Bear Markets are opportunities….
We are in the early stages of a long and major bear market that will inflict more pain and in many stocks it has been painful already. While we have never recommended shorting the stock market, we have advised people to “take money off the table” for several years. We have forecast a 30% to 40% market decline off the top with many rallies in between. The brokerage hucksters and banksters, due to the fact that they must keep the commission “meters running” cannot afford to allow periods of reasonable corrections and low volume. The old term was “healthy correction.” They cannot recommend waiting for better buying opportunities which causes many stocks being bought at the highly overvalued prices.
Few investors realize that in the life of any stock(s) there are sellers near the top when profits can be taken and the people who take the lion’s share of the profits are the brokers’ trading desks and foreign off-shore traders who have no tax implications and impediments. As is always the case, the average Canadian and American investor and many institutional investors gets the short end of the bargain.
The trading desks and off-shore investors have the enormous advantage of selling without time constraints due to taxes or any tax implications. What many investors and people in the media do not understand is that today a very small percentage of the public is in the market trading or investing at this time. Many are tired of overvalued brokerage recommendations that proved to be disastrous. You could see it coming for at least three years. They can never say “wait for a cheaper buying opportunity.” But then how are they going not pay the overpaid buffoon analysts?
The late Paul Kangas of NBR was our favorite television commentator for many years. I had been speaking to Paul since 1987 just before the crash. I was working for a firm owned by the late Thomas Mellon Evans in New York and my analysis suggested that the stock market was heading for a crash. Not being sure, I called Paul and asked him for his outlook. He modestly told me that in his opinion “the market was getting ready to be slaughtered.” He was looking for a massacre and told me that “the herd was being led to slaughter by the brokerages.” A week later the market collapsed. Few knew that Paul was one of the most knowledgeable investment interviewers and a superb analyst. The Michigan native had degrees in business and chemistry from the University of Michigan.
Paul knew the markets well and told me that he generally found brokerage house research to border on garbage. After college and military service, he started out in the brokerage industry in New York and was very dissatisfied with the brokerage house’s research so he did the research for his clients himself. He later relocated to Miami where he moved into radio on the local CBS network affiliate.
Prior to his death he told me that one thing that he really liked was gold mining stocks. About twenty years ago he told me that the market had changed dramatically from investing based on value to trend following to the benefit of the brokerage industry but not for the benefit of the investing public. Unlike some of the guests and commentator buffoons that we see today, he focused on having guests who would impart reasonable stock picks. Some buffoon interviewers today could learn a lesson from his approach. On another network, the worse that some guest “expert analysts” stock recommendations performed, the more often they appeared-again and again. Brings tears to my eyes.
Paul recorded each and every recommendation made by his television guests. When a guest market monitor had a return appearance, he or she would be shown live on air how his/her recommendations performed. Paul’s theory was benefit from appearing but “hang by your recommendations.” If a guest requested to not have the recommendations reviewed on air, Paul would not let the guest return.
Conclusion
We are always fully invested in stocks that our analysis finds undervalued. While we do forecast that the stock market is going to get hit hard with rallies back up in between, many investors have been led into a box canyon from where there is no escape. Yet we find numerous stocks that are undervalued and merit attention. Key? Insist on value and assume that you are more intelligent than the Wall Street brokerage house experts because you are.
We are entering a long term bull market in many commodities, particularly gold which has been manipulated for several years. That should change!…..very soon!
Thank you, K.C. Grainger and Bob Pellerin