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The Right Perspective In Today’s Stock Market: Forget the Bailout, Focus on the Next Big Bull Market

30 September 2008 12 Comments

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.

Energy

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.

Alternative Energy

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?

Convergence Devices

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.

Conclusion

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!

12 Comments »

  • rebel said:

    One of the things I ahve heard and read is that the infrastruction for moving clean energy around is lacking. This might be an area to look into closely. Also, if McCain wins he wants to build more Nuclear Plants.
    Both candidates are going to focus on energy. I think you are absolutly right that thi could be the next boom. I hope you don’t mind that a 30 something tries to make some cash with you 20 something folks.

  • kevin duffey said:

    Couldn’t be more pumped to have some 30-somethings along for the ride! Obviously, most of what we talk about here applies to people outside the 20s age group, but hey, I’ve got to create a niche now don’t I? 🙂

    Thanks for the input.

  • sbf said:

    Alright, well Kevin hit it right on, energy is on the back burner and the next big BOOM!

    Get in while it’s good (cheap) because this time next year you’ll be wishing you had.

  • Matt Peer said:

    Anything infrastructure-related should do well. Look for the “picks and shovels” industries that go along with energy, i.e. oil services, equipment or engineering companies. Also, anything raw material-related. Arcelor Mittal (MT), the world’s largest steel company could be extremely cheap right now, plus it gives you international exposure. For equipment, try Caterpilar (CAT) or Bucyrus (BUCY). Engineering, URS (URS) is strong.

    You might want to consider buying Harley-Davidson (HOG)now. The reason I would say a long position on a company that makes very expensive motorcycles is that as (if) fuel prices continue to escalate, poeple wil want to buy a fuel efficient vehicle. Harleys can get around 40 MPG. The are the Great American Brand (brand “moat”). Their clientele is increasingly upscale.

  • kevin duffey said:

    Matt,

    Don’t you think a slowdown in the consumer might make sales on high end motorcycles go down?

    I like your other recommendations.

  • Matt Peer said:

    That’s possible, but as I said, Harley’s demographic has a increasingly affluent clientele. More lawyers, doctors, and bankers are riding them besided rebels. They have a strong clothing brand too, and they just opened a museum in my hometown, Milwaukee.

    Harleys in the lower end are reasonably priced ($7-8k) as well for the everyday commuters in warm-weather states.

    Besides, they also make a “crotch rocket” in Buell, a bit lower priced.

    I would rather be positioned in HOG while it is priced in the $30s rather than when consumer sentiment picks up and is in the $70s or 80s.

  • Matt Peer said:

    Oh yeah, I forgot about entertainment. I believe that no matter how the economy fares, people always need escapes whether it be on the “cheap” at the movies (rather than a vacation) (think Disney, Marvel, NBC/Universal via GE, CBS, Viacom, etc.)

    I like Disney (DIS). ESPN for the guys, Desperate Housewives and Grey’s Anatomy for the gals, Hannah Montana, Pixar, etc. for the kids. all are strong franchises that will be around on TV if the economy tanks. Their knack for developing a ridiculously popular franchise with little capital is very impressive.

    GE is awesome, especially since Warren Buffett just stuck $3B into them. Their culture of innovation coupled with CEO Jeff Immelt’s desire to do a ton of business in China in the next few years, in addition to their majority stakes in NBC/Universal as described above could make for a great and cheap stock.

  • Stephen Ponce said:

    @Matt,
    You’ve made some pretty good recommendations there (although I’m not too sure about the Harley one 😛 ).

    In any case here’s my two cents on the issue. A little about my background, I am currently working within the web development sphere and currently the biggest buzz is mobile phone applications. The iPhone has helped fuel this buzz, but with Google’s release of Android (their open-source phone operating system) the mobile phone scene will surely begin to gain much more popularity.

    Think about the success a company like Google has had within the past decade, and that should provide some confidence behind the theory that the mobile phone market is quickly expanding, especially in the global market. Developing nations and even third world countries do not have near the market saturation that the US has…Industry studies are predicting that by 2010 over 90% of the worlds 6 billion people will have/own a mobile phone.

    With that said I’ll sum it up: mobile phones are the next big thing…Invest in them

  • Ray The Money Man said:

    There is a huge bull market coming, but is that late 2009, early 2010? there is lot’s of money to be made between now and then.

    Thanks, great post!