Best time to buy stocks since 1980s?
Legg Mason's Bill Miller gets bullish and sees the best market since the Reagan era.
It looks like I'm not the only one.
Legg Mason Capital Management chairman Bill Miller told CNBC today that he thinks it's "the best time since the early 1980s to buy." His rationale? The same as mine: Stocks are undervalued relative to bonds. Here's why.
In his words: "The last 10 years have conditioned people to think short term as opposed to long term. Now stocks are cheap and people should buy good, quality companies at reasonable prices, put them away and ignore the day-to-day fluctuations of the markets."
I couldn't agree more. While I still anticipate a broad market pullback over the coming weeks as some of the speculative dollar-drop risk trade is unwound, it doesn't change my over-the-horizon perspective that stocks are headed much higher from here.
How high? In my Sept. 29 column, I featured a price target, based on a model developed by Citigroup strategist Tobias Levkovich that suggested the S&P 500 could nearly double over the next year. This is based on 2011 bottom-up earnings-per-share estimates, 10-year Treasury yields and the equity risk premium.
If you think this sounds ridiculous, then consider the impetus another round of money printing, or quantitative easing, from the Federal Reserve could provide. Remember that the entire March 2009 to November 2009 rally in U.S. stocks, which accounts for the vast majority of this bull market so far, occurred during a period of quantitative easing. Similar stock price appreciation was seen when the Bank of England and the Bank of Japan deployed quantitative easing strategies to kick-start economic growth.
And finally, history also suggests we're on the cusp of something big: Stocks have badly lagged both on an absolute and a relative basis over the past 10 years. The performance has been so dismal that you have to go back to the 1930s to get a similar period of despair for the stock market.
But take heart, because periods of deep underperformance tend not to last long, and they are typically followed by periods of massive outperformance by the stock market -- including the 1860s railroad bubble, the steel bubble of the 1900s, the post-World War II bull market and the 20-year bull market of the 1980s and 1990s.
Be sure to check out Anthony's new investment advisory service, The Edge. A free trial has been extended to MSN Money readers. Log in using the following credentials: user name: freeuser; password: edge
The author can be contacted at firstname.lastname@example.org. Feel free to comment below.
Anthony, You aremy kind of guy. On March the first I made a list of stocks that were under valued.
Ford $1.01 per share
Ruby Tuesday .85
XM Radio .05
Avis Rent-A-Car .34
On March the 3rd a guy was talking about what great time to be in the market. The date was 3 x3=9
This was March, I did'nt get my check for $183,650.29 untill July. By then the race was on.
Your portfolio looks like balanced on investment point of view, if you add the target price and stop loss to make it more professional will be helpful for us. Personally I'm impressed the way you convinced logically the shape of future stock market. Most probably you will be right up to a great extent, I believe.
Actually, dam tired of this, person finance and investing have been hobbies of mine for 20 years, and I've made a lot of money. Don't assume that someone is unread.
Laughing all the way to the bank.......
I give a greater chance of aliens landing on the White House lawn than the S&P doubling to 2,300 by next year.
I'm sure Mirhaydari is fully invested in the markets right now, waiting for that double. Yea right......
We'd all like to believe the so called experts. However, they've led us down the garden path many times before. How a robust stock market jibes with a socialist president I just don't know. It seems to me that the more central control of the economy the weaker the stock market will be.
Copyright © 2014 Microsoft. All rights reserved.
The company complains after the son of Florida State's football coach is televised wearing -- gasp -- Under Armour.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.