Matt Blackman

Bear Markets Uncover Value

Yes, I think we all know we are in a bear market and that stocks get cheaper (value increases). The challenge with a pure value approach is stocks get increasingly more attractive as their price drops and simply buying for this reason could cost you plenty as long as the market continues lower.

I think the question on many minds right now is are we in a cyclical or secular bear market? If this is a cyclical downturn, it should have a relatively short duration and buying the correction will ultimately pay off. But in reality, no one knows and secular bears often last decades not years. Simply buying and holding stocks based on value in this environment will turn out to be a very painful strategy indeed.

Analysts See Dow Rising Sharply in 2008

I wonder what the analysts' track record is? They rarely mention that in such forecasts. Correct me if I'm wrong but wasn't Abbey Cohen bullishly optimistic in January 2000 as the market was peaking and didn't Glassman predict a Dow of 36,000 in 1999? And who can forget Henry Blodget?

I would bet that fundamental analysts have a similar accuracy to economists and here is a report on their accuracy at predicting economic slowdowns...

"In 1929, days after the stock market crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability” In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession's pitiful forecasting record offers little comfort." – Economist November 15.