Monday, November 24, 2008

Of Bulls, Bears and Rallies

Henry Blodget at Silicon Alley Insider put up a post this afternoon, "Did You Just Miss The Bottom?":
...Allow us to make a prediction: Optimism that the rally is "real" will increase every day that the market goes up. And, every day that that happens, you will get more and more worried that you missed the bottom. And then one day, when you just can't take it anymore, you'll pull the trigger.

Meanwhile: For long-term investors, stocks are still undervalued--even now. Buy now, and you have a good chance of earning a better-than-average return over the next ten years. Sure, if the rally isn't real, you will temporarily lose your shirt. But fund manager John Hussman argues that valuations going into the weekend were as low as they were in late 1931. And the market did pretty well from there....MORE

Which has a bit of spaghetti-chart-porn worth taking a look at.

I couldn't resist leaving a comment:

Climateer (URL) said:

Mr. B,
What does that headline mean?
Are you calling the bottom?
I've had my copy of the Cowles Commission's Common Stock Indexes 1871-1937 open on the desk for pretty much the past year.
I am struck by two things:
1) In the U.S. markets we've got one data-set, with a total of 1642 (Oct. '08) monthly points. Anyone trying to forecast off that had better have HUGE error bars. Or, fess up to the fact that no one really knows and acknowledge that this year a portfolio had a better chance if directed by an astrologer. (Arch Crawford is Hulbert's #1 market letter YTD)
2) Folks had better come to grips with the fact that coming out of a cyclical bear still leaves us in the secular variety.
To quote Warren Buffett:

"Now I'm known as a long-term investor and a patient guy, but that is not my idea of a big move."
-Warren Buffett
December 31, 1964: DJIA 874.12
December 31, 1981: DJIA 875.00
That's a secular bear market.