Hey, Monty. You're not kidding. I know we have a bear on our hands. When I look at the macros, they look terrible. Euro sinking, oil high, no president, Middle East trauma, Fed over doing it with rate hikes, corporate profits slowing, corporate credit crunch, liquidity drying up, and markets tanking to ridiculously low levels. You don't have to tell me we are in a bear market.
However, we were talking about statistics. Statistics tell us that everything regresses to the mean. They also tell us that probabilistically speaking, it is highly unlikely that a data point outside 2 standard deviations from the mean will occur. You can't really argue with that. It is a mathematical fact. Can a deviation occur? Absolutely. We saw it to the upside and we may see it to the downside.
I have something else to add to the statistical discussion. I think the market acts more like an oscillator than anything else. Therefore, I think that when you see aberrations to one side or the other, you'll see an opposite swing to almost the same degree, which means we will see a downside that is as gruesome as the upside in March was delightful.
Now how you react to it depends on you outlook and your time horizon. I'm in the market agressively for at least the next 10 years. That means, I am about to move some serious cash out of my low risk funds and drop them into some tech stocks, which haven't seen these kinds of lows in a good while. For a person with a 10 year horizon, this looks like the mother of all buying opportunities. |
