Читать книгу Unloved Bull Markets - Craig Callahan - Страница 12

On March 9, 2009, the stock market hit bottom after a seventeen-month agonizing bear market. Six months earlier, Bear Sterns and Lehman Brothers, two prestigious investment banking firms on Wall Street, collapsed under the weight of subprime mortgages. General Motors was facing bankruptcy and seeking a government bailout. Unemployment was 8.7% and racing to 10%. GDP had been negative for two quarters, including a stunning negative 8.5% quarter-to-quarter drop during the fourth quarter of 2008. Out of that setting, the bull market began. From the low on March 9, 2009, through February19, 2020, the Standard & Poor's (S&P) 1500 Index gained 530.12%, meaning if an investor had the courage to invest $1.00 at the bottom and hold eleven years, $1.00 invested would have grown to $6.30. As impressive as that is, many investors did not participate. Rallies and bull markets are often disguised.

On Monday July 13, 2009, I was on CNBC TV “Squawk on the Street” with Erin Burnett; Matt Nesto, who was substituting for Mark Haines; and another guest, Dan Deighan of Deighan Financial Advisors. Figure Intro.1 shows the S&P 1500 Index from December 31, 2008, through April 30, 2010. The arrow points at July 13, 2009, the day of the interview. Just prior to the interview the rally took a brief pause late June and early July.

Erin:	How do you position yourself? On the bullish side or the bearish side? Whether you go for a cataclysmic collapse or slow bleed?
Matt (after Mr. Deighan gave his bearish outlook):	Let's get Craig in before he blows a gasket. He's a bull!
Craig:	Yes, I am. It all starts with value. We measure the market right now to be well over 20% below fair value. The corporate bond rally is the best bond rally I have seen in decades and that is very supportive of higher stock prices. Many times we have seen the bond market just pull stocks along with it and I would expect it this time. So we think this is just a pause to the first leg of recovery and we expect the next leg will start soon.
Erin:	And where does that come from? What will be the catalyst for growth?
Craig:	We do not need a robust recovery. We just need the world not to be as terrible as was believed a few months ago. The market did overreact. People were talking depression back then. We are obviously not having one of those, so stocks are just trying to get back to fair value from a time period when people thought we were in a horrible [economic] setting.
Erin:	So you think stocks can go up without any catalyst from where we are now?
Craig (without hesitation):	Yes, we see them going higher.
Erin to Mr. Deighan:	And how low do you see them going? You're saying below the March bottom?
Mr. Deighan:	I see them going below last fall's low as much as 25% to 50% below that.
Erin:	25% to 50% below? Well, that is a great depression scenario.
Mr. Deighan:	That's huge.
Erin:	Where do you see unemployment then?
Mr. Deighan:	I see unemployment getting to 12% to 13%.
Erin:	OK. So, I want a best trade from each of you. Let's start with you Craig.
Craig:	Coach … apparel, purses. The third best performing sector this year has been consumer discretionary. That would surprise many people, but this is an economic anticipation recovery rally and the consumer discretionaries are part of that.
Erin:	And you, Dan?
Dan:	I don't have one. I don't have any buys right now. I think I would sell anything that is based on discretionary spending.

From July 13, 2009, through April 30, 2010, as seen in Figure Intro.1, the S&P 1500 moved higher gaining 35.32% and consumer discretionary was the best sector, gaining 56.98%. Coach was acquired by Tapestry so we can't find a price for it, but Tapestry gained 76.23% over that period. In Chapter 2, we will see that consumer discretionary was the second best performing sector over the eleven-year bull market.

Figure Intro.1 S&P 1500 Index, 12/31/2008–4/30/2010

That interview simply shows that one analyst was incorrectly bearish, but the first chapter will offer evidence that many investors did not participate in the bull market, as seen by investors redeeming from equity mutual funds rather than adding to positions to profit from the long-term market advance. Also, as evidence this bull market was “unloved,” investor sentiment was much more negative than in the previous two multiyear bull markets.

Those who have missed out try discrediting the bull market stating that it wasn't sensible or was due to gimmicks such as excessively easy monetary policy, bailouts, or corporate buybacks. This book will counter justifications by investors and advisors that this bull market wasn't sensible. The second chapter will show that the long bull market was sensible, had some behaviors and traits similar to previous bull markets, and, therefore, was fairly typical. In the subsequent chapters, the book will examine situations and conditions that bothered investors and could have caused investors to sell or, at least, sit on the sidelines. Looking back, this “wall of worry” was a darn big wall and so was the proportionate climb for stock prices. Let's see if there were lessons to be learned.

The great bull market ended February 19, 2020, just two weeks short of its eleventh birthday. Then the market experienced a twenty-three-trading-day crash, from February 19 to March 23. We could argue that twenty-three days does not qualify as a bear market and that the dip was just an interruption to the multiyear bull market. Because the S&P 1500 Index dropped 34.5% over that period, we would probably lose that argument because a drop of 20% or more is a very popular, although arbitrary, definition of a bear market.

If we concede that the eleven-year bull market ended, then the rally off the March 23, 2020, low must be a new bull market and a spectacular one at that. The NASDAQ Index got back to a new all-time high in fifty-three trading days. The S&P 500 Index took 103 trading days. If the eleven-year bull market was “unloved,” its sequel was downright despised, as shown by the bearish, skeptical, negative commentary that dominated print and broadcast media.

As in 2009, I was interviewed just before and after the bottom and provided a bullish outlook. In an interview with nationally syndicated financial columnist Chuck Jaffe that aired on his podcast “Money Life” on March 20, 2020, one trading day before the bottom, I stated, “Best bargains we have ever seen.” Mr. Jaffe then asked, “When do you buy?” I responded, “There are all of the supportive conditions typical of buying opportunities. I think that it is a matter of days or weeks. We're close.” A week and a half later, on CNBC TV “The Exchange,” I declared, “We do believe a bottom is forming and it seems like all the bad news is priced in.”

The two recent bull markets that began March 2009 and March 2020 seemed obvious to us but not to most investors.