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Friday, December 19, 2014
U.S. stocks had their worst week in over three years last week – falling 3.5%.
You couldn't have missed that – it was all over the financial news.
Is this massive fall in one week the sign of the end? Is this the peak of the great bull market? Is it time to worry?
In short, no.
Instead, history tells us we should buy this dip. Let me explain...
Something extremely unique has happened in the stock market in the last two weeks... It's only happened twelve times since 1928.
Importantly, in 11 out of 12 instances, stocks were higher 20 weeks later – with an average gain of 5.9%. This is according to Jason Goepfert of SentimenTrader.com – who does excellent work.
So what is this unique thing that happened?
Stocks hit a multiyear high two weeks ago – and then closed at a six-week low one week later.
After such a bad week, investors have panicked a bit. When investors see an all-time high, followed by a terrible week, they typically get nervous... quickly.
History tells us that we shouldn't get nervous...
In hindsight, out of all 12 previous instances, this market action signaled a peak just once – and when that happened, I wasn't even born yet. (It happened in February of 1966.)
Jason Goepfert says, "Other than that [1966 instance], any further weakness [in the market] was limited and temporary."
After the worst week in three years, investors are now worried.
Don't join them. Instead, use their worry as a buying opportunity.
Steve's True Wealth subscribers are up 30% in three months in China. And many people say it can't go up any more. "If you think like that," Steve writes, "my friend, I'm sorry... but you'll never grow wealthy through investing." Find out why right here: The Dumbest Investment Thinking Ever – Are You Guilty?
Last week, Steve's friend Meb Faber launched a new fund. It's based on a bold new business model – one that "could entirely disrupt the fund management industry as we know it – for the benefit of individual investors." Get all the details here.
THIS "BORING" BUSINESS CONTINUES TO SOAR
Last week, we showed you why "boring" means big money in investing... Today's chart provides proof.
Longtime readers know we're fans of simple businesses. Contrary to popular belief, you don't need to invest in complicated businesses to make money. Companies that "sell the basics" are often great long-term investments.
A great example is Clorox (CLX). Most people associate Clorox with cleaning supplies... but over the years, Clorox has acquired a diversified portfolio of household-name brands. Some you may recognize include Brita water filters, Kingsford charcoal, Hidden Valley dressing, K.C. Masterpiece sauces, Glad trash bags, and even Burt's Bees skincare products.
Selling the basics has made Clorox a cash-flow machine. The company has paid and increased its dividend each year for the last 37 years. And as you can see in the chart below, its share price has been increasing, too. Shares are up nearly 60% over the past three years. And yesterday, Clorox shares reached a new all-time high. It's more proof that selling the basics isn't exciting... It just works.