Are we There Yet?

The stock market continued its relentless 2008 decline yesterday and I got a lot of calls from worried clients. Our clients are a pretty level headed group but they are subject to the same emotions as the general investing public. I've been doing this for a long time and when the worriers start calling, we are probably near a bottom. I have little to hang my bullish hat on here; just a feeling, but after 25 years of market watching, attention must be paid to feelings.

The sentiment in the market is as negative as I've witnessed in a long time. I think maybe investors are thinking back to 2001/2002 and are worried that we are about to repeat that 2 year debacle. I don't think so. Back then the market started its bear run with P/Es around 30; this time we are trading at less than 15 times earnings.

Corrections are scary affairs because we don't know if they will turn into a bear market. Declines of 10% or more actually happen fairly frequently and most of them do not turn into bear markets. With sentiment already this negative and valuations quite reasonable, I don't think this one will.

I am looking for a buy point and it may come soon. I won't be making any big bets, but rebalancing a portfolio after a correction will force us to sell things that have gone up (bonds) and buy things that have gone down (stocks and reits). That is the very essence of long term investing - sell high and buy low.