When I got started buying stocks in the late 1970s, people were incredibly negative about the stock market. Most had decided that the market was never going to come back.
It had been years since people made money, or at least it seemed so, and the Dow Jones Average was something that nobody talked about because it never did anything. It couldn’t. Business was too horrible, but more important, the darned stock market was just despised.
Well, I liked being contrary and I started buying. Why not? Stocks have been a great long-term asset.
And what happened?
I was early. A couple of years early!
But you know what? It was a total homerun in two years time. And I lost next to nothing in the interim, because stocks were so hated no one cared.
I always thought if I could ever get into the game again when stocks are that hated, then I would be thrilled.
Right now, stocks are that hated. How do I know? Because each week an organization, Investors Intelligence, polls important market letter writers – gurus -- and asks them how they feel about stocks. Usually about half of the people like stocks -- 50% bulls. That’s too many bulls. Not enough people who don’t like stocks to convert them into stock buyers.
Sometimes 55 % of the gurus like stocks. That’s just a danger zone. You have to sell and sell hard.
And then, on rare occasion, the percent of bulls falls to the low 30s. That means way too many people hate stocks, and you can buy without that much worry because so many people dislike the market. A number that small shows there are too many bears. Not enough people in; way too many out.
Right now, the new reading is 27% bulls. That’s the fewest number of bulls since 1994! Astounding. Fourteen years since this many people hated the market. And look at the run we had within a year after the negativity of 1994. Notice I didn’t say “beginning right then.” Like when I got involved when everyone hated the market, the market stayed hated for some time.
But then it exploded upward.
When I saw the latest number, 27% bulls, I said to myself: I wish I didn’t have a daily show that appeals to everyone who is in the market. I need to find people who have never been in or never got started or never bought a stock or never made a contribution to a 401(k) or an IRA. Those are the people who need to start and start now.
This number of bears is a clarion call, a total wakeup moment for those who are new, or young, or never been in. The call is this: “I am not calling a bottom, I am saying that when you buy when stocks are this hated and you stash them away, you will be rewarded.”
Most people reading this do not have the time or the inclination to research individual stocks. And around the globe markets are under pressure.
My suggestion? Great time to buy one of the mutual funds I recommend in my book Stay Mad for Life. They are all battle-tested for crummy markets. Or, for those who really want autopilot, Vanguard -- where I keep my money -- just launched a worldwide fund that buys stocks all over the globe. Given that things are bad all over, this might be another opportunity.
There are NO “no brainers” in this business. There are indices of sentiment that have never truly betrayed us. When everyone hates ‘em, find something to love. Main Street has turned on Wall Street. Walk the other way and take the turn to Wall Street.
But don’t count on the road being straight up.
Just remember though, it has ALREADY been straight down. No one can ever accuse you of getting in at the high!