Ken Fisher on the market
... Let's turn to the pessimists. They contend for various spurious reasons that we're
not in a cyclical bear market but a secular one. In other words, we're doomed to
two or three more years of continuous downward movement. This view surfaces
in volume late in every bear market. It is normal and precedes the final wave--the
Death of Equities stories that we will soon see, about why stocks will never, ever
be a good deal again. At that point the optimists fade away and the future looks
grim to everyone, creating the bottom.
The pessimists, however, are simply beyond rational. Both 2000 and 2001 were
negative years. History shows that, using correctly calculated, cap-weighted
indexes, the U.S. has suffered just three instances where the market fell more than
two years in a row. And those times don't resemble our day. Take the most recent
one, the war-jittery 1939-41 bear market. Equally evil, Osama bin Laden has not the
multinational coalition behind him that Adolph Hitler had. The other two long periods,
1929-32 and the 1830s, featured an imploding money supply. That's not the case
today.
We've had many eras with two years down, three years up, two years down, one
year up--a decade or more when stocks sawtoothed and overall ended up going
nowhere. Some people are predicting that we're going into another such period,
last seen from 1966 to 1982. Overall flat, yet capable of driving investors crazy.
Maybe it will happen again, maybe it won't.
Yes, forecasts are wonderful--when they work. I've studied forecasting, its
history and processes, more than you want to know. I've developed methodologies
of my own. I've tested those of others. My conclusion: No methodology exists to
deliver any accurate long-term forecast, ever.
Be extremely skeptical of anyone telling you what will occur in five or ten years.
Plenty of seers do so and will. And some of them are famous names, legends
even. John Templeton--soon to be 89--and one of the alltime great investors,
recently has adopted the 1966-82 analogy (see story, p. 135). I've always been
personally interested in Templeton because, among many other reasons, we share
a birthday (not year). But the record of big-name investors morphing into
perma-bears as octogenarians is long and near perfect.
While I may be wrong, this market is most likely going to find a bottom in late
December tied in part to a wave of tax-related selling, the biggest one in decades.
Then, too, comes a year-end euro currency panic as the paper is converted,
revolving around Europe's vast underground economy, which will suffer huge tax
penalties in the process. And, finally, sentiment should bottom when forecasters
harden their hearts looking into 2002, delivering downbeat economic and market
forecasts, not wanting to be wrong again.
I don't have my specific next-year forecast right now, and won't until January, but
overall it will be positive. So yes, a bottom is coming, and not too far away.
Until then, hold tight. Remain defensive. |
