Wednesday, November 19, 2008

The Good News Is It Doesn't Get Much Worse Than This; The Bad News Is That Trends Almost Always Last Longer Than One Thinks They Will-Or Stay Solvent

One maxim that I have repeated often over the years is that trends always last longer than you think they will. The market doesn't care what we might think is reasonable and will almost always surprise us by continuing to trend up or down even when it seems to us that the move has already gone too far.

And that brings us to today's action and new lows for the major indices. Many market pros, including even Warren Buffett, have been telling us for a while now that this market has already corrected enough and represents a great value. They were far too early and have failed to respect the most powerful thing in the market, which is the trend. Five years of gains are now gone, and we are back at levels last seen in the last bear market back in 2002-2003, and it certainly is possible we may sink even more.

Unlike so many other market pundits, I'm not going to try to guess when this market will hit a low. I have no idea. The good news is that it doesn't get much more grim than this. The negativity out there is pervasive, and there is no doubt that this market is both scaring and wearing investors out. Even if you are sitting in cash, it is downright depressing. However, that sort of contrarian thinking is nearly impossible to time, and things can certainly get worse before they get better.

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