Liz Ann Sonders, chief market strategist at Charles Schwab, represents the more bullish point of view saying, "It's very clear we're in the midst of a V-shaped recovery." Tech Ticker credits Ms. Sonders with keeping its viewers ahead of the curve. It goes on to say, "In October 2008 she said the recession was upon us and would be deep. Remember, this was months before the NBER's official declaration and at a time when most economists were debating whether or not a recession was in the offing. In June 2009 she said the recession was ending, if not already over, a highly controversial statement at the time."
Ms. Sonders says, "I'm on the more optimistic end of the spectrum," she says. "I'm not expecting the kind of pop in growth you'd normally see after such a big compression, but probably [growth] still above what is a very low level of expectations."
Robert Prechter, founder of Elliott Wave International and author of Conquer the Crash, is on the other end of the spectrum cautioning retail investors to "stay away... for now." He was bullish near the lows in March, but now says the stock market "is in a topping area." Mr. Prechter compares the current market to those of 1966-74 or 1929-32, where massive bear rallies gave way to another "big leg down", i.e., a W-shaped recovery.
Mr. Prechter is predicting another crash in 2010 that will bring stocks below this year's lows. His word to the wise, "be patient, don't rush it" keep your money in cash and cash equivalents for now and wait out this bear market. His analysis further indicates 5 or more years before we turn the corner into real bull territory and "it'll be the buying opportunity of a lifetime."
Ms. Sonders and Mr. Prechter are professionals who have both made, through extensive research and study of the same market history, reasonable sounding arguments for their diametrically opposing views. They represent armies of experts on both sides of the ongoing bull vs. bear debate. Whether the market as a reflection of the underlying economy will experience a W, V, U, "Square Root" or whatever shape of recovery, remains to be seen.
As emphasized in my previous posts, my personal view is that we will be stuck in a volatile environment until we have seriously tackled the underlying structural rigging problems of our economy that were decades in the making.
However, I am optimistic that, unlike before, these problems are being dragged kicking and screaming out of the shadows and into the public eye where with full recognition -- over time -- they will be resolved.
How to Solve the Dilemma: Core Asset Conservation
First, let's stop buying into this Wall Steet notion that we have to "climb the wall of worry" for the rest of our lives. There are alternatives.
As a financial planner, I specialize in the management and preservation of what are defined as Living and Legacy Core Assets. For my clients, the bull vs. bear dilemma is solved by placing these core assets in a step structure that provides, safety of principal, locked-in gains as credited and liquidity. By utilizing the indexing method, clients are able to share in the upsides of the market, but have an automatic defense system in place that eliminates the possibility of losing principal or credited gains whenever the market wave patterns turn negative.
When you know that your Living and Legacy Core Assets are safe, with non-core assets that have direct exposure to the markets, you are in a far stronger position -- financially and psychologically -- to either try and time the upswings and downswings, or just ride out any of the more severe downturns which may occur and not be forced to sell at the wrong time.
From the standpoint of timing, milestones in life -- college tuition, an untimely death, guaranteed retirement income, etc. -- are totally indifferent to whatever state the economy or the markets may be in at the time they arrive.
In today's world, true asset allocation is adding the guarantees of the step structure as a permanent feature to the mix of diversifying risks among the wave patterns of various assets classes in order to provide the stability you can rely on to support life's milestones for yourself and those who depend on you.
For more information on Core Asset Conservation, please visit my website.
The Dilemma: Bull or Bear?