Predicting the bottom of a stock market crash is a waste of time, but people still try and do it. Timing the market is a fool’s errand. No one knows how low the stock market will sink or when it will rebound. But, that does not stop a lot of people from trying to predict the bottom of the decline. Don’t believe them. Here are a few examples of what some of the smartest investors in the world have to say about predicting the bottom. Hint: all the good ones don’t do it.
Some famous investors’ thoughts on stocks…
Charles Schwab. The founder of the famous investment bank and financial services firm told Conde Nast Portfolio magazine that he thinks that the market will read the bottom and begin to rise sometime between now and just after the presidential election.
Dave Ramsey. Dave does not predict a bottom. But, on his radio show, he is very bullish on the economy over the long term. He has also said that he does not see the stock market going much lower than it is now. Dave Ramsey is a big fan of dollar cost averaging through the good times and the bad markets like the one we are in now.
Warren Buffet. The Oracle of Omaha recently announced in an Op-Ed piece in the New York Times newspaper that he was making large investments in American stocks.
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful…most major companies will be setting new profit records 5, 10 and 20 years from now.” – Warren Buffet
Even though these market leaders refuse to put a specific time or number on the bottom of the market, I think that their statements and actions speak loudly. Warren Buffet is buying stocks in his personal investment accounts. Buffet makes it quite clear in his New York Times editorial that he cannot predict short term stock prices next month or even next year. Prediction or not, I personally take it as a good sign that Mr. Buffet is buying.
Here are some other market indicators that may be beneficial to keep in mind…
Consumer Confidence Index. The index measures household optimism and likelihood to spend money, and it is down 40% this year. That is the same amount that the index was down during the 2000 bear market.
Investors’ Intelligence Survey. The survey is currently at -13.7. The higher the negative number is means that investors are more bearish. Many experts do not think that we will be at the bottom of the current bear market until the survey reaches -20.
Demand at NYSE. To reverse the course of this bear market, stocks need to find some bulls. Large buyers such as institutional investors, mutual funds, and pensions need to come back to the market and purchase stocks. They have been keeping their cash on the sidelines lately waiting for the markets to stabilize.