Tuesday, December 28, 2010

Mark Twain and Investing

Not only is sentiment wildly bullish on stocks and equally as bearish on bonds, but history says that when yields and equity values soar in tandem, as they did in the summer of 2007, we almost always see a reversal in both markets. On average, equity prices corrected 12% in the next six months.

On a similar note is Barron's Outlook 2011 ― none of the 10 strategists see a down market, the average forecast is for a double-digit advance and the range is 1,250 to 1,450!

To quote Mark Twain ...

“When I find myself on the side of the majority, I know it’s time to find a new place to side.”

Only by standing against the prevailing winds-selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising, based upon the momentum of the herd vs. fundamental valuations.