Roger Nusbaum submits: A friend pinged me this morning asking/saying we are in a bear market. He then said "now I know why you are not bottoms up." This was a reference to my a being top down manager in which the focus is on the big picture first, then focusing on sectors, countries, market cap, style and a couple of other things before selecting stocks.
It is kind of tough to label, what is now, a single digit correction as a bear market. There was a point last week where the S&P 500 was down double digits but that was just for a couple of hours. While the idea of 10% equals correction and 20% equals bear market seems too simplistic, I would not be surprised to see the market go lower, which has been my thought for this year all along.
In the last six weeks, picking stocks has been very difficult. During periods like this, when nothing is working (by the the way, there is nothing unprecedented here) picking a good company to buy is like swimming upstream. While I haven't tried to find one, I can't imagine that there are too many emerging market stocks up since May 10.
I have been writing about my fondness for Chile as an investment destination for more than a year. There are two catalysts, global demand for copper and systematic public pension contributions going into the stock market every pay day which means constant demand for stocks.
Neither of those catalysts have changed but the stock I own for Chile, Santander Chile (SAN) has gone down 19.5% since May 9 (I chose May 9 instead of the 10th as above because it closed higher on the 9th than the 10th). Assume for a second that I am right about the fundamentals about Chile -- that has not mattered. What has mattered is that emerging markets have been sold down and Chile went along for the ride.
To me, this is a big pitfall for relying solely on bottom up stock picking.