The Great Buying Opportunity in Stocks Is Coming
By Dr. Steve Sjuggerud
Friday, February 27, 2009
The moment we're all waiting for is coming...
Our kids and grandkids will never have to worry. Stocks will be so cheap, it won't even matter what you buy. As I'll explain, it could be the start of a 17-year "tailwind" in stocks...
When I first came up with the table below many years ago, I didn't actually think we had a chance of it coming true once again.
This table shows you how stocks go through generational cycles, lasting roughly 17 years... One generation learns to love stocks. The next generation learns to be disgusted by them.
| 100 YEARS OF INVESTMENT GENERATIONS |
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Generation
|
Stocks (S&P 500)
|
Years
|
| 1914-1930 |
159%
|
16*
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| 1930-1947 |
-30%
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17M
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| 1947-1965 |
503%
|
18M
|
| 1965-1981 |
35%^
|
16
|
| 1981-1999 |
1054%
|
18
|
| 1999-2016 |
-?
|
17
|
* Data starts in 1914
^ If you adjust this number for inflation, it's negative.
My grandparents lived through the Great Depression. The experience scarred them so dramatically, they never bought stocks, ever.
My parents' generation lived through the Great Stock Boom, spanning most of the 1980s and the 1990s. Ten years of negative returns haven't killed off their faith in stocks yet... It'll be tough to convince them they'll never make money in stocks. (Another five to seven years of terrible times like now... that should do it!)
Is today the stock market bottom? Has the fear reached its peak right this second? Or will the fear get worse, and will the stock market bottom five years from now?
Unfortunately, I don't have the answer to those questions. But we do know stocks will find a bottom. We are closer to a bottom than a top. And we are closer to a historic buying opportunity than a historic high.
I will be a buyer again when the uptrend returns. I define the return of the uptrend as when the S&P 500 closes a week above its 45-week moving average. (History shows this is an incredible indicator, good for double-digit annual gains in stocks.)
This could take five years, or it could happen tomorrow. Here's where we are now:
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We're Still Waiting on an Uptrend
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My generation may end up like my grandparents... swearing off stocks forever. But that will be the wrong way to go. Chances are excellent that my kids' generation will have the luxury of a seventeen-year bull market, an epic tailwind.
In the worst case, a great bull market – where you could buy and go to sleep and still make money – should begin sometime in the next five years.
In the best case, we're almost there already. I'm seeing more cheap and hated opportunities than I ever have in my career. I'm just waiting on the uptrend.
I will let you know when the uptrend returns, and it's safe to go back in again.
Good investing,
Steve
P.S. Now's not a great time to get in on the stock market in general. But click here for one incredible income opportunity that's in its "sweet spot." And click here for another opportunity I've found in a little-known corner of the gold market.
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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HOW TO TRACK THE WORLD'S BIGGEST DISASTER
In the past decade, one China story has dominated the world's newspapers, magazines, and investment advisories. That story is the "bull case."
What you rarely read is that China is also the world's biggest potential economic disaster. The "bear case" goes like this: China has a centrally planned economy... which has allocated hundreds of billions to unproductive enterprises. And China's dependence on low-margin manufacturing is a killer in a world cutting back on televisions, cars, and appliances.
It's a huge potential story that will play out over the next few years. We'd be fools to tell you what will happen. But we can give you an easy, no B.S. way to track the situation: the price of copper.
The Chinese government lies about its job and GDP statistics. But China is the world's workshop... so it's also the largest copper consumer. If the country starts to "blow up," you'll see it in a plunging copper price. Here is our rough guideline: If copper holds above its December lows around $1.35 per pound, China's glass is half full. If copper violates $1.35, China's economy is going to hell in a hurry.
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Gannett is slashing the dividend on its stock for the first time in its history as the largest U.S. newspaper publisher finally succumbs to the financial squeeze that has triggered similar moves by its cash-strapped brethren.
As an advertising drought dries up the main source of revenue for newspapers, more publishers are scrambling to conserve cash – a pursuit that is erasing dividend payments. McClatchy Co., Media General and The New York Times Co. are among the major publishers that have decided to eliminate their dividends since the end of 2008.
– USA Today
Japanese exports to the US were down some 37% yoy [year over year], losing some 26pp since the 11% yoy contraction in July.
But we cannot highlight strongly enough how truly mindboggling Japan's collapse in exports to China are. Last July they were expanding at a 16% yoy pace. Now they are contracting at a 35% yoy rate!
This is a phenomenon throughout the region. Hence despite the notoriously manipulated Chinese GDP data showing a shocking slowdown in GDP growth to 6.8% yoy, I would eat my hat if the Chinese economy was doing anything other than contracting right now.
– Albert Edwards,
Societe Generale strategist
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Friday, February 26, 2009
Watch for This Signal to Sell Your Gold
Wednesday, February 25, 2009
A Dramatic Turn for the Worse
Tuesday, February 24, 2009
What You Must Own When the Banks Go Bust
Monday, February 23, 2009
How to Make Safe, Double-Digit Gains Outside the Stock Market This Year
Saturday, February 21, 2009 |
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