Dec 08 2008
Where Will The Market Go From Here?
After many months of steep market declines, there are some very smart people buying in with both hands. Warren Buffet has stated that this is the time to grab U.S. stocks, and now Stephen Leeb reports that the CEO of General Electric has bought heavily into the company. Does that mean the decline of the market is over or are these people just overly optimistic. Or does it even matter?
In the twenty years that I’ve been trading, there is one good thing that I’ve learned: never try to figure out where the bottom is. The only time anyone will know is months after the bottom has occurred. The time to buy into a stock is when it is a good deal, and there are some very good deals out there right now. Actually, there are many good deals out there. But the next month’s unemployment numbers might impact the market greatly. If you buy in now, looking for that bottom, it’s hard to say if that upcoming job report might not imfluence those numbers a great deal.
One thing is for sure: even if the market begins to climb, it’s pretty difficult to believe it will go blitzing back. There are several reasons for this. First, the booming market of the past twenty years has been led by the baby boomer generation who needed to invest aggressively in order to have a good retirement. Many of those people are now entering a time crunch area where they can not afford to lose any money. They will naturally prune down their stock holdings in favor of cash or even bonds. The recent market fall left many of these investors wary of investing at all, especially in their twilight years.
What probably will lead the upward movement of the market, when that movement does come, will be institutional investors and big money from folks like Buffet, Sims, Gates, and Pickens. These people have so much money that can be thrown into the market that they may drive the rebound all by themselves. Consider someone like Oprah Winfrey or any well paid basketball player, wealthy business owner and the like. We have had over a hundred years for the wealthy to build fortunes, and with bargain stock prices, their personal planners will go shopping.
If you have stayed in the market, you will find, to your surprise, that as long as you chose solid stocks, your net worth will probably be more than if you had jumped out. When stocks rebound like this, they generally return to their pre-crash prices long before the Dow returns to the pre-crash level. This is experience here talking, so be patient and watchful.
Most of all, have faith. Whether we go through a tough time again or not, the point is that we will persevere as a nation. We’ve done it before, and we’ll do it again.
