The Smart Money Is Buying

October 22, 2008 at 9:46 am  ·  Category: Market Commentary, Sentiment Analysis

Here are some of the best investors in the world who have recently become bullish, at least for the short/intermediate term:

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

On October 10th we can say that, with the S&P at 900, stocks are cheap in the US and cheaper still overseas.  We will therefore be steady buyers at these prices.  Not necesarily rapid buyers, in fact probably not, but steady buyers.

… an awful lot of things are available at a friendly price.  It’s the kind of market I’d take advantage of.

Today, we look at specific data and charts that can provide some insight as to how extreme these present levels are. All these suggest to us that we are increasingly close to a bottom that can be purchased for an upside trade of 20-30% from these levels.

The best way to begin this comment is to reiterate that U.S. stocks are now undervalued. I realize how unusual that might sound, given my persistent assertions during the past decade that stocks were strenuously overvalued (with a brief exception in 2003). Still, it is important to understand that a price decline of over 40% (and even more in some indices) completely changes the game.

I didn’t think I’d see this situation in my entire investment career…..

I never thought I’d be able to buy stocks as cheap as they are right now.  It’s a time of exceptional value….

It’s my opinion that we’ll look back at last week as the 2008 trading low (not to be confused with a market bottom) before a harsher downside comeuppance arrives next year.

As someone who has been around markets for a while (with plenty of scars to show for it), it is hard for me to look at the level of extreme pessimism and the number of indicators flashing “oversold” in today’s equity markets and not think prices are probably due for one of these periodic, hope-breeding rebounds.That doesn’t mean I’ve turned bullish, of course. Just realistic.

Investors (not traders!) eyeing the intermediate-term outlook should now begin to feel like an oversexed man in a harem, as this is the time to start buying stocks.

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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