Last March, at the market bottom, we wrote a three-part series on why a bottom would not be recognized by most investors.
Investors would be misled on valuation. The debate is playing out just as we forecast.
- David Rosenberg, the economist hero of the bears, continues to see the market as overvalued. We have all been suckers.
- Eddy Elfenbein sees things as more balanced.
We predicted the wide disparity in methods, suggesting that backward-looking methods would fail. The forward-looking methods continue to catch criticism.
Investors would be misled on politics. We suggested that the failure to deal with "troubled assets" would provide scope for criticism. This was correct.
Investors would be misled on economics. We accurately noted the consensus forecasts, much better than most thought at the time, and now proved to be accurate.
Our Current Take
Anyone who is a serious investor or trader should click through to read the old articles, but most will not. Most people start with a viewpoint about market valuation, politics, and economics and stubbornly adhere to this viewpoint even when the evidence changes.
In the face of improving economic data, many focus on their political viewpoints rather than finding investments, a theme that we cover regularly. It is an unfortunate fact that most people highlighting investment articles do not realize that this is an important theme.
In April, we described how this was a classic Wall of Worry. This is also a good read, and one met with skepticism when we wrote it.
Many investors now worry that they have "missed the rally." Here is something to consider. The market is still 10% below the pre-Lehman levels. This was a time when the market was expecting a recession, and some saw a deep one.
The situation is now different. There is a massive stimulus effort, with more to come. There are many problems, as we suggested. It is no longer a question of just "buying the market" but the story is not over. There is still plenty of opportunity for those analyzing specific stocks and sectors.
