This is true but today it is cheaper than ever. Those TV commentators are in hideouts.
There is more to buying stocks than just on the basis of cyclically adjusted earnings. We have demonstrated our love with a few emerging markets that carry a low CAPE number. Yes we do take it in consideration. However the macro picture is one of strain as stimulus is removed.
It would not matter how many times we have tried to convey our point but it goes unrecognized. The unwind of carry trades is accelerating a hard drop in money growth. While looking at the annual change rate it has gone negative. This is why we have turned very bullish on duration. We carry a 10% allocation to long strip Treasuries. We are probably the only forecaster that holds the view of 10 year bonds reaching 2.25% by summer.
We have looked at the Ruble. We think it can easily drop 10% to 15% more. Technically speaking it appears to have formed and inverted head and shoulder in a general sense. The recent break out would suggest therefore more pain for the currency.
Typical of the environment we are in is the fact that markets get oversold but keeps dropping.
This is something that we have often reminded people when gold was dropping. All market observers kept insisting that sentiment had reached bottom. They failed to read between the lines.
In a regime shift the range of sentiment gets shifted lower.
A market might not necessary bounce hard but go sideways as the over sold situation gets worked over.
Our first reaction to the question is it time to buy Russia, for us, is one of interest. It also denotes little fear as any true bottom is accompanied by really scary news.
Just ask the recent folks, us, who carry Thailand and Turkey about the hair raising news that the media loves to carry at just the right opportune time. We are human and we have to really dig hard to fight the emotion side of investing.
We do not feel that we are any closer to a capitulation bottom. Our proprietary model shows a massive drop in fear recently. It represent a move of 80% less fear.
We are much more interested at watching a market we owned last year namely Poland symbol (NYSEARCA:EPOL). We would love to be able to buy it on the cheap again. It is a great growth story of the middle class coming into its own.
Polish stocks recently realized the geographic reality of having borders with Ukraine as they have suffered a 3.34% drop Thursday. We look for a better discount than that but be aware that the CAPE ratio stands at around 12.
For comparative purposes the equivalent CAPE ratio for the US market is over 25.
For the time being we are comfortable in a long position in grains (NYSEARCA:JJG). Ukraine farmers still continue to hoard them as they are a source of US currency.
We held a 90% stock allocation in 2013. We stayed ultra bullish. We now hold a 45% stock allocation as it represents our most defensive view. The necessary correction ahead will create fantastic buy opportunities by this summer. We await this impatiently.