Why do people try to guess where the bottom of the stock market is?
（The U.S. stock market that is…Are the guesses people are making based on emotions or is there actual data that can determine the likelihood that we have hit a bottom? (i doubt the latter is possible, as if we knew we’d all be rich) …but curious, is there a scientific way to know if the market is over or underpriced?）
Answer ：
Look who makes these calls. They are usually mutual fund managers who cannot short or hedge well. They are generally long only and they try to come on TV, magazines, newspapers, etc, and they “talk up their book” and try to say oh, we’re 98% fully invested. We’ll I’d say they have been 98% stupid.
That has been the wrong call for the last 2 years. 99.9% of all US mutual funds are down this year (CNBC-TV).
One of many problems with most mutual funds is that their charter makes them be invested all the time. This strategy does not work in Bear Markets which we have had two in the last 8 years. And of that 8 years, were are looking at 1/2 of that time in the Bear mode.
The key is don’t take the advice from mutual funds managers. Most have no clue what they are doing.
Posted: July 29th, 2010 under US Stock Market.
Tags: Stock market