The Pundits I Admire Are Turning Bullish

By Matthew Hougan

While Jim Cramer and others are wringing their hands, the people I respect most are turning bullish.

At least, over the long term.

Let's start with John Bogle. (Doesn't it always start with John Bogle?)

Judging by the series of interviews he's been giving lately, Bogle is very worried about the U.S. economy. As he said in an interview with Forbes today (highlighted by Murray Coleman in our invaluable new daily news roundup), "it will be a year-and-a-half to two years before [the U.S. economy] turns upward."

That doesn't mean investors should be sitting on the sidelines. Far from it. Bogle says the market may be undervalued by about $7.5 trillion right now, and thinks that the market has likely over-discounted the impending recession.

Bogle's not alone. In the forthcoming January/February issue of the Journal of Indexes, Rick Ferri (a great financial advisor) calls this "the greatest opportunity in our lifetime" for young and middle-age Americans to "set [them]selves up for retirement." Buy now, he says, and in 10 years you will be very happy.

David Kotok of Cumberland Advisors is even more bullish, saying markets could "gap" higher in 2009, and warning that investors who aren't in now will find themselves chasing a market that may have already moved much higher.

The list goes on: Wharton professor and WisdomTree advisor Jeremy Siegel thinks stocks are "dead cheap"; Larry Swedroe thinks stocks will recover; even PIMCO's Bill Gross is turning positive.

What separates all these analysts from the parade of negative voices filling CNBC, TheStreet.com and similar properties is that they are focused on the long haul. And from that perspective, understanding the market is easy.

I have no idea where the market will be three or six months from now. But 10 years from now, do you really think the Dow will be trading at 8,000? I sure don't.

Here's a thought: About a year ago, when the Dow was trading at 12,500, I bet our executive vice president Don Friedman $100 that the Dow would fall below 10,000 before it hit 15,000; in other words, that it would fall 2,500 points before it rose 2,500. I was worried by the failure of Bear Stearns and what it meant for the economy.

Right now, I'd make a similar bet, but on the upside. I'd bet $100 that the Dow will hit 10,000 before it hits 6,000; in other words, that it will rise 2,000 points before it falls 2,000.

How many people would take the opposite side of that bet?

Comments

[herbert hoover:]

Great article - not! We all know the economy is going to turn around, the key is When? I also think that the market is undervalued but who cares what I think? I don't expect to buy at the bottom, the question is when will it get close? We ain't there yet.

2008 Dec 02 01:12 PM

[User 68127:]

Agree. In fact, you convinced me with the first sentence! If Cramer is wringing his hands, what further do you need to know?

2008 Dec 02 01:17 PM

[SW Richmond:]

Bogle and Gross are convinced of the inevitability of a turnaround because they see governments and central banks finally and overtly committed to reflation. They believe it will work, and they are stock and bond guys so they think we should buy stocks and bonds. It is sad when investment fundamentals have more to do with government action that the underlying businesses, but that is the regime voters have chosen.

The questions one must ask are: will reflation money flow into stocks and bonds, or is there a better reflation play?

2008 Dec 02 02:07 PM

[eurotrash:]

And, pray do tell, what makes you believe that the respected "pros" that have been wrong and lost trillions all the way down are now somehow going to get it right this time? Invest based on your own research and opinions, not on what others are saying/doing. I'll take your bet and I believe we will see Dow 6000 (actually even lower in my opinion) before spring 2009.

2008 Dec 02 02:17 PM

[nmelendez:]

You are right, but you forgot one issue....5 dollar can of coke!! Only way for Dow to hit 10,000 is dollar to hit 60 DYI. Thats the problem. Whats the use of a dow 20,000 if a lb of beef costs 125 USD?
Everyone keeps discounting inflation. Thats the only way companies would be able to sustain profits.
Me, i'm a gold bug. Once inflation starts, gold will skyrocket. With the dollar having gone up to 89, gold is still almost 800. What do you think will happen the next timee the dollar goes down to 70 DYI?
Lets see, from 2001 to today gold is 2.6 times, so next time dollar devalues, extrapolation gives you about 1.6X today's price.....should go up to 1250 next year. And thats without the bailouts!!!!

2008 Dec 02 02:34 PM

[Steven Hansen:]

"I have no idea where the market will be three or six months from now. But 10 years from now, do you really think the Dow will be trading at 8,000? I sure don't."

do you think somebody thought this in 1998?

2008 Dec 02 09:55 PM

[ikkyu:]

"I have no idea where the market will be three or six months from now. But 10 years from now, do you really think the Dow will be trading at 8,000? I sure don't."

I live in Japan. No one here thinks 10 years is a sure bet for a stock market recovery!

Cheers,
john

2008 Dec 03 02:35 AM

[fran:]

try the article by justin litle[and hopefully follow up] in 12/03/08 SA


On Dec 02 02:07 PM SWRichmond wrote:

> Bogle and Gross are convinced of the inevitability of a turnaround
> because they see governments and central banks finally and overtly
> committed to reflation. They believe it will work, and they are stock
> and bond guys so they think we should buy stocks and bonds. It is
> sad when investment fundamentals have more to do with government
> action that the underlying businesses, but that is the regime voters
> have chosen.
>
> The questions one must ask are: will reflation money flow into stocks
> and bonds, or is there a better reflation play?

2008 Dec 03 05:28 PM

[fran:]

steve--

i remember a lou[lew?] ruckheyser show in the 70's when an old greybeard predicted DOW 3000. i never bet against upward growth, but always expect wild swings on the way. i wish i had invested another $1000 at the time; i also wish i could remember his name. old age can be problematic!


On Dec 02 09:55 PM The hand wrote:

> "I have no idea where the market will be three or six months from
> now. But 10 years from now, do you really think the Dow will be trading
> at 8,000? I sure don't."
>
> do you think somebody thought this in 1998?
>

2008 Dec 03 05:45 PM