I haven't come across any columns by Tom Stevenson in the Daily Telegraph lately. So I was glad to see one in today's edition -- with a timely message for us investors.
He first paints the backdrop against which we're operating our investment portfolios these days:
Sir John Templeton, who died last week, said the best time to invest is at the point of "maximum pessimism". If we didn't reach that on Friday, it certainly felt close at hand as the UK's benchmark index plunged to its lowest level since 2005, oil hit a new record and the two US mortgage giants Fannie Mae and Freddie Mac wobbled ominously.
After the third worst January to June in nearly 40 years (only 1970 and 1982 were worse for global stock markets), it is hard not to be downbeat. Newsflow is awful, growth is slowing and inflation back with a vengeance. The credit crunch grinds on, while corporate profits and the housing market look into the abyss.
Then he gives two reasons for investors to be "cheerful":
The first reason for an investor to be cheerful is, counter intuitively, the fact that most people are down in the dumps. History proves time and again that the best time to buy shares is when no one wants them and when taking the plunge makes you feel most queasy.
Then a bit further down:
The second reason for investors to smile is that, on some measures, shares are cheaper than they have been for years, if not decades. According to Citi, shares around the world started the year valued at about 16 times recent earnings. That was already lower than the long run average of 17.
I don't know how right -- or wrong, for that matter -- Stevenson is in his view. No one does. Things may get a lot worse from here before they get better generally. I heard someone say that Bear markets surprise on the downside (I can't remember who, and I don't even know if that saying is even largely correct). But I suspect Stevenson's attitude is correct if we hold on long enough.
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