As value investors, our perspective is more patient and measured, no doubt out of respect for the difference in the character of bull and bear markets. The big bull markets typically begin deep in the hole and then spend years climbing what market commentators have called a “wall of worry,” as memories of what created the hole in the first place slowly fade. The emotional forces motivating investor behavior are comparatively mild in generally rising markets, unless or until the bull phase reaches the stage where rising prices themselves become the primary exciting force propelling further advances. At that point prices effectively detach themselves from the traditional tethers to value.
We can’t call markets, but we can observe human behavior. We suspect that this secular bear market will end with a whimper and not a bang. Futile attempts to pinpoint some elusive bottom will eventually give way to despair. When buying bargains on the sale rack yields nothing but disappointment, when patience wears thin, and when hope is finally abandoned, opportunity
clothed in black will be abundant. While nobody knows to what levels the popular indices might sink—and when—like the flipside of the bull market just passed, one need only be generally right to sleep peacefully at night and earn low-risk, wealth-building rates of return.
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