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Bogue Asset Management’s Quarterly Investment Letter      

Financial market history tells us to expect the unexpected; expect to be surprised.  And positive surprises happen too.  Last year was a tragic one, yet global stocks were up over 16%.  In this latest edition of my Quarterly Investment letter I see the current momentum in the market continuing, but it is not without it's risks.  And I'm beginning to see the headwinds of recent portfolio performance turning into a sustained trend.........[See More]


How your advisor is compensated does matter.  Lately there has been a blurring of the lines with the use of the term “Fee-Based” to describe how one is compensated.  I’ll tell you why Fee-Based is not Fee-Only and the difference can be substantial: [See More]





The Bottom or a Suckers Rally?

Mar 11, 2009 09:26 AM 

Yesterday’s surge in the stock market was a welcome sight for a lot of investors. Did the bottom occur? Should I get back in?

This is the paradox of those who try to time the market. For the losses you avoid, you’re left with the problem of when to get back in. For example, those who were clairvoyant enough to get out in November, I bet you are feeling good. You may have avoided the rollercoaster over the past few months, but did you know that we are less than three percentage points off the lows set back in late November for the S&P 500? If this is the case, has the clairvoyance really provided a big payoff? Not yet.

Now what if you had enough this past week and decided to sell out. How are you feeling now? Are you anxious that you made a mistake and got out at the wrong time? Are you anxious that you now are missing out on the great gains that could potentially happen if last week was the bottom? I bet a few people are feeling this right now.

Who knows if yesterday signaled the bottom or if this is one of the multiple sucker rallies that occur within a secular bear cycle. We won’t know until we are looking back at this in the rear view mirror of time. It could certainly get worse as the market would need to lose another 20% to get within the lowest 1% of historical valuations. But at the same time, historically bad markets have been followed by extraordinary rallies that come without warning when there is no hope. If you are telling yourself “this time is different,” those quotes are usually followed by some poor decision making.

You should have a proper emergency fund and if retired, five years worth of cash flow needs in assets that are relatively safe. But if you are playing the timing game with your long term money, the money that is required to grow so it can meet your needs five or more years down the road, drinking the “timing” cool aid is only putting you at risk for being on the wrong end of a rally. In the end, you shouldn’t get too worried about how far down we have to go. You have to acknowledge simply that stocks are at very low historical valuations and you will be rewarded for this conviction when it’s most important – when you actually need these funds in the future.