Mike & Bruce, let me play devil's advocate here for a second. If you look at that correction/recovery chart from "the glass is half full" perspective, then you can find a great deal of comfort in those numbers, but if you look from "the glass is half empty" perspective...some questions arise. What I'm getting at is this...
Looking forward -- up until October 1998 -- the average correction was 22.46% -- then followed by a very handsome 53% recovery.
But if you look at that chart going backwards -- you see that every recovery "gave back" 42% of those gains in the very next correction. (.2246/.53 = .4237)
Now I don't know what the index numbers were in Oct 1998, but if we give back 42% of that 267% advance (which incidentally, was 5X greater than the norm), we could be in for quite a nasty haircut - and 'bad hair days' are never any fun.
I love gorilla stocks, and I essentially agree and practice the LTB&H strategy, but I also try to keep in mind that it is just that -- a strategy -- and not a religion. In other words, if I see a bus coming down the street, I head for the curb -- I do not stand in the road thinking 'god will save me'.
I'm afraid that Friday -- in their mad rush to exit the market -- someone tilted the money machine. Starting Monday, I think it's a brand new game -- "stories & concepts" are totally out -- and earnings are in. To be in the market, people are going to be forced to -- once again, "do the math"...i.e...place a reasonable valuation on proven earnings and projected growth rates...and then compare the risk of that valuation to a safer, alternate form of investment -- like government bonds, or the historical returns of index funds. From the safest GE -- to the speculative ICGE -- every multiple of every stock is now suspect.
Ulysses is home from his oddessy, and ready to reclaim his castle from the miscreants -- and it doesn't look like he's interested in taking any prisoners. Value has come home to roost.
"the dodger" |
