Chris B

2009 Depression Will Be Nothing Like 1929

"You certainly want to be long any stock that is doing well in this environment. Consumer staples stocks such as Autozone (AZO), Wal-Mart (WMT) and McDonald's (MCD) are prime examples "
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These safety stocks also won't go up as fast as more volatile, high beta, cyclical stocks in a recovery. In fact, they'll probably underperform the market and riskier stocks on the way up because high beta companies are more discounted right now. If you sell your more volatile stocks on the way down, and buy safety stocks with small gain potential on the way up, you have ensured underperformance against the market by locking in oversized losses and undersized gain potential. When the bottom hits, you'll want to be in high beta - but solid - companies. The good news is that there are plenty of them available. Examples: staffing agencies, technology, international stocks, entertainment & leisure, etc. Many of these shares will appreciate over 100% in the next 3 years vs. maybe 30% for pricier but safer shares like WMT (what, you think their P/E will rise to 25 or something?).

If you think that's wildly optimistic, take another look at stock values after the bottom of the great depression. A lot of investors had fled to safety at the time, due to no better reason than emotion and a horrible external environment. They locked in their losses early and missed double-digit gains in the later half of the depression and WW2.

The bottom is never a time to follow the herd into supposed safety. It's when stocks get irrationally cheap that you get rewarded for thinking for yourself and being agressive. Unfortunately, we investors tend to do the opposite.

Running Strong Again: The Four Horsemen of Technology

Healthcare: the baby-boomer narrative is already in place, you can buy drug companies for PE's of 10, and it has underperformed for years.

But overall, I'm looking at another decade where bonds outperform stocks due to an inevitable long-term correction in consumption. For convenience I'm moving new $ into TIP, LQD, and AGG.



On Jan 24 09:17 AM ArtfulDodger wrote:

> Chris B:
>
> Good comment. I much appreciate reasoned and well-thought out comments,
> such as yours usually are.
>
> What do you think will be the next sector leaders for the coming
> years?
>
> Your answer appreciated.
>
> AD

Running Strong Again: The Four Horsemen of Technology

I swear, this is the internet site of "what we should have bought 5 years ago." Almost all the commentary is about the following:

gold
oil
dollar-shorting
technology
banking

Past performance is no indication of future performance. The world has changed, and none of these sectors is likely to be the next leader. More likely, their recent outperformance means that these sectors are likely to underperform the market for the next 10 yrs. It always works that way.