Sure signs that the market has hit a bottom
Just as a fun exercise, I took a look at some coincidences that signaled market rebounds in past recessions. They’re not tied to fundamentals (like unemployment or corporate earnings) in any way, but offer a window into the silly tendencies of book publishers, fund managers, and pretty much everyone else to mistime the market about as badly as possible.
The book How Harvard and Yale Beat the Market, for example, probably seemed like a surefire best seller back when the schools were posting double-digit returns. But unfortunately, the book came out just last month, soon after both schools’ endowments lost about a quarter of their value. I sympathize with publishers that have to try to guess what the economy will be like months beforehand.
A few books hitting my bookshelf, and another silly indicator, have given me reasons to feel pretty good. (Forgive me for not linking all these books. Some of them I’d rather not send the traffic.)
* The market is flooded with money “scare” books. This started in mid-to-late 2008 and continues now. In the past several months, I’ve received copies of Financial Shock, Game Over: How You can PROSPER in a Shattered Economy, and the Guide to the End of Wall Street as We Know It. More recently, it’s been The Ultimate Depression Survival Guide, Jim Cramer’s Real Money: Sane Investing in an Insane World, and The Great Depression Ahead.
By comparison, see the July 2006 classic How to Buy Real Estate Without a Down Payment in Any Market.
I’m not too familiar with the book industry, but the lead time on some of their books must be pretty long. In January, I bizarrly received a book titled Do-It-Yourself Hedge Funds, complete with a cigar-smoking cartoon character in a tophat on the front cover. As the lone Amazon reviewer of the book wrote, “I haven’t been this excited by a DIY book since ‘Do-It-Yourself Biohazardous Waste Disposal.’”
* A prominent value mutual fund manager is fired. We all know that we’re supposed to invest for the long run. But unfortunately for fund managers, their own industry doesn’t work that way. You see, it’s important for funds to post good returns every year. Otherwise, investors tend to leave the fund in droves. Although value managers are supposed to make money by being “contrarian”, that is, investing in companies that the market has shunned, in the shortterm that can lead to losses and put their jobs at risk before they have a chance to bounce back.
Last month, 72-year-old David Dreman was fired as the manager of the DWS High Return Equity Fund. Dreman had led the fund for two decades.
As this blog entry from Money notes, it was at the height of the tech bubble in 2000 when the last spate of value managers got canned. Their funds hadn’t kept up with peers loading up on tech stocks. You know what happened next.
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Unless I hear someone say something really interesting, this is about as far as I’m going to go in calling whether or not the March low was the bottom of this bear market. The real answer is “No one knows.” Yes, that’s a frustrating answer. But it’s the right one.
— Joe Light
