A buying stampede happens when a whole bunch of investors and speculators all decide at once that a market is moving and they have to get aboard, now. We saw something like that recently when despite a poor jobs report, no inflation pressure, Fed waffling on QE2 and other ambivalent news, the stock market started heating up. There are a lot of underinvested or un-invested people who decided this was what they were looking for, proof that the coast was clear to begin investing in this ongoing bull market. Sure stocks are up 70% from the bottom eighteen months ago, but there is a good argument why it should keep going up. The argument goes that the Fed will engineer what looks a lot like stockholder nirvana, lower rates, mild inflation, better growth, a lower dollar and yet not inhibit strong earnings (if you believe that, we’ve got some real estate we’d like to sell you just as soon as the tide goes out.) Read more

We have to thank Mark Hulbert of the Hulbert Financial Digest for regular reminders about contrarianism. The latest consumer confidence and consumer sentiment data are not a reason to worry about the length or strength of the economic recovery or the market advance. He notes that consumer sentiment is very much a lagging indicator and in times past has bottomed well after the onset of bull markets and economic recoveries. The current low for consumer sentiment was way back in May last year, although we aren’t that far from those levels after this past month’s reading. Typically, consumer sentiment turns several months after the onset of recovery and even further after the onset of bull markets. The recent reports are just a couple more bricks in the wall of worry that this bull market must climb. Read more

We’ve been on the ‘new normal’ kick for a while now. Maybe it’s time for a break?

Your punditry team was chatting the other day (actually we do that a lot, but that is one of the most useful parts of the job) and we got off on the topic of turnover. Have you ever wondered why it is that value investors tend to have a fairly long time horizon while growth investors seem to be much more focused on the near term? It would seem that value investors ought to be the ones with the fairly short time frame. Value, if you do it even remotely right, ought to be the approach that would compel you to buy and sell, buy and sell as one investment after another became cheap and then was recognized as being undervalued and bid up. By the same token, true growth companies should work for perhaps decades before the growth fades and they become more pedestrian. So, which group has it wrong? The value investors who wait and wait until even their worst ideas work out? Or the growth folks, who demand instant satisfaction? We think it is mostly the growth folks. Too many ‘growth’ investors are in fact only momentum investors. Read more