This market is giving me the BULLs!!!

Stan Weinstein will tell you, never buy a stock in phase 4, that is to say in a bearish phase. You don't catch a falling knife, you know. You can't blame him, the trend is a devilishly effective thing. I sometimes have a bit of trouble with the chartists, but I like him: simple and effective. And even if I feel closer to the fundamentalists, there is always Weinstein's voice telling me "be careful there, you're going to burn yourself". Except that this time I see things a little differently.

 Ok, that's right, we've gone below the 30-week moving average. Ok, the market is completely crazy, with volatility likely to wake up a Ukrainian sleeping off his 3 liters of vodka. Ok, there's going to be some sport for the old economies if they want to repay their sovereign debts. Ok, the whole planet is freaking out and buying gold. Let's talk about gold, actually.

 Here is a graph from Olivier Crottaz's blog that shows the evolution of the Dow Jones in relation to gold. Interesting, isn't it? I remember that when I was starting out in the stock market in 2000, a guy told me on the Webfin forum that he was a bear on stocks and that he swore only by gold. I didn't believe him. Too bad. Investing in stocks back then was like doing it in 1929 or 1965.. Furthermore, compared to gold, the performance of the stock market is less clear over the long term. What is most striking is the "hole" of the 70s and 2000s, proving that stock market performance was achieved at the cost of a massive devaluation of the dollar.

The bullish peaks of stocks are getting higher and higher, but you have to wait about thirty years to get your stake back in real terms if you bought at the worst possible time. That would be valid if we were in one-shot mode. We put everything in, nothing for thirty years, then we look at the result. As we said, in 1929, 1965 and 2000, it just wasn't a good idea. But in 1934, 1979 and ... the situation is completely different. The idea is not to seek out the trough, the inflection point, at all costs, but to gradually move towards a greater weighting in equities, even if we are far from being at the end of our troubles yet. Having a little gold left in the portfolio can prove useful to face these last storms, but it would be wrong and dangerous to believe that the yellow metal will be able to continue to outperform in the coming years.

The other point to consider is the current good health of companies and their more than accessible prices. Chevron was trading on Wednesday evening at a PER less than eight, when I decided to buy some. For once, I broke my principles and did some "bottom fishing" without waiting for this stock to be considered by my algorithm as a buying opportunity. As a reminder, the analysis model is based on five years of data and only long-term movements can change the buy/sell signals. In any case, I doubt that what we are experiencing at the moment will stop any time soon and CVX would have been a buy signal sooner or later. And then, above all, I couldn't let the simultaneous conjunction of a monstrous fall in the USD/CHF pair and of the title itself. I could get a lot more for my money with the click of a button. The very next day the dollar recovered massively against the CHF and the stock did the same. And then finally, I accept that a reduction in government spending and/or an increase in taxes could lead to a recession. But with a price/earnings ratio like that and a price that only represents one and a half times net assets, there is a good margin of safety.

Apart from the Dow/Gold ratio and the good health of companies, there is something else. ratio of total market capitalization to US GDP was Wednesday night at 78.3. We are not yet in the "undervalued" zone, but we are not far from it. Since 1997, there have only been four such occasions, in 2003, 2009, 2010 and now. This will therefore be the third consecutive year where the market is considered at least correctly valued. This proves once again that the Various market players are increasingly losing interest in stocks to divert to other investments (gold, real estate, bonds, etc.). The bubble of the 2000s is therefore finally completely absorbed this time. The problem is now elsewhere.

In addition to Chevron, I have also benefited from buying on the Swiss market since the beginning of this crisis.  JFN, BELL (whom I will introduce to you tomorrow) and EMMN. The current opportunities are indeed too good to pass up. With these stocks, CVX, which offers good long-term protection against dollar fluctuations, and PAXN, acquired just before the crisis (it barely moved...), I was able to clearly reduce currency risk of my portfolio, and at a lower cost too. Well now that I am writing these lines the CHF is finally deciding to weaken (thanks to the SNB?). It doesn't matter, my new covers will be useful to me sooner or later.

To return to our friend Stan, it is true that buying in a bear market is risky. And There will certainly be further corrections in the market. The Dow/Gold ratio is not yet at its lowest and the market capitalization to US GDP ratio is not at its lowest either. Nevertheless, it is time to start changing tack, so as not to miss out one of the biggest bull markets in history.