Viva The V Ken Fisher, 10.15.09, 11:20 PM EDT Forbes Magazine dated November 02, 2009 If history repeats, the current V recovery is far from over. Expect another 20%-to-25% gain by January.
Viva the vrrooom! We're in the midst of a really big and steep V. As detailed in my Feb. 16 column, "Anticipate the V" (and updated in my May 25 column, "Blink and You'll Miss It"), big bear markets are almost always followed by big bull markets in a V-shape pattern. The steeper the descent, the steeper the ascent. Most investors give too much credence to the theory that prices are rational; they presume that a market collapse must have been justified by serious economic trouble. As a result they presume that we can't have a big bull run after prices crash. History proves that presumption to be false. This time the V is almost perfect--so far. As I write, the MSCI All-Country World index is exactly where it was on Sept. 29, 2008. From there to the Mar. 9 bottom was five months and ten days. From the bottom up to here is not quite seven months, a slightly lopsided V. Note: The V works for the whole world stock market, not necessarily every country's. Any one market, including America's, can take on an odd shape. Always think globally first. The fundamental force behind every V is always that the last phase of a bear market is driven completely by imploding panicky sentiment rather than the fundamentals people think they're thinking about. The sentiment implosion is a societal, psychological depressed-spring effect that makes the market bounce back as quickly and as far as it went down. All the while people fret about sucker rallies and expected pullbacks, the V keeps its shape. I described that sequence for the 1930s in my May 25 column. Now take a look at the bear market bottom on Dec. 6, 1974. A year and five months later the stock market was almost exactly where it had been a year and five months before Dec. 6. If history repeats, the current V recovery is far from over. If it keeps up for another six to nine months the global stock market will be 20% to 25% higher by Jan.1, 2010. We had a long (16 months) and deep (down 60%) bear market. Now we're getting a big, long bull run.
