Fred Voetsch

Valuations Alone Don't End Bear Markets

Unfortunately you have provided no data to back up your "feelings". May I ask when I can expect to see you on CNBC?


On Feb 08 12:33 PM Caveat M. Tor wrote:

> Most investors acknowledge that exact timing of markets is impossible
> - No one has 20-20 foresight. However, we do have 20-20 hindsight,
> and we know that we're nowhere near a market top, since that was
> about 50% higher. We're quite possibly very close to a market bottom.
> While we certainly could see an additional 20% drop in the markets,
> we could also see a gain of 50% or more. A significant proportion
> of funds parked in short-term treasuries could easily return to investments
> in stocks. The potential gain/loss ratio is looking good for common
> stocks in favored industries.
>
> Certain companies, such as many clean energy-related firms (among
> others,) are profitable and will continue to reap profits and expand
> regardless of how bad the recession/depression is. That hasn't protected
> most of them from having their prices beaten down in this market.
>
>
> Stock prices are leading indicators of economic conditions. Investors
> who wait until the outlook gets better, will miss out on the large
> gains which typically occur early in stock market recoveries.

Valuations Alone Don't End Bear Markets

It's nice to see some critical thinking out there but this article still falls short. Why? Because it is based on speculation and blind comparisions rather than facts and statistics.

All the leading economic indicators are still accelrating downward and as we learn more about the housing crisis we see that it really is a crisis and it may take years, if not a decade or so to play itself out. We have 19 million homes vacant and an aging society that won't be eager to jump from house to house in the future. Many of these baby boomers will likely move into retirement homes; who will pick up the buying slack?

The stock market is still overvalued by any objective valuation. PE ratios are in the 20's and earnings are falling and falling faster than last quarter. The stock market has not yet fallen to its historic "fair value" of about 6,000, and yet one would expect it to fall far below that level during an economic era such as this.

I could go on and on but we each must thing for ourselves and not rely on hope alone.

I predict the DJIA hits 3,000 within the next several years and falls below 5,000 prior to the end of this year.