Valuation Voodoo

Written By: Tom Hankes  |  Posted: Wednesday, August 3rd, 2011

          I've been waving red flags at you for many months now about pending market downturns.  Terrified readers calling for advice are scarce; the Maytag repairman gets more calls than I do; investors are very complacent.  Stocks rose from March 2009 and continued into 2011.  Nobody's worried- yet.

          The firms and magazines which sell stocks & mutual funds try to induce investors to buy with statements such as "Stocks are cheap!", "Valuations are ridiculously low", "I've never seen a better time to buy", "10 stocks to buy now"; you get the picture.  Curiously, the message coming from Wall Street always seems to be the same in any market environment and that message is: "It's a great time to buy".  Sometimes they're right and sometimes they're not.  If that advice comes in a bull market, nobody notices; if you take the advice and run with it at the wrong time, you could be looking at a big financial haircut.  The pleading to buy becomes more shrill when the market advances and as optimism climbs.

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