The question that seems to be on every investor's mind is “When will the stock market stop falling?”
I can't tell you how many times over the past few weeks I've heard market strategists share their views on when the stock market will bottom out. I am always amazed that people think you can predict when the stock market will stop falling. I often wonder if the interviewer really believes that the market strategist really knows.
Wall Street is littered with predictions that have never come to pass. Why should we believe the soothsayers now, after they failed to predict the extent of the housing bubble and subsequent credit crisis? If anyone tells you they did predict this bear market, tell them to show you their brokerage statement, which should reflect their great market call.
Investors seem to want someone to tell them the date or the price level, which is impossible to predict. In a down market, regardless of how cheap a stock appears, it can always become cheaper. When trying to pick a stock market bottom or top, one is trying to figure out the unknown as well as attempting to measure the extent of fear or greed in the market — a task that is very hard to do.
When I'm asked about when I think the stock market will stop falling…I don't even try to guess. Since I don't have a crystal ball, anything I see would just be another prediction.
Since I view buying stocks as buying pieces of a business, my concern is how the business is doing and not what the current stock price is. If I buy pieces of great businesses at attractive prices and hold them for the next few years, I couldn't care less if they closed the stock market. I do not become distracted by Mr. Market's manic-depressive outbursts as he offers stocks at extremely low prices.
The Guessing Game
I recently heard someone say how obvious it was only six months ago…when “everyone” knew that the stock market was going down because of lower crude oil prices and a downturn in China, to sell their stocks and wait to buy them back when the “future was clearer”.
