Regular readers know that our Contrary Investing stance is that we believe we are still in a secular bear market – one that most likely began in the year 2000. Bear markets typically last roughly 14-18 years or so. Which means it’s unlikely we saw a bottom in March 2009.
Furthermore, price-to-earnings and other valuation measures were more expensive in March 2009 than is typically seen at a true secular market bottom (where average P/E ratios often hover as low as 5 to 8).
Investing guru Felix Zulauf seems to agree – he made some excellent points in the recent Barron’s Roundtable, which was published last weekend.
“The market is naïve in assuming the earnings models of the past 20 or 30 years can be extrapolated out to the next five years. The market will hit a lower low than it did in March 2009. What was missing last year was the complete desperation and turning away from equities as an asset class that marks the end of a secular bear market. That will come. European and U.S. policymakers believe China eventually will bail us out, but China is tightening. Its real-estate sector will get hit badly. All the leading indicators are topping around the world.”
Our friends at Pragmatic Capitalism put together a fantastic recap of Felix’s thoughts if you’d like to read more.