All that doom and gloom (except in this blog) over the past year or more and you’d think there wasn’t any money to be made. Well, check out the returns afforded by North American stock markets:
When writing A Maverick Investor’s Guidebook (summer of 2010) all indications pointed to a bottom in investor sentiment and market valuations….with improving fundamentals despite the consensus growing more negative. Investing is alot like taking a hot bath – the secret is knowing when to get in (without being scalded) and when to get out (before the water gets cold). I warned in the spring of 2011 that a summertime correction was imminent (out with gold and commodities, in with “Main Street” America I suggested), and indeed it came and went. On September 8th I published Market undervalued? YES! Of course, every other blog or article I read at the time ignored conventional measures and myopically concluded the market was overvalued….since this was the conclusion generally expected of them.
On October 24th, I considered the correction in materials and metals (with the exception of gold) to have run it’s course, and published Time to buy base metals says expert! Those with a sense of humour will know “I” was the so-called expert, but nevertheless the metals and mining index rocketed up roughly 42% or six-fold better than the TSX Composite Index.
Then on November 1st, in a posting entitled Understand stock market in one minute! I tried to point out the virtues of avoiding the obvious (golds) and focussing on what we know best…..good companies performing well that are under the radar screen. Gold did plummet from $1700 to $1550 (recovered nicely since then mind you) but over the same time period (just 2 months) Pfizer managed to steadily wind its way up >10%.
Understandably, I’m leaving out any ‘missed’ predictions – after all I’m only human. But as a for instance, if instead of patting myself on the back after correctly anticipating that gold was overbought and would drop; when the gold price fell as low as $1550 I could (maybe should?) have bought some and I’d have done pretty well if so. Having rebounded since then to almost $1750 an ounce, it’s done slightly better than the Pfizer, but still far less than dozens of other good companies – I still prefer real businesses participating in a rejunenating U.S. economy.