January 27, 2009
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Few have had as many quotes attributed to them as Winston Churchill.
One of his expressions is especially relevant right now: “Pessimists see problems in every opportunity. Optimists see opportunities in every problem.”
These days, there’s certainly no shortage of difficulties– the only saving grace is that the vast majority of these problems appear to be priced into the market.
In fact, a strong case can be made that the pendulum has swung to the point of excess gloom. At a lecture I attended a few years back, a prominent professor of business history commented: “There has always been good news and bad news out there. Only two things vary at any given point in time: First the balance between good and bad news and second what people focus on.” The tech mania of 1998 to 2000 was a classic period in which we only focused on the good news and ignored the bad; arguably we’re seeing the opposite take place today as all that people talk about are the negatives, neglecting anything remotely positive.
For advisors looking to balance today’s bad news with some offsetting positives, here are twelve “good news stories” to consider:
1. Attractive market valuationsDepending on who you ask, stock valuations are generally seen to be at either normal historical levels (which should lead to returns in the 8 to 10% range) or at extremely attractive levels, which would result in returns well above that.
In a recent Advisor Perspectives interview, Bruce Berkowtiz, manager of the highly successful Fairholme mutual fund, said “Prices today are as attractive as I have seen in my career.” Berkowitz is a highly respected value investor, and was chosen to write an introduction to the just released sixth edition of Graham and Dodd’s classic text, Security Analysis.
One skeptic who has changed his views is Robert Schiller of Yale, who predicted both the tech collapse and US real estate meltdown – and now says that market valuations have returned to normalized levels.
And, as most advisors know, none other that Warren Buffett proclaimed in an October 17, 2008, op-ed piece in the New York Times, “Buy American. I am.”Display article as PDF for printing.
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