Another Monday Cliff Dive

This is a tough time for bottom callers.

Mark Hulbert wrote last week that the best market timers in his database are bullish, while the worst ones are not.

Steve Sjuggerud wrote:

U.S. real estate is no longer a bubble. It’s affordable once again. The median family can afford the median home in most of America. Sure, we have an oversupply of homes for sale. It happens in recessions. That’ll work itself out. No big thing. (Really!) And sure, it will likely take many years for the market to stabilize, much less recover. But the bubble is gone.

The forward price-to-earnings ratio for the Dow Jones Industrial Average is about 12. By that standard measure of value, stocks are the cheapest they’ve been in a quarter century… That’s hardly a stock market bubble!

Meanwhile, people are downright fearful. Instead of being scared, you should think about buying. Stocks are 1) cheap and 2) hated. We’re just missing 3) our uptrend… Then, it’s time to buy!

That part about a missing uptrend is worth noting, especially this morning.

You may recall the market’s performance last Monday: The Dow lost 7%, the S&P; 500 8.8%, and the Nasdaq 9.1%. It was the S&P; 500’s worst day since the 1987 crash.

The bailout bill passed on Friday, though, so all was supposed to be well. It wasn’t. The relief rally from that lasted all of three minutes before rolling over and ending the day down again.

Last night, here’s how the rest of the world fared:

-4.3% Japan
-2.6% London (9:00 a.m. Eastern)
-4.7% Germany (9:00 a.m. Eastern)

The U.S. is set to open lower following those acknowledgments that a $700 billion bailout plan that replaces the worst assets in banks with lendable cash still can’t make banks lend. More is yet needed, and a fine step according to traders would be another interest rate cut.

I always like to point out opportunities where they exist, and it’s awfully easy to see the one staring us in the face right now. Real estate prices are down at the same time that interest rates are down. You can fairly often get one or the other, but rarely do you get both.

Consider spending time away from the stock market to get some money together for a down payment (remember those?) on something that’s become a great value. Experts disagree on whether real estate has bottomed and it varies by region anyway, but now is a good time to become that fabled “prepared man” who’s favored by chance.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • Here are your three options:

    Option 1: Annual Subscription (no refunds)

    For just $200 per year, you’ll receive everything listed above to completely upgrade the way you manage your investments. This is 17% cheaper than the monthly option. This is what I recommend:

    Option 2:Monthly Subscription (no refunds)

    If you'd like to try The Kelly Letter  without paying the full year, you can pay $20 per month.

    Option 3:Free Email List

    If you'd like to hear more from me but aren't ready to part with any money yet, you're welcome to join my free email list:

    Join the free list

    Thank you for the work you do. You're a household name here and my wife and I often discuss your letters on Sundays. My ten- and seven-year-old children recognize your name and will eventually be taught to invest using 3Sig and 6Sig. You've had an enormously positive impact on our investing and inspired me to look at the world in more rational and clear terms than I did years ago. I'm sure that thousands of others would say the same. Kelly Letter subscriber Matt Barnes
    Matt Barnes
    Product Line Director

    Join Matt and thousands of other rational investors to invest without stress.

    Subscribe to The Kelly Letter  now!

Bestselling Financial Author