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The Great Buying Opportunity in Stocks Is ComingBy
Friday, February 27, 2009
The moment we're all waiting for is coming...
Our kids and grandkids will never have to worry. Stocks will be so cheap, it won't even matter what you buy. As I'll explain, it could be the start of a 17-year "tailwind" in stocks... When I first came up with the table below many years ago, I didn't actually think we had a chance of it coming true once again. This table shows you how stocks go through generational cycles, lasting roughly 17 years... One generation learns to love stocks. The next generation learns to be disgusted by them.
* Data starts in 1914
^ If you adjust this number for inflation, it's negative. My grandparents lived through the Great Depression. The experience scarred them so dramatically, they never bought stocks, ever. My parents' generation lived through the Great Stock Boom, spanning most of the 1980s and the 1990s. Ten years of negative returns haven't killed off their faith in stocks yet... It'll be tough to convince them they'll never make money in stocks. (Another five to seven years of terrible times like now... that should do it!) Is today the stock market bottom? Has the fear reached its peak right this second? Or will the fear get worse, and will the stock market bottom five years from now? Unfortunately, I don't have the answer to those questions. But we do know stocks will find a bottom. We are closer to a bottom than a top. And we are closer to a historic buying opportunity than a historic high. I will be a buyer again when the uptrend returns. I define the return of the uptrend as when the S&P 500 closes a week above its 45-week moving average. (History shows this is an incredible indicator, good for double-digit annual gains in stocks.) This could take five years, or it could happen tomorrow. Here's where we are now:
My generation may end up like my grandparents... swearing off stocks forever. But that will be the wrong way to go. Chances are excellent that my kids' generation will have the luxury of a seventeen-year bull market, an epic tailwind. In the worst case, a great bull market – where you could buy and go to sleep and still make money – should begin sometime in the next five years. In the best case, we're almost there already. I'm seeing more cheap and hated opportunities than I ever have in my career. I'm just waiting on the uptrend. I will let you know when the uptrend returns, and it's safe to go back in again. Good investing, Steve P.S. Now's not a great time to get in on the stock market in general. Butclick here for one incredible income opportunity that's in its "sweet spot." And click here for another opportunity I've found in a little-known corner of the gold market.
Further Reading:
Read This If You're Confused About What the Government Is Doing Market NotesHOW TO TRACK THE WORLD'S BIGGEST DISASTER
In the past decade, one China story has dominated the world's newspapers, magazines, and investment advisories. That story is the "bull case."
What you rarely read is that China is also the world's biggest potential economic disaster. The "bear case" goes like this: China has a centrally planned economy... which has allocated hundreds of billions to unproductive enterprises. And China's dependence on low-margin manufacturing is a killer in a world cutting back on televisions, cars, and appliances. It's a huge potential story that will play out over the next few years. We'd be fools to tell you what will happen. But we can give you an easy, no B.S. way to track the situation: the price of copper. The Chinese government lies about its job and GDP statistics. But China is the world's workshop... so it's also the largest copper consumer. If the country starts to "blow up," you'll see it in a plunging copper price. Here is our rough guideline: If copper holds above its December lows around $1.35 per pound, China's glass is half full. If copper violates $1.35, China's economy is going to hell in a hurry. |
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