So, while I feel good about putting long-term money to work at current prices, I realize fully that that a definitive bottom may still be ahead. Read on:
Investors like to look for that classic “Death of Equities” moment to aggressively get into the market. But widespread negativity among investors does not necessary mean that a new bull market is starting tomorrow.
Still, all else equal, it’s a good sign that the potential upside is much larger than the downside. It’s the classic trader’s argument that “there is no one left to sell.”
Looking at valuations, stocks are relatively cheap by historical standards and absolutely, rock-bottom dirt-cheap when compared to bonds, cash and most commodities. Buying when prices are cheap and sentiment is rotten is a good recipe for long-term gains. And if you buy stocks that pay decent dividends, you’re getting paid to wait out any short-term hiccups.
Just be realistic and acknowledge that prices can get cheaper in the short to medium term. That has certainly been the case for most of 2011 and 2012, as volatility coming out of Europe has caused sentiment to go from bad to worse.
View full article here: Forget Doomsday Talk; These Three Traders Say “Buy”
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