As most investors concentrated on the jobs data this morning, another meaningless and backward looking data point, a much bigger story was brewing behind the scenes.
You see, “Buy the Dip” crowd or most investors out there today, continue to believe that today’s market offers a “buying opportunity of a lifetime”.
This year is off to one of the worst starts in the history of the Dow Industrials, and investors are increasingly concerned about wealth preservation in these turbulent times. Yet, a turnaround is inevitable, and investors are pondering the possibility of wading back into the market. The questions, as always, are what do I buy and when do I buy it?
Perhaps. I’ll be very honest with you. I hate the short side of the market. It is difficult to make money on the short side. I would much rather load up on a bunch of investments on the long side and hold them for the long-term.
And there lies the problem. Even though the market is down about 10% from its highs last year, there is nothing to invest in. The stock market as a whole is massively overpriced. Still selling at the 4th highest valuation level in history.
And unless my valuation analysis skills have deteriorated considerably over the last few years, majority of stocks out there today do not justify a risk averse investment. Now, mind you, I didn’t say speculation.
Then there is this.
This shouldn’t come as a surprise to readers of this blog. I predicted this recession over two years ago. The problem has to do with, once again, investing in overvalued stocks and right ahead of a big market drop.
As my book The Hunt For 10 Baggers illustrated, 75-80% of all stocks tend to decline in a bear market. 15-10% stay flat and about 10% advance. To one degree or another.
I am not sure about you, but I am not smart enough to pick out only appreciating stocks in what is likely to be a massive bear market.
In other words, the abundance of opportunities might be on the short side (stocks like Facebook (FB)), not the long side.
