Tuesday, January 13, 2009

Mauldin: 10 Out Of 10 Barron's Roundtable Gurus Are Wrong

From ClusterStock:
Barron's annual guru roundtable was unanimous: stocks are going to rise 10%-20% this year. That's a safe prediction, given that 10% is the average and, after last year's collapse, we're due for a bounce. But it still seems a bit too happy.

Bearish (and right) analyst John Mauldin is also skeptical:

Ten out of ten analysts in the recent Barron’s forecast saw stock prices rising 10-20% this year. For reasons I outlined last week, I think we could see a tradable rally in the next few months, but at the very least test the lows this summer, if not set new lows. Earnings are going to be far worse than any analyst’s projections I have seen. And earnings drive stock prices.

Further, this recession is going to be the longest in anyone’s memory. It is going to seem like it is never going to end (it will, I promise), and more and more investors are just going to give up on stocks. The buy and hold for the long run mantra is wearing thin. In inflation-adjusted terms, the stock market is about where it was in 1973! If you reinvested dividends, that gets you to 1991 (again, inflation-adjusted). It takes a lot of buying to make a bull market. It only takes an absence of buying to make a bear market....

...With all the massive printing of money, you would think I expect the dollar to crash. I don’t. The question is, what will it fall against? The euro? Really? The pound is better valued, but England and Europe are going to have to cut rates and apply massive stimulus as well. Every developed country will have problems. I can see holding Canadian, Australian, and other commodity-country currencies, but the leverage needed to make it a reasonable investment potential is too risky for individuals....MORE