Bad news, rainy days, darkness and other crap like that. Well, you know what, here’s some good (or hopeful) news. Two of my favorite writers in Forbes have both turned bullish, and I am pre-disposed to believe that they are right.
If so, at least the market piece of this ennui and financial storm starts to turn sunny again.
Ken Fisher, who is the consummate macro investor, says in Media Mayhem:
The bearish headlines have gotten bolder, and the panic has gotten worse (notwithstanding the late-November rebound). So I'm even more bullish now. Stocks are an even better buy. The S&P 500 is going for 12 times earnings (after nonrecurring items) for the 12 months ending Oct. 31. This at a time when ten-year Treasurys yield only 3.08%. Business inventories are at record lows for the start of a recession, and that fact should make the recession milder. These times will pass. Because stocks are so cheap, a big bull market will emerge. I don't know when. Depending on your willingness to take risk, you could own bigger, safer stocks or smaller, riskier ones.
Now, a lot of Ken’s thesis is driven by a belief that the market is a discounter of all known information, and thus, the negative media bent is: A) overshooting the real picture (as the media usually does); AND B) the underlying value relative to alternative yield strategies is sufficiently off track (i.e., you can buy into the market at 12X earnings, or 1/12 = 8.33% yield OR you can count coupons at 3.08%, a pretty big spread) that once the panic subsides (as it seems to be journeying towards), the market will swing North in a big way.
And while I believe that Fisher understands the market better than most, having had a really transparent record at Forbes over the past 24 years, I take particularly great confidence that the same market interpretation is coming from John Rogers (who writes ‘The Patient Investor’ column in Forbes).
Whereas Fisher is more of a market relativist, Rogers is a fundamentalist, or value investor, and until recently was very bearish. What changed? Read this excerpt from ‘It’s Time for Equities’ here:
Warren Buffett, who is buying right now, advises us to be greedy when others are fearful and fearful when others are greedy. Is that simple-minded? No, it’s just a recognition of the fact that the crowd can become irrational, producing valuations that anyone not caught up in the frenzy can see are too high or too low.
The rest of Rogers' article goes into a technical analysis of the current asymmetry between market pricing and yield as well as his analysis of the economic picture and why he is feeling optimistic. It's a pretty crisp piece and worth the read.
Obviously, the stock is just one axes of our fiscal picture, but it’s a biggie, affecting consumer outlook, corporate liquidity and of course, it's a real a cornerstone of many of our financial portfolios.
