O’Shaughnessy: History Tells Us Now Is The Time to Buy

Jim O’Shaughnessy, Chairman and CEO of O’Shaughnessy Asset Management, believes that equity valuations “present buying opportunities akin to 1974 and 1982.” He writes that investors need to ignore short-term volatility and market-bottom calling, and instead focus on where stocks will be three to five years from now. O’Shaughnessy offers a number of historical stats that put the recent decline, volatility and opportunity in context. One is that “there have only been 66 days that the Dow closed +/- 6% (total return) from the previous close. Eight of those days (12%) have come since September 29th of this year.” Second, according […]

Hulbert: Current Crisis is “Textbook Illustration” of Liquidity Shock

In his regular New York Times column, Mark Hulbert looks at the stock market’s behavior since the credit crisis began and references a 2001 academic study to glean some insight as to what we can learn from these types of periods. He writes, “you can view the markets’ behavior since mid-2007 as a textbook illustration of a statistical pattern uncovered years ago by two finance professors, Lubos Pastor of the University of Chicago and Robert F. Stambaugh of the Wharton School of the University of Pennsylvania. They found that the financial markets are always vulnerable to what they called a […]

Cash-to-Stock Market Ratio has Leuthold Group Bullish on Stocks

The amount of cash, bank deposits, and money-market funds ($8.85 trillion) is equal to 74 percent of the market value of U.S. companies, according to this Bloomberg article. The cash-to-stock market value ratio is the highest it’s been since 1990, according to Federal Reserve data compiled by Leuthold Group and Bloomberg. This huge cash hoard has made some professionals, including Eric Bjorgen of the Leuthold Group, more positive about equities. “There is a store of cash out there that is able to take the market higher,” said Bjorgen. “The same dollar you had last year buys you twice as much […]

Gross: More Gloom — and “Enormous” Opportunities

Pimco founder Bill Gross lays out some ugly economic predictions in the latest issue of Forbes, but also offers a tip for how investors can profit from the U.S. financial woes: by buying preferred shares and senior debt of financial companies benefiting from the government’s bailout spending spree. In the past year, writes Forbes’ Bernard Condon, Gross has bought $100 billion worth of such investments. Gross thinks the government will want to ensure that it gets paid back the money it has given to these financial firms, and thus will keep doing — and spending — whatever it takes to […]

Values Abound in Small-Caps

In this week’s Validea Hot List newsletter, John Reese says that his Guru Strategy computer models are finding an array of values among small-cap stocks, particularly among those that would be considered small-cap growth firms. Reese’s Hot List portfolio added eight new stocks on his regularly scheduled rebalancing, all but one of which are in the small-cap growth category — one of the market’s most beaten-down areas of late. For 2008, Reese notes, small-cap growth has been the second-worst performer among the nine size/style categories, according to Morningstar. Small-cap growth funds have lost almost 45 percent on average, with only […]