PIMCO’s Mohamed El-Erian says that “Only New Thinking Will Save the Global Economy”. El-Erian believes that the situation will get worse before it gets better, saying that we are moving toward a “different destination” and one that results in “more market accidents, disorderly sectoral realignments and additional shifts in policy.” He goes on to say that “we are also in the midst of a prolonged increase in precautionary behavior among entities that have suffered massive… Read More
Top managers from Legg Mason, including Chuck Royce, Hersh Cohen and Isaac Souede, think that stocks are priced for a depression but that a depression is unlikely (Souede thinks there is a 20% chance of a global depression). At Legg Mason’s year-end investment briefing, the managers said “the stock markets won’t rebound until the global credit crisis is fixed.” Royce, Legg’s ace small cap manager, “hopes to start seeing ‘signs of spring’ in the next… Read More
Validea CEO John Reese today writes for MSN’s Strategy Lab that those proclaiming the death of buy-and-hold investing are premature in their claims — very premature. Buy-and-hold has a two-century-plus track record of success, Reese says; for market-timers to claim that the approach is “dead” after one very bad year or so just doesn’t make sense — especially now, before market-timers have faced their toughest challenge. “If the riskiest part of market-timing involves missing the… Read More
RealMoney and CNBC’s Jim Cramer writes today on TheStreet.com that he believes the Dow Jones Industrial bottomed about two weeks ago when it hit the 7350 range during intraday trading. Going stock-by-stock through the Dow, Cramer — who about two-and-half weeks ago said he was finding few, if any, stocks to buy — says “it would be very hard to drop more than 1,000 points. Very hard, especially given the newfound view from many people… Read More
Legg Mason fund manager Bill Miller — who once beat the S&P 500 for a remarkable 15 straight years before hitting an ugly patch over the past couple years — said Wednesday that “it looks as if the bottom has been made” in U.S. stocks, Reuters reports. Miller, speaking at Legg Mason’s annual luncheon for media, said that all long-term investors believe that stocks are now cheap, but he also said credit markets must regain… Read More
A couple more tidbits from Jeremy Grantham: the long-time bear who recently turned bullish tells USA Today that the economy could be in store for a lengthy period of trouble. “Grantham thinks that ‘we could have something reminiscent, in some respects, to the Japanese situation’ that began in the early 1990s and continued well into this decade — a long, low-grade deflationary recession’,” the newspaper reports. “U.S. investors in stocks and bonds may have to… Read More
Jeremy Grantham, manager of the $100 billion investment firm GMO, believes analysts’ 2009 earnings estimates are “vastly overstated”, writes Forbes James M. Clash. “Grantham says S&P 500 earnings could easily drop 30% to $65,” Clash says, adding that Grantham “thinks the index is close to fairly priced at its Nov. 13 close of 911. But he notes that bear markets overshoot as often as bull ones do. So he guesses that the index will bottom… Read More
In Forbes new “2009 Investment Guide” issue, contrarian specialist David Dreman says that now is the time to buy stocks. “Do not flee the market by selling your quality stocks,” Dreman writes. “Yes it’s the worst bear market since 2000-02, and stocks are trading at valuations not seen in decades, but equities will come back.” Dreman has been pretty bullish in recent months, but he now appears to be a making a major bull call… Read More
Bill Gross, managing director of investment manager PIMCO, says stocks are selling at very low historical levels — but only if looked at “in the context of a financed-based economy once dominated by leverage, cheap financing, and even lower corporate tax rates”. Unfortunately, Gross writes on PIMCO’s web site, “That world … is in our past, not our future”. Gross — who six years ago incorrectly predicted the Dow, then at about 8,500, would fall… Read More
In an interview with the Associated Press, John Bogle says he expects the current recession will last longer than many think, perhaps as long as two years. But despite that prediction, he says critics who have been questioning the sensibility of a buy-and-hold approach are wrong. “They’re wrong to question it,” he says. “Because for all of the last century really, stocks have gone up and down with some frequency. In fact, this is my… Read More