Earl Weaver's Logic

Investing, gambling, managing a baseball team or confronting a par 5 with water in front have this question in common: When does one pull the plug?

The common rubric in baseball management circles these days is the pitch count. Regardless of the score and situation, once a predetermined limit of pitches is reached, the starter must be replaced with a fresh arm to keep the former from suffering arm fatigue or injury, the prevailing philosophy goes. But this is cookie-cutter discipline. If the object is to win, the best players should take the field. And if the starter is breezing along, why insert an inferior player merely because the starter has thrown x number of pills? Life itself is fraught with unknowns, but this doesn’t prevent the stalwart commuter or mom with a baby carriage from crossing the street merely because they have reached their limit by successfully doing so 10,000 times without getting hit by a bus.

If one is inclined to wager, the common wisdom is to press when ahead and pull back when behind. But this is a loser’s strategy. In effect, the wagerer acknowledges his position and gives up, preferring to dig the hole a little, not a lot, deeper, holding out hope that he can chip away at the deficit. The courage of one’s convictions becomes pale imitation.

When faced with a water hazard on a long par 5, the golfer is faced with the decision to lay up or go for the green (in my case, if all went right, it would be the third shot, but for the more accomplished it might be the second). Discretion may be the better part of valor, but as a poker-playing buddy of mine used to say, “No balls, no blue chips.” Since it’s just a game, it seems silly not to make a Homeric attempt that could result in a birdie or eagle, the psychic rewards of which would dwarf a day of triple bogeys.

The casino called the stock market has been encouragingly resilient this past month. But is it time to take money off the table, just as the baseball manager removes an effective starter or the prudent golfer or gambler lays up or reduces wagers?

The economic data last week were not encouraging. Retail sales were lower than expected. Deflation was evident in the price indices. However, much of this had to do with the decline in energy prices last month. The “green shoots” alluded to by Obama and Bernanke and the profit reports of Citibank and JPMorgan tempered the macro news. Indeed, the New York Fed’s Empire State survey of manufacturing suggested things are not sinking as fast as they have been.

I’m not taking out Sabbathia, not laying up and not cutting back on the wagering front. Look for further gains in stock prices as confidence builds that the worst is behind. Conditions may continue to deteriorate, but at a slower rate, which presages a bottom in the economy. Equity prices rebound before the economy. Sticking with F, AMD, PALM. Consider some REITS, such as DDR, which may be cheap after the General Growth Properties bankruptcy.

Like Earl Weaver, I'm leaving Cuellar, Palmer, Dobson and McNally in. Meanwhile, in our half of the inning, the gun is loaded, as Weaver used to say, and I’m counting on a three-run homer.