The Right Perspective In Today’s Stock Market: Forget the Bailout, Focus on the Next Big Bull Market
et me begin by saying the stock market is crazy. Nobody can deny that. However, everything causing the fear in the markets today is already done. What’s done is done. The right perspective is not on how to get away from the ugly market; the right perspective is on finding the next BOOM. For my fellow 20-somethings, the pummeling of the market is a gift. A gift filled with lower stock prices and an opportunity to make a great deal of money on the next big thing.
The right perspective is on positioning yourself for the next big bull market. Do not kid yourself, there will be another big bull market and many people will make a killing from it. The people that will make a killing from it are the people who stay calm as fear and panic penetrate every level of investing and every kind of investor.
Sure, your 401(k) is down. Sure, your confidence is shattered. Shake it off, forget the daily three digit moves in the Dow, forget the daily partisan talking points on TV, get your emotions in check and work with me to find the next big bull market so that I, you, and the other 20smoney readers can make a crapload of money in the coming years. Let’s get down to business.
Resisting The Urge To Throw In The Towel
I’d like to start by posing the following question to ask yourself: How would you describe the general investing attitude and confidence immediately before a bubble pops? The answer is euphoria. Everyone wants in. It’s guaranteed money. Every average joe out there decides to become an investor. And then the bubble pops.
Now, let’s look at the opposite scenario. What is the attitude and environment like immediately before we hit a bottom and a new bull market starts? The exact opposite. Overwhelming fear and panic. Everyone is pulling their money out of the stock market.
Last question: What does today’s environment look more like? I’ll let you figure that out. To help you, let me tell you one of Warren Buffett’s most famous quotes: “be fearful when others are greedy, and be greedy when others are fearful.”
Ok, no more questions or quotes. What I’m saying is screw the fear and the panic. Emotions are driving this market lower and it is time to capitalize on this fear. It’s time to look for the next bull market. Do not bail on the stock market; this is the worst thing you can do.
Where Should We Search For The Next Big Thing?
What is the next big boom? What are the trends that are developing that will make people a great deal of money? What do past busts and booms tell us? Let’s look at a few potential bull markets in the future.
While the financial meltdown has put the energy situation on the back burner, the fundamental energy issues are still present. We are still ridiculously dependent on foreign oil. Oil prices are still extremely high when compared to historical numbers (and may go higher).
Is the correction we’ve had in recent months in energy only temporary? Many experts think it is just a pause in the long term bull market for energy. If so, there are some very attractive investments out there.
Natural gas, while it has gotten killed in the last few months, is still a very attractive option for increased usage domestically. We have tons of it, its cleaner and the technology exists. Picken’s Plan promotes the use of it; hopefully, more politicians get on board with this.
Perhaps, the next boom will be fueled by more innovation in the energy realm. Electric cars, increased solar usage and other innovations could perhaps fuel an entire new bull market and take our country and our world towards a better future.
GM is pushing extremely hard for its Chevy Volt. Perhaps, buying GM at its lowest point in decades is a good investment as it pursues their ambitious goal of producing a mainstream electric car. Most manufacturers are focused on Hybrids that use mostly gas and electricity to offset its gas usage. The Volt is designed to run mostly on electricity and will use gas only when it runs out of juice. Perhaps, such an aggressive move can save GM and the U.S. automakers?
Another trend which is apparent is the concept of convergence devices which perform multiple functions with one device. The most popular device here is the Apple iPhone. It’s pretty undebatable that this is the direction we are heading in terms of consumer electronics. Apple is positioned better than anybody to take advantage of this. Apple is at its lowest levels in a long time (disclosure: I just bought more Apple shares at $108 and $109).
What about the family room? When will we finally get rid of the multiple set-top boxes and have a device that can play any kind of media from cable tv, to the internet, to media stored locally, to on-demand content? Perhaps all built into a single flat screen television? Again, I’m not sure who is positioned better for this than Apple.
I want to hear my reader’s ideas on where the next bull market is. Share your thoughts by adding a comment!
Potential Side Effects Resulting From Current Actions
Lastly, I want to discuss how actions to combat certain market forces always produce a side effect that possibly helps contribute to the next bull market. For example, when the dot-com bubble went pop, government officials bottomed out the interest rates to try and keep our economy growing. What was the side effect? Among other factors, it contributed to the housing boom. The housing boom became a bubble and went pop. Government has and still is assaulting interest rates to keep our economy moving forward. Perhaps, a side effect has been helping push commodity prices higher.
The point is that while bull markets are usually not caused by a single factor, some of the actions we are seeing our government take ($700 billion bailout?) may help push our economy in an unseen direction.
The goal here is to attempt to anticipate the next bull market(s). The current stock market represents a great opportunity to make money because we are definitely closer to a bottom than to a top. At which moment would you rather be buying?
It’s impossible to time the bottom perfectly but it will probably come when the situation looks like it can’t get any worse. The panic and fear will be incredible. I’m not sure we’re there yet, but we’re closer than we were a few months ago!
My challenge to you is to find the sectors, industries or individual companies that represent the best opportunities for future upside from current levels. Where do you see the trends developing which can lead to money being made? Give me your input and let’s get a discussion going here so we can all benefit!