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In the last few years, we've received quite a reputation as a "perma bear." That's an appellation that is particularly difficult to live with, since your Editor may have been the most bullish person on the face of the planet in July 1982, in December 1987 and in January 1991, before the war began in Iraq. In each case, bearishness was pervasive and gloom was universal.
On July 9, 1982. I wrote my clients that, "I still believe the birth of a new Bull market is imminent. The most likely scenario, in my estimation, is that the new Bull market will begin before the end of July." I was not wrong by much. The greatest bull market of all time began on August 13th.
On December 3, 1987, at Dow 1776, only 38 points from the Crash low, I wrote, "The Crash of '87 has produced much misery, intensified by the obligatory media circus attributing the blame to at least nine different economic events, and has succeeded in routing investor psychology to a large degree. Pessimism abounds. Virtually no predictions are made of a return to anywhere near the August highs. The gamut of forecasts for the fundamentals, interest rates, dollar & G.N.P. are all skewed heavily to the side of the beast, contributing to the general atmosphere of dread. When the good news of a discount rate cut by West Germany is punished by a 76 point drop, we may properly assume that the market's reaction is one of total gloom, despair and the denouement of capitulation. With the consensus at such an extreme, only one course of action is dictated. Buy stocks. The Dow gained 11% in the next nine days and never looked back.
Then on January 8, 1991, quoting from a Reuters interview: "Alan Newman…..said the market had probably discounted an outbreak of war in the Mideast. Newman said the sluggish volume suggests, "there are no sellers left. Noting that investors are sitting on substantial amounts of cash, he added, "there's enough buying power for the market to go up 15% to 20%." By March 6th, the Dow had gained 20%. We went on to praise the odds for the baby bull market on February 25, 1991, with "Extraordinary Action implies extraordinary gains to come….we consider the possibility of further dramatic Bull market gains to be real and substantial." We reiterated our view on March 25th, saying "Greenspan scenario picture perfect for equities," and again on April 29th, saying, "Perfect scenario" possible for economy and equity market." As prices surged higher month after month in the mid-90s, we participated, but were more and more uncomfortable with valuations. More and more, we adopted a hedged stance and offered both long and short selections for readers.
Only four days before the Dow's July 17, 1998 peak, we said "Risks are extraordinarily high." In our July 27th issue, we cited Greenspan's Humphrey-Hawkins testimony as a "clear warning about the extreme risks in stocks and derivatives." On August 17th, we cited a Dow Theory Bear Market sell signal. The Dow fell 1000 points in the next two weeks as the Long Term Capital Management derivative fiasco unfolded. If it hadn't been for the Fed's intervention, the stock market might have crashed.
On February 28, 2000, with Nasdaq at 4590 and only nine sessions before the blowoff peak, we headlined "The New Economy Rationale is Bogus," said that Nasdaq shares prices could not be justified by any analysis and warned of a Nasdaq crash. We offered a targets of "….under 3000 for Nasdaq, possibly as soon as mid-April." This was an almost impossible call to make, with Nasdaq 53% above our presumed target and only a month-and-a-half away! Yet, by April 14th, Nasdaq traded down to 3321! Before the year ended, Nasdaq traded below 3000 and has never seen that level since.
Immediately after the 911 tragedy, we climbed on the gold bandwagon with two recommendations, which later grew to several additional choices. The XAU gold index stood at 57.51 and has since more than quadrupled. We have maintained a "core" position in gold shares since that date.
In 2003 we publicly cited secular target lows of Dow 6400 and SPX 680, reiterated the targets in a November 2003 speech before the International Federation of Technical Analysts in Washington, DC and afterwards, many times in the Crosscurrents newsletter. The Dow bottomed at 6469 in March 2009. The S&P 500 bottomed at 683. We called the exact lows six years in advance.
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