Tuesday, November 13, 2012

Is the Cliff in the Price?

I pay a great deal of attention to market sentiment, as decades of investing have provided evidence that buying amid gloom and selling amid euphoria leads to investment success.  It is often tricky, however, to ascertain what the true mood of market participants is at any given time.  Surveys are helpful, and actions are even more so.

In addition to the concern--even gloom--over conditions in Europe, investors are alarmed at the prospect of the U.S. going over the "fiscal cliff" of automatic spending cuts and tax increases scheduled for January 1. 

But the dire fiscal situation is widely known--and may already be discounted--by investors.  The latest issue of Barron's is titled, "Are We Headed for a Recession?," based on the economic impact of not reaching a political deal to avert the "fiscal cliff."

My sense is that stock prices are oversold after the recent correction and are likely headed higher, especially if the president and congress take meaningful action on fiscal issues and taxes.

As I recently suggested, now is a good time to compile a purchase list (such as AGXXF, GLW, MOFG, MOS, TOT, and VOD) with target purchase prices.  If I am wrong and stock prices resume their decline, the available cash that I've advocated accumulating can be used to add to equity holdings.

Steve Lehman

S & P 500:  1387

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