Ken Fisher is a money manager, Forbes columnist, and is one of the Forbes 400 richest Americans. He is also author of several books, including his two latest, The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!) (Fisher Investments Press) and How to Smell a Rat: The Five Signs of Financial Fraud (Fisher Investments Press)
Ken Fisher Interview Part 6
Please note: Interview took place on Friday, September 25, 2009
Stockerblog: Speaking of six months out, are you anticipating a short-term selloff in the next six months?
Fisher: I don't think so. Let me just say that there might be a short-term selloff at any point in time. Every bull market has little periods that have pullbacks in them. But one of my most important points that I try to encourage people to do is to think globally first and about their own country second. That's true whether you're in the biggest and best country in the world like America or whether you're in a little country. America is about a quarter of world GDP and the other three quarters will have more impact on us than we will have on it. Americans don't think that way because our economy is so big and strong, we tend to think American-centric.
But when you think about the global stock market, there has never been, what you can think of as a counter trend rally within a bear market that was nearly as big as the move from March 9 through Tuesday of this last week [Thursday, September 24, 2009], not even by 25%.
The fact is, this is the beginning of a bull market, and one of the points that I've made repetitively that most people scoff at but it's true, is that when you think of global markets, the nature around the bottom and the beginning of the next bull market is a V shaped pattern. That is, the rate of descent of the back of the bear market is pretty much exactly the same as the rate of ascent of the beginning of the bull market, and that V lasts from one to two years.
So the bigger the bear market, the bigger and longer the V tends to be. This is really hard for the human brain to accept because the human brain wants to think, the bigger bear market: that must come from bigger problems. Bigger problems must mean that it takes longer to get back. From the beginning of this year, we've heard people talk about how in this bear market, it might take ten years to get back to where we were at the peak of the prior bull market. The fact of the matter is that at this point in time, we're about half way back already, and it's been only six months and a few weeks.
The power of that V-like function, where the ascent of the beginning of the bull market is at almost the same rate as the descent of the last roughly half of the bear market, is something that is virtually impossible for the human brain to want to accept. But it's real. Therefore, from here, as we look at the end of September, and think out through the next six months, I bet that, with regular vacillations along the way, the market moves in a pattern that's very, very similar to the way the market descended in the six months up until the end of last September.
Stockerblog: That's actually good news. I think everybody wants this to be a real bull market.
Fisher: I don't know if that's true Fred. When you go and look in Internet chat rooms today, and you see what people are saying, you still have an awful lot of people that are running around naked because they had the pants scared off of them. And they're feeling very naked, and they're feeling very upset, and anytime you say anything bullish you get a tremendous amount of Internet wisecracking going on, because those people are all sure the market is going to go down. I think there are a lot of people that would prefer the market to go down, because that vindicates them sitting in cash all this time.
Stockerblog: I think the big concern is, like you mentioned, is we're already halfway back in a six month period, and a lot of people think "Too much, too soon, we've got to have a selloff, maybe we'll lose 10%, 15%, 25%; is it going to happen now, is it going to happen October 19? When's it going to happen?" I think that's the big fear.
Fisher: Well 10% can happen at any point in time but 10% can always happen at any point in time. And the other point that I'd like to point out to you Fred, is this mentality is true early in every bull market ever. That is, if you went six months off the bottom in 2003, that's exactly the same mentality that people had. There's nothing new or unusual about this. The bear markets convince people that things are terrible, then when the bull market starts, stocks go up and people didn't expect them to go up. Since people didn't expect them to go up, they think that they can fall further.
Now, I want to go back to my point from before, which is that any point in time, at ANY point in time, regardless of what the market did before, for the market to drop 10% in a minor correction is nothing. That happens and it goes away as fast as you can blink your eyes fifteen times. But the thing people should fear is a bear market, not a correction. The nature of stocks is that they're volatile; the nature of bonds is that they're volatile, and you can get corrections at any point in time.
Stockerblog: So people should look at a 10% correction as a buying opportunity instead of "this is something terrible that's happened to my portfolio."
Fisher: Another way to say that is a ten percent correction in the market tells you nothing about where the market will be six month from now. That is, we could have a 10% correction that started this week [Friday, September 25, 2009], and that tells you nothing about where the market will be six months from now. And further, because you can get a 10% correction at any point in time, they're virtually impossible to time, therefore there's not much point in trying to do it.
Stockerblog: I think we've covered everything. I really appreciate your time.
Fisher: Thank you much Fred, I enjoyed doing it.
Stockerblog: Thanks Ken.
End of Part 6
If you missed Part 1, you can check it out here.
If you missed Part 2, you can check it out here.
If you missed Part 3, you can check it out here.
If you missed Part 4, you can check it out here.
If you missed Part 5, you can check it out here.
By Fred Fuld at Stockerblog.com
Copyright 2009. All rights reserved. Reproduction of this interview prohibited with out permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview.