November 18, 2008 - Looking back is an easy way to invest. It seems absolutely obvious that all of us should have sold stocks in October of last year, when the Dow Jones Industrial Average hit an all time high over 14,000. Or better yet, having the brilliance to get out of tech stocks or most of the NASDAQ issues in late 2000 as the NASDAQ hit its all time high just over 5000. It's easy to see those as turning points in the market. Now.

Maybe. Here are a few things to consider. You're not going to buy at the bottom. But if you're within 10% of it, when the stock goes up 100%, are you going to complain?

The waiting period is unknown. Maybe it will be 6 months before the market sustains a meaningful rally. Maybe it will be 2 years. Maybe it will be 10 years. No one knows. Everyone can guess, but no one knows. The waiting is the hardest part, but a rally will happen, and not just a one day wonder. When the mindset changes from fear to greed, a sustained rally will take investors to new highs and new irrationality will rule the day. It's happened so many times before that unless the whole capitalistic system collapses, it will happen again. Remember there were great stock market rallies well before there was a housing bubble or loose credit.

There are true, incredible bargains in this market. Many stocks sell for less than half their book value (not just banks). Others sell for P/E's never seen before, with some that averaged 20 or more, selling at 10 or below. Yes, the near term outlook for earnings is down, but when earnings grow again, these P/E ratios will reflect that growth.

Just as we can all look back and see that selling when valuations were so high would have been brilliant, we will one day look back and see that valuations now were incredibly attractive. Sure, stocks can go lower, get even cheaper by any valuation metric. But the odds are definitely low for that happening, especially if history is any guide.

Of course, things are different now. There's a new reality for investors. Things will be different, better, again, and all of us can benefit from the change from pessimism to optimism but only if we're brave enough to buy stocks now. If we do buy, especially very solid, earnings producing companies, we've given ourselves a great chance to make a considerable amount of money.

 Ted Allrich