The Year of the Ox gets off to a bullish start

(26 Jan) Well, it wasn't that much of a bullish start, to be sure, but I'll take a bull where I can find one these days...

The markets, I believe, are at a most interesting juncture. On one hand, we have the already known, totally horrible, shouldn't be seen in public kinds of numbers coming out as a result of the fourth quarter's lack of economic activity. As we have seen, careers are ended - not made - on these types of results.

And yet - on the other hand, as the economist is wont to say - we have professional investors, traders and money managers who are saying, "well, sure, those are terrible - but what's down the road for this company, industry or sector?"

The result, it would appear, is exactly what the markets have been doing for a couple weeks - at least. They are churning around on these bad reports. That, to me, is the market responding much as my cohorts and I did once upon a time when we said, "what are you going to do - shave my head and send me to Vietnam?"

Put another way, what else can be worse than what has already happened? What other news is out there that can make this. Granted, there's always the "what if" crowd talking about things that could occur but those guys are always around. This type activity is what occurs at the beginnings of bull markets. Check the record...

Jeremy Grantham

This man is a professional investor - well-known in the concrete canyons, especially since, in 1998, the called the market bubble and exited stocks. He subsequently also called the credit bubble. I don't know what he drinks but I'd like to find out... Point is - he's been out of US equities since 1999, as in, hasn't owned any, right until just recently.

The reason I invoke his name is because he's come out and said "it's Showtime." Well, he really said this is the time to be buying US equities. I mention it because he doesn't use tea leaves, frog innards or whatever - it's just old-fashioned number crunching. The same fundamental approach that had him get out of stocks in '99 and lost him quite a few clients in the process. The market didn't cooperate with his findings - right away.

Now, he says, the markets are just about as cheap as the y were in 1974 and 1982 - both times at the end of long, tough recessions.

He also says that, using the 7 year cycle he favors, things look quite positive for the US markets in general.

Counter-intuitive

As I'm writing this, American Express is reporting their earning down 72% for that quarter. Earlier today, Caterpillar announced the layoff of 30,000 people - the ripple effect on the communities where that happens will be huge and not in a good way. And yet, I'm telling you that now is the time to be moving into the US equity market and that the future will be grand.

I am basing this representation not on current events or the effect of bailouts or any other "check in the mail" program on the horizon. I am basing it on the lengthy study of the historical record of the US equity markets AND the personal experience of recent (1974 and 1982) similar events.

The bottom isn't known until after you're well into the upward trajectory. It never comes when the conventional wisdom expects it. It usually comes when news of the hour is, shall we say, "less than good." There is no for sure time for it to start and no one knows how long it will last. People hesitant to get back in after having exited before still will hesitate to believe the data before them simply because they don't want to be wrong - again. Too painful - the amount of money has no bearing on that.

You do have to have two things if you wish to be a successful investor. This is based on personal observation of 35 years of working with investors.

You have to have an unwavering faith in the future...first and foremost. The other is that you must have a plan, based on your needs and goals - not some fill-in-the -blank thing - that you stick with, regardless of current events.

As Virgil said in the Aeneid, "forsan et haec olim meminisse iuvabit."

Perhaps even this will, one day, be pleasant to look back on...