsoft, have a combined market capitalization of nearly $800B that is greater than the aggregate of the 500 companies back in August 1982.

But as any marathon runner can attest, there is a time to pause and rest. The Bull is resting, giving businesses a chance to slim down and become more productive, more competitive, for the next push. Businesses will need the technology that is coming along in order to remain competitive. Our higher workforce productivity resulting from this investment in technology will keep prices and inflation down and keep the fittest of companies growing.

This Bull has plenty of leg left. It’s just catching its breath!