We've seen similar conditions 6 times in 25 years. Not the same mind you, but similar. Every case sent turmoil through the bond and stock markets...and every case created the last stages of the platform that produced higher long-term interest rates AND higher stock prices.
Maybe yesterday created the extreme panic in your mind. I hope you didn't succumb. We've been discussing that we expected this cycle to closely correlate to the one we had last year as that big bull market rally up until May suffered a scary correction. Of course, scare is a friend of the good investor, since scare runs all the weak holders of stocks off, and with no bids, the prices crash. In this day of the flash traders, you have zillions of dollars that are so choreographed that their computers can be buying stocks (all together with essentially the same algorigthm) and then when the switch activates, they all together start in the opposite direction. It's unbelievable that this can't be stopped or regulated, since it has NO value except to exascerbate the volatility. But of course, we have to live with it, and the bottom line is that for good investors it doesn't really hurt, it just makes the swings so much more violent.
This is NOT a "I told you so," but we have to think back to August 8th when the extremes of fear and volatility said that the odds were huge that was the peak in the momentum of fear (read "The End is Near!"). It did not say it was the lowest level that the market indices or your stocks would reach in the weeks ahead, but it did say that if that lower low did arrive, it would be only marginally lower and the subsequent months would erase the temporary loss very quickly. We also said to use the correction of last year as the most likely rhyme that the ensuing correction would take.
Our last point was that we didn't expect this "correction" process to end until sometime around Thanksgiving, and our logic was that the effects of the Super Committee mandates may start to bring some more sensible compromise to the spending versus taxing that has America so polarized.
Yet, our long-term discipline is still saying based on the very complex analysis of the last 100 years that today's juncture is still a very good buying opportunity, and furthermore, we'll make sure that we stay close and provide regular updates on the events of the next few days and weeks as they unfold.
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