Is the Market Headed Lower?
by Louis Basenese, Oxford Club Senior Analyst

The Oxford Portfolio Update – March 5, 2009 (Broadcast #851)

Almost daily, a friend or family member interrogates me about whether I think the market has finally bottomed out. “My crystal ball is broken,” seldom suffices anymore.

“No seriously, what do you think?”

“I think you’re asking the wrong question.”

Instead of fretting over the exact day the market turns, we should all be asking, “Will the markets be higher in one or two year’s time?”

I’ll spare you my longwinded explanation of why I believe they will. My short answer is simply – history.

The longest recession on record lasted 18 months (January 1920 to July 1921). We’ll likely eclipse that mark this go round. But going way beyond that point suggests we’re headed for a Depression. And even the most ferocious bears refuse to make such a leap…

As Steve Leuthold, whose Grizzly Short Fund returned 74% last year, told Bloomberg yesterday, “These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid… We’ve been in much worse, much more panicked and more scary situations in the United States.”

I concur. So it follows we should overlook the rampant pessimism and buy into these downdrafts, because we know the stock market will firm up – typically six to nine months before the miserable economic news ends – and the bargains will promptly disappear.

Now, by no means do I advocate going all in and moving large sums into the market. Such boldness would presuppose we indeed have hit rock bottom. And I’m not saying that.

But I do believe investing small amounts in companies destined to survive this recession and bounce back quickly…

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