Start placing your bets.
It's on - The Market just broke through heavy resistance today - Totally disproved a possible double top.
It's off to the races!!
One thing to keep in mind is the vast majority of fund managers are lagging the indicies and are getting nervous. Also, earnings forecasts are too conservative. Prepare for alot of upside surprises and upgrades very soon.
[quote=skeedaddy2]One thing to keep in mind is the vast majority of fund managers are lagging the indicies and are getting nervous. Also, earnings forecasts are too conservative. Prepare for alot of upside surprises and upgrades very soon. [/quote]
Buy the rumor, sell the news.
No tree grows forever.
If you're long, you're wrong.
There's a million stories in the Naked City--and one of them is named Bear.
Joined: May 30 2005
Posts: 2027 Posted: April 25 2007 at 6:05pm | IP Logged
Well, here's my nickel...
I see NOTHING like I saw in the fall 1999/spring 2000. I vividly recall feeling uneasy about the market, but also afraid not to participate at all in it. While I had several years experience in investing for trust portfolios (which by their nature are pretty conservative), I was pretty new to the retail game and very concerned about blowing up a bunch of clients and losing my reputation before it was built. Because of my background, and my fear, I almost completely avoided internet stocks. I recall selling Munder Net-Net to exactly one client on an unsolicited basis. I remember telling a client who was gung-ho to buy Cisco at $78/share, that I had some near-term concerns due to valuation, although I felt like the company was a fine one long-term (I still feel like that client blamed me for his poor decision...he sure didn't follow me when I left the bank!)
My clients and I participated in the market, although we lagged behind since I was using a lot of value stocks, American & Franklin funds. I don't consider myself a value-hound, although I probably lean that way. I was simply afraid of the stratospheric P/E ratios on all the growth/internet/tech stocks. I remember having a difficult time convincing a prospect to roll his IRA into American Balanced Fund, which had just turned in a stellar 3-4% return in 1999. His friend was telling him to call Janus and avoid paying "all those broker charges". The prospect, only because he knew me and my family, reluctantly decided to roll his IRA to me. You all know the history for the three years after that. My client made money, while his Janus-loving buddy lost 70% of his rollover and ultimately bailed at the bottom.
The bottom line is, sure, all sorts of folks are finally waking up and loving stocks after missing the first four years of this run, but I don't think we're done just yet. P/E ratios are about half what they were in spring 2000. Earnings are slowing a bit, but the tank doesn't look out of gas just yet and I think 14,000 before the end of 2007 is very reachable. Is it possible that we'll get a shake-out correction before then? You bet it is. At the same time, if you're going purely off valuation, it looks MUCH less threatening than it did in early 2000. Despite what historians would have you to believe, there were PLENTY of people concerned about high valuations seven years ago. Unfortunately, they were being mostly drowned out by people like a Putnam manager I remember listening to (who sounded like he was about 23) who said...and this is pretty close to verbatim..."I think that a 20,000 Dow in 2005 is pretty much a slam dunk. Think about it...all we have to do is average a 12% return between now and then and we're there." I can't speak for everyone who heard that commentary, but sirens were going off in my head! I just wish I'd kept that CD...
Seven years later, the value/growth roles are reversed. Large-cap growth looks relatively cheap when compared to traditional value stocks. While I haven't abandoned value stocks, I've certainly been overweighting large cap growth for about the last six months. If we are paid to manage money for clients, we will earn our keep when, for example, the Dow drops almost 500 points in one session and/or drops 10% or more between statements and the clients begin to call looking for advice and reassurance. It's not fun work...I did a lot of it in 2000-2002...but if you survive a prolonged bear like that, you have a new perspective (no pun intended) on the market and you pretty much know that you can survive anything (short of a depression)thrown at you.
I'm no Abby Joseph Cohen and I can't tell you which number we'll see first, but I'm a long-term bull. I personally don't know any long-term bears who have survived in this business. Certainly, they won't make more money for their clients than a good bullish advisor. I don't expect a big pullback until we are considerably closer to the 2008 election, but I'll be at least somewhat positioned if we do...Lord help us if we elect Hillary...
How is 4:00 p.m. today look?
My personal opinion is that we see the market run for the next 6-8 months, and then go into neutral until after the election.
But maybe I'm just saying that because of 2004.