Peter HodsonInteresting read
from
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Do you stay in the market or get out? If you believe a rebound isimminent, shouldn't you take advantage of the current market panic andinvest more while prices are low? Or do you wait for volatility to comedown somewhat before taking the plunge?
That, says Peter Hodson, a senior portfolio manager at Sprott AssetManagement, “is the million-dollar question.” The answer, he adds,ultimately comes down to the investor's “viewpoint of the world.”
Which means you have to take a stab at answering this question: Do youbelieve we're headed into an economic situation in which markets won'trecover for a long, long time? We're talking a decade at least.
Or do you believe that the volatility will come to an end sooner, and that good markets will return in a year or two or three?
These aren't easy questions to answer. We may have experiencedrecessions and downturns in the market, but very few of us haveexperienced a depression or the prolonged market downturns beingpredicted.
“I can say right now that there are stocks that I think will double ortriple or quadruple in a good market; I just can't tell you when thegood market will be,” Mr. Hodson says.
He cites some statistics that reveal just how cheap some stocks outthere are: U.S. value stocks as represented by the S&P 500 ValueIndex are trading at 42 times earnings, he says; growth stocks aretrading at 14 times earnings. Which means that growth stocks now areabout three times cheaper than value stocks. The reason? Investors arescared and are fleeing to value stocks, considered safer havens.
“On a historical basis, [growth stocks] are cheap,” Mr. Hodson says.“And this is where I have to say, ‘What's your viewpoint of the world?'Because if we're going into a depression, all those earnings are goingto disappear anyway and growth stocks aren't cheap.
“But if the world doesn't end, they'll be exceptionally cheap.”