Bottoms Up

All the financial sages and philosophers tell us that the probability of picking a market bottom, or top for that matter, is so low as to be foolish. But one must try because investing is really all about timing, just as inflation is always a monetary phenomenon.

Isn't buy and hold really market timing? The bet is that over a certain time horizon being invested in stocks will pay off. The problem now is that no one has a clue to what the horizon portends and one must eat and pay college tuition today. Given the bleak horizon and the exigencies of preserving wealth, the bears roar with increasing strength.

Picking the bottom is like a linebacker befuddled by a double-reverse, statue of liberty, hook-and-ladder play. If the ruse succeeds in scoring a touchdown, the linebacker will conclude that all is lost and the rout will continue. If the result is no gain, then confidence swells his steroidal sternum and he struts confidently on, only to be pancaked on the next play, a simple off-tackle burst by the halfback to the end zone.

Until the bears go three and out, this bullish linebacker (moi), trained to rely on fundamentals, is chastened. He thought stocks were cheap, but were they cheap for a reason?

Reason is the operative word. You might as well trust a palm reader than depend on lines on a chart. The only thing technical analysts can offer is that the trend will continue - until it doesn't.