Update April 2020
When To Buy Stocks: Hint When the Masses Are Scared
Let’s start off with a bit of history. Look at the chart below, it will illustrate quite clearly when astute investors start to buy stocks.
Had you purchased stocks anywhere between Sept 2008 and March 2009, you would be sitting on a fortune today. Sure if one had bought back in Sept of 2008, one would have had to deal with a large bout of volatility. However, the astute investor always deploys capital in equal lots and never deploys it in one shot.
Take a look at the chart below
So much noise is made over the 1987 crash, yet it is probably was one of the best buying opportunities of all time.
When the markets are crashing or pulling back strongly, negative sentiment is running high and the crowd in their haste to get out; they dump the baby with the bathwater. In other words, they sell quality stocks for pennies on the dollar. As an Astute investor instead of panicking you realize that this is a once in a lifetime opportunity and you jump in. Now it’s not easy to do this for in the heat of the moment it feels like the market could continue crashing forever. That’s why we created tools to help us identify key market turning points; the most important of which is the “Trend Indicator”.
2020 Coronavirus Pandemic Another Great Opportunity in the Making
There is no doubt that we are experiencing one of the most challenging times since the financial crisis of 2008. Hysteria has gripped everyone, especially in the U.S. and its feeding on itself as everyone from the top of the rung to the bottom is running around like headless chickens. Now before we continue, we are not going to distort the truth or make up stories; in the short term we have taken a beating, it’s a blood bath out there.
Having said that we have never seen such a situation after having witnessed several crashes in the past. Everyone at the Tactical Investor is freeing up all the available cash they can. Huge amounts of liquidity are already being added to this market, but you have seen nothing yet. Helicopter money is about to become a reality and regardless of the mantra its different this time, nobody can fight a fed that is determined to unleash the mother of bail ut packages
Just a few weeks ago, everyone would have begged for such prices, but 15 days later everyone is ready to throw the towel in. The volatility is likely to continue until the end of the month, especially since V readings soared by a whopping 650 points to an all-time high. Again, think about it, when was the last time the Fed dropped rates by 150 basis points in two weeks. This is a massive development but its overshadowed by the current hysteria. As we stated before, companies are going to go ballistic with their share buyback programs.
When the panic subsides, it will create a feeding frenzy of the likes we have never seen before. When you combine zero rates, two trillion dollar injection by the Feds and several more billion-dollar packages designed to stimulate the economy, the result is going to be a market melting upwards. The markets will be driven to heights that are unimaginable by today’s standards. Zero rates are also going to force a large portion of individuals on a fixed income to speculate, and these guys have a lot of cash sitting on the sidelines.
When to buy stocks 101? Buy when the insiders are loading up
The chart above does not need explaining. When the insiders jump in, stocks tend to fare better in the long run.
As indicated further below, the sell to buy ratio has dropped to a level not seen for a long time, indicating that insiders are not scooping shares but devouring them. Insiders don’t pick bottoms; they buy because they know the long-term outlook is going to improve significantly. Take a look at the chart above, during the financial crisis insider buying, surged in Oct of 2008 and then spiked up again in 2009.
The markets bottomed in March 2009 and soared for 11 years with some hiccups along the way but look at the profits they banked. While the short-term outlook is unpredictable as hysteria is in control, the long-term perspective based on historical data dating back over 100 years points to a very bullish outcome. In the words of Winston Churchill “never waste a good crisis.” It is during moments of crisis, that one has the opportunity to buy top-notch stocks on the cheap that have a very high probability of yielding spectacular gains.
To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit. Bull markets are born in pessimism, grow on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell. If you want to have a better performance than the crowd, you must do things differently from the crowd. Sir John Templeton
So what are the readings today? Based on very heavy transaction volume, Vickers’ benchmark NYSE/ASE One-Week Sell/Buy Ratio is 0.33, and the Total one-week reading is 0.35. Insiders are not just buying shares, they are devouring shares. Insiders behaved in a similar fashion in late-December 2018, after stocks crashed on Christmas Eve; in early 2016, when stocks also corrected; and in late 2008/early 2009, at the depths of the Great Recession correction. Those were spectacular times to buy stocks. Insiders seem to be telling us that today offers a similar opportunity. https://yhoo.it/2TV0cE2
When To Buy Stocks? According To The Naysayers, the Answer is never
The naysayers can talk all they want about supply lines being backed up for months or other scenarios that they pull out of their rears. The fact is that the market will eventually discount (if it has not already done so) all those scenarios. Furthermore, these experts are severely downplaying the role of technology. Suddenly a host of businesses are going to see that a lot of personnel can be replaced with AI-based technology without interrupting the flow of goods. Replacing them will improve efficiency on a colossal scale.
Once the markets discount all the bad news, this massive mountain of money is going to flood the system, and it is going to make the Bull Run from 2009 look like Child’s play for the amount of money the Fed has already thrown into this market makes 2008 look like a stroll in the park. Officially we think they will throw north of $5 trillion; unofficially the figure could end up being north of $10 trillion.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Sunday night on CBS’s “60 Minutes” that “there is an infinite amount of cash in the Federal Reserve. We will do whatever we need to do to make sure there’s enough cash in the banking system.” https://yhoo.it/2JdtRlH
And there you have it, a tacit acknowledgement that forever Q.E. is real and here to stay. When the Fed states they will do whatever it takes, you better believe this statement.
Don’t Fight The Fed
If that is not enough, then this should help you understand just what the Fed is willing to do, and by the way, we stated that they would take this route.
Struggling to illustrate the scale of the measures, T.D. Securities’ Priya Misra was left asking, “What’s bigger than a kitchen sink? “Wells Fargo’s Jay Bryson attempted to answer that question by comparing it to what the Bernanke-led Fed did during the last economic crisis: “The actions taken are breath-taking in their scope. Indeed, these steps surpass in breadth and depth the measures that the Fed created in the midst of the financial crisis a decade ago. If the Fed pulled out a monetary policy ‘bazooka’ during that crisis, then the steps it announced this morning are the central bank equivalent of ‘going nuclear.‘” https://yhoo.it/3bqrmIT
Regardless of whatever the experts state, one should never fight the Fed, for you will end up dead. Dead as in dead broke.