Market Outlook: Seize the Day

There is no better example of why ordinary individuals are particularly unsuited for managing their own investment accounts than at this very moment.

Granted, these are extraordinary times, but small fortunes can be made when bold investors seize the moment. Of course, modest savings with aspirations of becoming small fortunes can also be wiped out.

Hence the dilemma.

As perma-bears like Jeremy Grantham wake from a long slumber and as value investors like Warren Buffet open their wallets to snap up bargains (stocks that might be even better bargains next week, perhaps even more so next month), ordinary retail investors eye the stock market with a myriad of thoughts going through their heads.

That is, the ones that haven't already sold everything in a panic.

This report in BusinessWeek about Grantham's new outlook adds to the "fight versus flight" calculation:

Now, Grantham, whose firm manages more than $120 billion in assets, is almost gleeful. The value manager, who earned the sobriquet "perma-bear" for his long-standing bearish outlook, is buying. Like Warren Buffett and a growing number of savvy value investors -- among them, Third Avenue Management's Marty Whitman and Longleaf Partners' Mason Hawkins -- Grantham is seeing opportunities in the cheap prices created by this autumn's rapid stock market unraveling. Stocks, Grantham says, are now cheaper than they've been since 1987. "You are looking at the best prices in 20 years, and you should be making 7% to 8% to 9% real (inflation-adjusted) returns. The last time I was this optimistic was in the summer of 1982."

Not that Grantham's blindly upbeat. "It's optimism with great trepidation," he says. That trepidation reflects the fact that Grantham doesn't know if the market will fall further. But he's not the type to try to time the bottom. In fact, he says, bubbles historically overcorrect, and usually quite dramatically. That's what happened after the stock market crash of 1929, the 1965 collapse of the Nifty Fifty, and the contraction in Japan in 1989. "We are reconciled to buying too soon," says the money manager. "A value manager buys too soon and sells too soon. That's the nature of the beast."
...
With a stomach of steel and a keen sense of history, Grantham feels no qualms about buying now: "I don't have any anxiety. I feel so much better with history on my side. Truly. I've been looking forward to this for years."

Now, Mr. and Mrs. Ordinary Investor - push aside your own anxiety and go out there and seize the day!

Comments

[Howard Kalt:]

yeah, never mind the guys you cite either are using OTHER people's money, not there own, or they have so much they can't get killed..

2008 Oct 24 04:02 PM

[debtacid:]

Seize the day exactly how? The worst case scenario is that the ongoing collapse will make the depression look mild. The best case scenario is that we will suffer a Japanese style recession that will last decades. The FIRE economic paradigm has evaporated and Fed smoke and mirrors won’t revive it. In addition, the leadership choices we have in the election don’t inspire much confidence. More of the same crony capitalism on the right or a radical step toward the Venezuela “model”.

2008 Oct 25 01:01 AM

[tomyris:]

I thank you for writting a coomon sense article with cast iron advice .Yet it was inevitably picked upon by by the doom and gloom merchants. I dont understand why these people get out of bed, but perhaps they dont..

2008 Oct 25 07:29 AM

[alajac:]

Granthan is way early.

2008 Oct 25 09:48 AM

[Urbane Gori...:]

We get out of bed, because the scotch is kept in a cabinet adjacent to the stove and I don't have an ice machine in my bedroom... Silly!

All kidding aside, read Barrons... Sure, they aren't always right, but they had three articles this weekend and several opinions from long term investors that the market **may** bounce, but will probably decline from these levels. I'm also 1/2 through Louise Yamada's book.... Boy, was she ever prescient... And I've listened to several recent interviews with her. She doesn't get much airplay here in the US, but they have her on a lot overseas. The last two interviews were in India and can be accessed by Googling

Forbes Roundtable
The Charts Are Ugly
Forbes.com staff 07.17.08, 3:08 PM ET

(Sorry... I'd post the link, but apparently SeekingAlpha has plotted to not allow links... )

Ignoring for the time being that the market is a leading indicator, consider that we still have not resolved the credit mess, foreclosures or fund redemptions. Nor have we even begun to address slowing sales, more foreclosures entering the market, credit card problems or commercial vacancies. That's not even considering the impact of the drop in people's home values and retirement funds. Then! Lets look at what just happened on Friday! Seems the rest of the world just woke up to the fact that their economies also suck!

And that's just the beginning.

You want advice... Wait for the runup... Expected to be in the range of 1050, give or take. Sell all your holdings... Wait for a confirmed downturn (This wold be the C leg of an Elliott Wave) And buy Ultrashort S&P, Ultrashort Emerging Markets and if oil has bottomed by DIG. At least, that's what I'm going to do.

See ya at DOW 7200!!! Byyyyyyyyeeeeeeeee.......

jegan ;-)

2008 Oct 25 07:41 PM