Buy Stocks Now

Forbes.com Columnists ^ | 07.08.02, 12:00 AM ET (06.23.02 - web) | Kenneth L. Fisher

[lentulusgracchus]

Legal disclaimer of my own -- I am not a financial advisor or anything like it, either -- so there! <moronic singsong> Anything you can disclaim, I can disclaim better ... </singing>

Nobody here but me and my enthusiastic opinion. FWIW, AFAIK, and IMHO all apply.

[lentulusgracchus]

I continue to be concerned the Chinese are equipping for an attempt to cross the Formosa Strait. That would dump the markets really fast, since it would bring two nuclear-armed powers into direct military conflict for the very first time. We'd smoke them if we went nuclear, and China's population would probably fall by 75% in the year following if we really decided to take them down hard and kill their ability to feed themselves -- but that would be precisely the kind of confrontation markets hate the most, and would be an engine of destruction on the stock exchanges such as I've wondered about. The world's first general thermonuclear exchange -- wow, that would definitely do it!

[firebrand]

Nice of him to tell us all the stocks he just bought.

[lodwick]

Weiss of safemoneyreport.com agrees with your take.

[ThePythonicCow]

Stocks can go nowhere but down right now. In fact, if they return to normal valuations, the stock market could easily fall by 60%. And that is likely to happen.

I agree that we are likely in a secular (long term) bear market. But just as one could lose money in the last big bull market by getting caught in the cyclical (shorter term) bear markets, the downdrafts on the way up, one can also, though with greater risk, make money in this big bear market, if such it be, by catching the bear market rallies.

[ThePythonicCow]

What's so horrific now?

Yeah, there's definitely much wrong. Besides the trade deficit you mentioned, there is the related excess valuation of the dollar, stock prices that are still high by historical measures, real estate's too high, ...

The currency devaluations in Argentina are spreading to Brazil. And the dollar is beginning to get its first scent of the same.

[lodwick]

That would be report, not repot. doh

[lodwick]

Part of Mr. Weiss' 20 June free public report:

Though some economic data seems to point to a rebound (productivity, manufacturing), other economic fundamentals (business spending, employment) remain weak. Plus, other "strengths" in the economy (consumer spending) are now becoming weaknesses.

Consumer spending, which drives two-thirds of the economy, is undoubtedly the greatest variable when it comes to whether the current slump in the U.S. economy will worsen. And, right now, there is strong evidence that consumer spending is faltering. Retail sales sank 0.9% in May, their biggest decline since last November. Plus, consumer sentiment dropped much more than expected in June, indicating that consumers are not as optimistic about current and future conditions and may rein in their spending.

As consumers cut back on spending, the economy will inevitably fall back into recession. And the second stage of this recession could pack an even greater punch than the first.

[ThePythonicCow]

but I don't see the underlying damage to the world economies that was caused by World War I and its huge war debts (which caused widespread devaluation or delinking of world currencies from gold and silver), ... It would take war with China

There's a whole lot of fiat money been printed these last decades. It wasn't until the early 70's, as I recall, that Nixon unlinked the ability for foreign dollar holders to exchange for gold. I am more optimistic about gold than you, and less optimistic about the dollar, over the next ten years.

[lentulusgracchus]

I am more optimistic about gold than you, and less optimistic about the dollar, over the next ten years.

You're right that there is just a whole lot of paper sloshing around. I've been aware of the G-7's hold-hands-and-reflate strategizing, which could I suppose be characterized as a conspiracy of the note-printers against the rest of us. And yes, the gold holding that I sold recently was a core holding, and I just haven't replaced it yet after my convertible preferred issue was called at the company's option for an exchange into common. (I didn't want common; I want an income-paying convert.) I'm looking for a replacement, though not very hard as gold-backed assets have gone soft and Investors' Intelligence keeps reducing their commitment level in their own portfolios, reflecting apparently some suspicion on their part that we've had an intermediate top in gold issues.

In the longer run, then, I'm bullish on gold, especially if the G-7's are baited into reflating even more later this year and next by bad markets. I.I. is very bullish long-term, but they have their own way of refusing to fight the tape, as Marty Zweig always says, and that is by reducing allocations and commitment levels as their chart work suggests.

They have made a call recently that the dollar has turned, and probably on a multiyear basis. They aren't as sure how bad a development this is, but it'll put rocks in the market's pockets as conversion factors weigh on foreign investors' minds going forward. I. I. doesn't see a mass exodus of foreign dollar holders, not yet anyway, but just more of a drag factor.

[lentulusgracchus]

Thanks for the link, I'll have a look later at his comments.

[lentulusgracchus]

Bear markets typically overshoot fair-market P/E's, just like bulls do....the newsletter I was quoting above, in one of their lookback mini-articles, was talking about P/E's around 4 to 6 being common. I remember a lot of P/E's in the single digits when the '82 bear was on -- and those P/E's were based on shrunken, recession earnings. Price-to-book was also extremely low, and the Ben Graham value fans were having a buying field day with whatever cash they had on hand.

[lentulusgracchus]

Market-timer Paul Merriman's comments and current (very cautious) market allocation are posted here: Fundadvice.com

and quantitative analyst Elaine Garzarelli's free public comment is posted here: Garzarelli.com

She's a little more constructive on the economy and sees the buying opportunity coming up.

[Osinski]

Now for a totally different perspective:

http://www.freerepublic.com/focus/news/704316/posts

Summing up: It’s crunch time for the old recipe of US-centric global growth. What worked so brilliantly for the past seven years seems unlikely to do the trick this time. Global risks are mounting and there may be no easy way out for world financial markets.

[Lessismore]

Re #22 -- I'm not so worried about China invading Taiwan. More likely the Taiwanese will become more and more integrated into the Chinese economy. It is already happening in the IT industry. Eventually the politics will follow the money.

[ThePythonicCow]

Not totally different - just different in time scale.

I agree that the next ten years will suck. Indeed, this may well be what poses the greatest risk to Bush in 2004. The public doesn't hold him responsible for what we've seen so far -- much of that was already in progress by the time he took the Oath of Office. But a dramatically worse economy over the next two years would present a real challenge. He could lean conservative, like Hoover did, and get run out of town. Or he could lean liberal, like FDR did, and use it to win a second term easily. Pretty clearly, he's willing to lean liberal.

So I predict:

1. worse times ahead for the economy,
2. major bull market for gold already begun,
3. greater Middle East wars ahead,
4. Bush will lead us in war, and "feel our pain",
5. two full terms for Bush, and
6. no balanced budgets for quite a while.

But for the short term, I predict a nice little bear market rally, and I urge us to Get the Senate Back!.