Friday, April 10, 2009

Good Time to Buy Stocks Now?

Like the child who has been hiding from an abusive parent, investors are peaking their heads around the corner too see if it is safe to come out and start to buy stocks again. The financial public has had to endure over a year of CNBC and Bloomberg commentators’ constant question to every single guest: “Are we at a bottom yet?.. Is this the bottom?.. How about now?”

I don’t know about you but after a couple months of that constant refrain I started to yell at the TV screen or radio every time Maria Bartiromo or Kudlow The Tax-Obsessed asked Mr. Predictor if we were at a bottom yet. (The most common answer: “I think so, but we still may go lower.”

A bunch of idiots trying not to get caught being wrong by not taking any position but hypnotizing you into believing they just said something which was informed by their years of undocumented beating the S&P 500 and the Dow Jones.

Anyway, I digress. This article is my answer, late as it may be, to the question, “Did daddy pass out yet?” Err.. “Is it now finally a good time to buy stocks?”

The 666 Stock Market Bottom: March 6, 2009

On a date which was numerically fascinating enough on its own, 03/06/09, the Standard & Poor’s 500 Index touched the 666 mark, the sign of the Devil! As of close today, Thursday, April 9, 2009, the S&P 500 stood at 856. This is an amazing gain of 29% in just one month. I would guess that the U.S. stock market hasn’t seen such a gain in so short a time since the 1930’s Great Depression.

I have previously focused on best stocks to buy in 2009: Google and General Electric. Now I would like to state that it is time to buy indexes, buy industrial stocks, buy food stocks, buy penny stocks online for God’s sake! Close your eyes and hover your finger over the business section like it was Ouija board and buy whatever stock it lands on. (Please do not follow that direction, or at least don’t blame me if it doesn’t work out, although chances are it would… But still.)

I was inspired to write this post when I heard Warren Buffett say, “Just because the economy’s going to get worse doesn’t mean it’s not a good time to buy stocks.” This was from his most recent interview with Becky Quick from CNBC.

And the economy is going to get worse. For all I know, another 600,000 will be laid off for the next couple months, lowering national purchasing power, lowering revenues, forcing more layoffs, etc. (By the way, that’s why the government has to intercede, another point Buffett makes well.)

But stocks in all likelihood should not revisit the 666 lows. And even if they do, that does not mean it’s a bad time to buy. Unless you are the next Edgar Cayce, you should not be in the business of calling exact bottoms. And you should certainly not both try and predict the future of the market and invest your family’s money accordingly. Warren Buffett and his second-in-command Peter Lynch never tried to do any of that; they know they can’t. But they have managed small amounts of money into vast fortunes simply by using their own rationality. Be greedy when others are fearful. Now is a high-probability time, a window of investment opportunity if you will. The window is not a little slit like in a prison cell. The window is, say, 350 points wide on the S&P index. And all we can really know is that the longer we wait to buy stocks the more likely the stock market will be more expensive at that time and those corporate earnings will cost more.

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