Bullish on America
Readers of this space have grown accustomed to the unsolicited—and thoroughly unprofessional—advice we sometimes offer on the stock market. To recap, about three years ago we began warning about an excessively priced market. A year ago we fretted about rising prices of crude oil, which almost always foreshadow an economic downturn. And all along we have voiced anxiety about the rising class of equity-enriched yuppies, the size 2 women driving the Expeditions, the expensive cigar craze, and all those huge damned houses where the only thing exceeding the square footage is the tastelessness of it all.
In our judgment, the fin-de-siècle material rush that is almost over was a fairly silly event. Very soon now, those who did all the purchasing will realize that they really aren’t any happier than they were before they started their spending sprees. But it really won’t be anything spiritual that will have slapped these people upside the head and told them to quit spending. It will have been this slowing economy, which has pulled down the markets, hurt earnings, and made us all a little bit more careful.
Our last financial advice in this space was to hoard cash and buy bonds. We now advise readers to buy stocks.
Much talk has been wasted about whether the slump in the stock market will be a V (sharp downturn and equally sharp uptick), a U (a downturn that takes longer to turn around), or an L (a downturn that really never comes up). In our judgment, we’re gonna have a U, with a little bit of L, and if you’re still with us on this, suffice it to say that you have just got to go out there and separate the dogs from the darlings. Amazingly, some people don’t know the difference. So, here’s a fundamental lesson: If a company is losing a boatload of money and the CEO is in his 20s, don’t buy the stock. If the company is making good money and makes something we need (car parts or lite beer), then buy it.
The reason we should be buying is because things are beat up. You don’t want to buy into the markets when things are absurdly high—and we were there only a year ago. Today, however, the Nasdaq, Dow Jones, and S&P 500 are seeing some good dips. All of them have seen more ups and downs than the manic-depressives who wander the streets of Nashville screaming at passing cars. There is no shortage of value-oriented companies (i.e., safe businesses producing things we need) with good earnings whose stock prices are in the trash can.
Highs and lows are inevitable when it comes to stocks. The trick is finding the highs and finding the lows. We confess that we missed the high—we were early. And we may be missing the low one way or another.
But better to do this than to jump into the market when it’s too hot. Now things have gotten chilly. But it won’t stay chilly forever.
Buy low. Sell high. It’s only as complicated as you want to make it.
