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In Dow Theory terms, this would mean investing in a period of severe undervaluation and holding on to your stocks (or dollar cost-average into your portfolio) until the end of the bull market – such as September 1999 when the Dow Theory bear market signal was given -- and then stay out until the primary bear market has fully asserted itself. I myself sold all my stocks in January 2000, and since then, I have maintained that we are still in a secular bear market, despite the fact that I am still bullish in the intermediate term. When the current bear market bottoms, I believe that we will be seeing new lows in the major stock market indices -- such that stocks will be attractive from a valuation standpoint once again.
Dear readers, this particular commentary will be a little bit different. In the previous paragraph, I discussed the importance of recognizing and investing in harmony with the primary trend. Easy to say, difficult to do. Secular bull markets are notorious for shaking the average investor out, and conversely secular bear markets are notorious for keeping the average investor in (such as the market we are experiencing now) – that is, keeping them in until it has parted them with their money. Another secular trend that is or will not be difficult to recognize, however, is the super, secular trend of aging demographics around the world. We have all heard it from the media, but how deep and pervasive is the “problem, ” really? A good knowledge of this trend is very important. I will also use this forum to discuss the possible implications as well as other trends that I see happening in the future. I may well be wrong, but I definitely do not want to get caught off-guarded.
To see the entire article, please go to: http://www.marketthoughts.com/z20040624.
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About the Author:
Henry To, CFA is the managing member of Independence Partners, LP, a SEC registered hedge fund. He is also editor of the investment website, www.marketthoughts.com.
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