I Never Thought I'd Get Such a Great Opportunity...

I didn't think I'd see this situation in my entire investment career...

I never thought I'd be able to buy stocks as cheap as they are right now. It's a time of exceptional value...

Of course, I know "cheap" doesn't count for much if you've been holding stocks all the way down this year. But I'm going to show you a few things today that explain why I expect a big rally over the next 12 months.

Until a few weeks ago, the cheapest the stock market had ever been in my career was back in 1995. But it wasn't even officially cheap... It traded at 16 times earnings, and dividend yields were less than 3%. That was nothing compared to history.

I know how cheap stocks were after the 1973-74 bear market... and how cheap they became in the Great Depression. Stocks were even cheap as recently as the early 1980s, after we experienced unprecedented double-digit inflation. Here's a look at the past hundred years of stock market valuation:

When It's this Cheap, the S&P Soars

I didn't think I'd see "really cheap" days like those again in my career. I lived through part of the greatest boom in the history of stocks. But we never got the classic bust. Until last week... 

Almost instantly, stocks are cheap. They're the cheapest in a quarter century. While I can give you all kinds of numbers that show it, and you can see it in the chart, I'm sure your portfolio statement drives this point home. 

Importantly though, "cheap" is only one of the things I look for in an investment. I also want to buy when an investment is hated. Consider this...

One of my favorite indicators of whether stocks are loved or hated is the opinion of newsletter writers. But it's not for the reasons you might think...History shows that when newsletter writers are nearly unanimously scared, it's time to buy stocks. 

Since the 1960s, a service called Investors Intelligence has tracked just that. It's "taken the pulse" of newsletter writers and published a bullish and bearish percentage every week. Last week, the numbers were astounding...Newsletter writers are more scared today than at any time since 1988– 20 years ago. 

The thing is, if you'd bought on that day in 1988 when newsletter writers were so scared, you'd have made a lot of money... The S&P 500 soared 29% in the next 12 months. You'd have to go back to June 1982 to find another reading as low as today's... and stocks soared 49% in the next 12 months after that one. 

We saw extreme readings in 1979 and 1980, too. The average gain over the next 12 months was 28%. My point is... every time newsletter writers were as scared as they are now, stocks soared over the next 12 months. 

Now, you might say, "Well, today is much worse than 1979, or 1980, or any of those times." After all, today we have the big three: the housing crisis, the credit crunch, and now the stock-market crash. We also have more government involvement coming to banking and business. Higher taxes are on the way for investors as well. 

Could the outlook in 1979 really have been worse than the outlook today for businesses and, therefore, the stock market?

It's true, 1979 was a terrible time... Stocks had done nothing for over a decade. Horrendous inflation had eaten away at investors' returns, so they actually lost money. Double-digit interest rates were punishing everyone. And nobody trusted the government. Times were so bad, BusinessWeek ran a cover story called "The Death of Equities."

You get my point... things looked so bad, that folks were asking if the stock market as a whole was "dead." It was a time to buy, not to sell. Same with today.

Right now, as you read this, pessimism is at extraordinary levels... so I think stocks will have an exceptional run over the next 12 months. Make sure you don't miss it!

Good investing,