Market Rate Of Change, Part 2
October 4, 2008
Well, as of this week, we hit -12.4 on the ROC, which is the lowest level since -14 near the market bottom in 2002.  Obviously I don't know if the market will go down, sideways, or up from here, but at least one of my requirements for a bottom has been met.  This was a big one for me, so I will add to some small positions I already have, and have already started to look for new opportunities.
Market Rate Of Change, 1990-2008 October


This market has been ugly, and for very good reasons.  Equity markets across the globe are weak, with bailouts being debated in other G7 countries.  Hedge funds are liquidating at an unprecedented pace, based on redemption requests that were due September 30.  The messiness won't get sorted out tomorrow, and we may see more fear and forced selling before we are through.  However, unless you think that we are going into a world-wide depression, opportunities to own great companies at once in a life-time prices abound.
This market has not traded on fundamentals for a long time, so you haven't heard me talking much about individual stocks.  Right now, the good are being thrown out with the bad.  I've used ETFs a lot this year to hedge individual company risk for that very reason.  This weekend I started looking at individual stocks very closely again, and there are some amazing valuations.  Companies with double digit earnings growth trading at 3, 5 or 8 times forward earnings.  That is a PE/Growth ratio of .3 to .8, which is usually pretty hard to find.  Today, there are literally screens-ful.  I'll talk about those in the near future.  Until then, please don't panic, and try to raise some cash when you have a good profit.  There are always more opportunities.
All the best,
Dan Grill