Let me comment on some of your arguments...
1. <<we will not see another bull market like the late nineties>> I agree with this. The late nineties were analogous to the late 1920s. But, if you get a chance, go to a public library and get a copy of the the May 2001 issue of Mutual Funds magazine and read the article about the Stealth Bull Market. I sincerely believe we are in a bull market now. It just excludes large cap tech stocks.
2. <<*need* to be in equities>> Preservation of principle is very very important to me. But if there is money to be earned at minimal risk, why not? What is not to like about Cambiar? They have not had a negative year in any of the 26 years since their inception. Those 26 years includes the last two years of the bear market of the early 1970s.
3. As you are well aware, the general sentiment is extremely negative. Investing is counter-emotional. There are extraordinary amounts of cash on the sidelines. This money will return to the markets. FWIW, Salomon Smith Barney is forecasting 20% returns in 2002, but, as mentioned earlier, it will be in different stocks. It won't be in the types of stocks that overperformed in the late 90's. It will be small and mid cap stocks.
4. <<be careful with the market so overvalued>> Through money managers, I am investing in companies who have PEGs of 1. Their average P/Es are 15, and they are growing their earnings at 15% per year. Some of these companies are in the S&P 500, and consequently they get averaged in with the CSCOs (P/E about 80 last time I looked) and MSFTs (P/E around 45, I think), so that the overall P/E of the S&P 500 is about 24. (My numbers may be off a bit here, but you get the idea).
5. I can get 10% to 12% returns on bonds issued by high-quality corporations. There is so much widespread fear that these bonds are profoundly undervalued. The potential for appreciation in these bonds is in the neighborhood of 30% this year.
Bottom line is that the large cap tech stocks have such a huge impact on cap-weighted indexes that they color the general perceptions of the stock market.
My reasons for starting this thread are a mixture of selfish (to learn more and get a reality check) but also to try to help out and suggest that perhaps somebody like you (who I know to be extremely smart, from reading many of your postings) might be well-served to consider a different approach to investing (like I did in December 2000).
I have tested my financial consultant by grilling him with questions, strategies and ideas that I have read on SI and elsewhere. He has passed such tests with flying colors. I submit that you have the discernment to interview a few of these financial consultant types and figure out who really knows what they are doing.
The strategy that I advocate here is a radical departure for many of the rugged individualists who regulagly post on SI. But if small and mid caps are the place to be, who among us has the time to follow 10 or 20 of these stocks?
Tom D |
