OUR TAKE

Buy Stocks Now?

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By Matt Richey (TMF Matt)
June 21, 2002

I'm a fan of Ken Fisher. If you're not familiar, he's an investment manager, author of Forbes' "Portfolio Strategy" monthly column, and son of legendary investor Philip Fisher. While I don't subscribe to Ken's market-timing approach to investing, I do appreciate his insight on the market, which is always off-beat and frequently counter to the mainstream Wall Street consensus.

Part of Ken's approach is to take careful account of all the expectations that are currently built into the market, and then recognize that whatever is discounted cannot, by definition, impact the market. For example, if "everybody" knows that terrorism is an ever-present threat, then that's no longer really a factor -- it's already baked into stocks' prices. Or, if "everybody" knows that IT spending is in the dumps, then that, too, can no longer negatively impact stocks -- it's known, it's discounted, it's a non-factor. Get the picture?

It's for some of these very reasons that Ken's most recent column is titled, "Buy Stocks Now" (free registration required). Again, I'm not a market timer, and I don't advocate a market-timing approach. For the record, I buy stocks of attractive businesses at attractive prices, no matter what is happening with the overall market. That said, I do find Ken's comments interesting, especially from a guy who's been bearish for the past 18 months. He writes:

"What's so horrific now? The global economy is no longer collapsing. Layoffs have largely laid off. Corporate scandals abound and everyone expects more ahead, and that is discounted into pricing. And we know the terrorists will be terrible -- our government now guarantees it, even promising that there will be future attacks. No surprise, so terrorism can't impact markets much. And everyone knows the market isn't statistically cheap, so valuations won't impact pricing."

The bottom line is that markets always surprise us. Literally, the only thing that can be expected is the unexpected. Which is, again, why I think you take Ken Fisher's insight as food for thought, and then go about your Foolish business finding legitimately undervalued businesses, without really worrying about the overall market.

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