Time To Be Optimistc, Says Pring

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When I first started working in investments in 1984, a standard item on my reading list was Martin Pring’s InterMarket Review, which served an extremely useful function with its prescient analysis. Almost 25 years later, I am still paying close attention to Martin’s views.


Martin has written 14 best-selling books, including his seminal Technical Analysis Explained. He was the winner of the 2007 Traders’ Hall of Fame Award and also the recipient of the 2004 Market Technicians Association Annual Award.




My view is that one should not expect a quick convalescence period for stock markets, short-term rallies aside. Although I am not in the Armageddon camp, I have republished two fairly gloomy interviews in recent weeks, namely those with Louise Yamada (Bearing Up) and James Montier and Albert Edwards (Market Fundamentals are Appalling).

For the sake of balance, and because his arguments certainly deserve more than a cursory glance, I would also like to share with you Martin Pring’s latest report, in which he argues the bullish case for equities. Over to Martin.

“Yes, the financial news gets worse every day. Yes, the average stock is down more than 25% over the past 13 months. Yes, the housing market is still reeling and foreclosure activity is rising. Yes, the price of gas is skyrocketing. And yes, this too will pass, and the economy and stock market will begin a new expansion and sustainable bull market, as all business cycles have.

“Over our several decades of investment management experience, we have witnessed many business cycle recessions and stock market declines. They all have one thing in common. In the midst of the most negative financial news, the stock market begins to move higher in anticipation of the next economic recovery.

“We believe the market has more than discounted all the bad news out there and is putting the finishing touches to the bottoming process for stocks. Yes, a significant advance is set to begin that will take stocks much higher in the year ahead.

“Considering all the negative financial headlines, is it any wonder investor psychology has reached a gloomy extreme? Legendary value investor and philanthropist Sir John Templeton made a career (and fortune) taking advantage of bargains that showed up during recessionary periods and bear markets. His foremost investment discipline was geared to wait patiently for stock prices to ‘reach the point of maximum pessimism’ and then he invested. It is somewhat ironic that this pioneer of value investing, who began his career in the 1930’s, would pass away this month at the age of 95, just when the markets have hit an emotional low point. We know Sir John would be buying stocks during today’s financial turmoil. Investor psychology has reached that pessimistic extreme and conversely sets up the year ahead to be a very profitable one.”

Please click here for Martin’s full report in which he expands on four reasons to support his optimism.


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6 comments to Time To Be Optimistc, Says Pring

  • It is hard to pick a bottom, but I agree that there are many contrarian indicators pointing to a bullish case. I also think the financial rally last week on news that wasn’t outstanding is a good sign. However, there many macro fundamentals that point to continued trouble in the financial markets.

  • wc fowler

    Most interesting article. I agree completely with Pring’s observations regarding Consumer Confidence, Bull/Bear Markets, and cash levels in liquid funds.

    The oil market weakening will happen, but it well could be temporary, and lead by lower demand. Until the USA and other “developed” nations develop a true energy policy the oil question will return as it has in the past. A fresh look in Washington DC should also provide for a rally, as it has in the past.

  • Jim Hancock

    I agree this was an interesting article …it was thoughtful and well reasoned unlike most bullish reports of the time.

    I think it is overly optimistic though. We may have the perfect storm for consumer confidence that takes it well below it’s previous 70s low. I also agree oil will drop, but think the reason is because emerging markets slow down which increases the value of the dollar and reduces oil demand in those economies.

    Ultimately this reminds me of the 3 blind men and the elephant. Pring picked indicators that support the bullish case, but there are things he ignored:
    1) UE could still go much higher.
    2) We have not really begun the slowdown in consumption due to the stimulus bill. This could further hurt earnings significantly.
    3) Housing prices have yet to even flatten let alone bottom. This means losses are still unknown for most financials. ARMS are still resetting, inventories rising and foreclosures rising.
    4) The credit crunch has yet to do it’s worst damage to businesses. Banks are going to hit “margin calls” and will be forced to continue deleveraging.
    5) Technically speaking he is completely ignoring the huge head and shoulders patterns evident in the major indices.
    6) We had many bear rallys from 2000 to 2003 as the markets went lower and lower over a 30 month period …I see no reason to believe this one should end after 8 months. If anything I would think housing and financials to be a greater impact to the broader economy than tech.

    Though the author in this case seems completely sincere (unlike most bullish media propaganda), I think we are just in another bear rally at the moment. After we peak this time, I expect another huge plunge.

    The trend is your friend and the major market trend is still down. Wait til the 50 DMA crosses above the 200 DMA …missing the first 10% up beats catching another 20-30% down.

    Anyway, just my 2 cents …worth what you paid. 🙂

  • Jim Hancock

    I would add one final comment that most of the previous downturns we have experienced were due to fairly normal cyclical events. I would argue that downturns caused by bubbles imploding have harsher consequences.

    We avoided the full impact of the tech bubble by blowing another bubble …but the result still took the NASDAQ from ~5200 to ~1200.

    I hate to sound too bearish, but the only other comparable bubbles I can think of are the US in 1929 and Japan in the early 1990s. If anyone can think of other similar financial bubbles and their impact please post…

    I personally think we fare better than those two scenarios …I am not in the doomsday camp. I also think comparing this situation to previous light recessions is too optimistic as well though.

  • Frank Wordick

    This is only the second time in memory that I have ever heard the phrase “…this too will pass…”. Generally, I hear “…it’ll come back…”, a phrase that indicates that you have just lost a wad of money thanks to the advice of the person who just uttered it. In respect of the other phrase “…reach the point of maximum pessimism…”, does another who is in touch with reality really think that we have reached the point of maximum pessimism, when Martin Pring, Jeremy Siegel (Wharton School of Business) and David Dreman (Value Investing) are still giving the sort of advice contained in the above article and the stock market has been rallying — or at least attempting to — for days? Pring gives four “good” reasons to invest: 1) Consumer confidence is at a record low and presumably can go no lower. Consumer confidence surveys mean close to nothing. According to a recent study, there have been occasions, when consumers say they are exceedingly pessimistic and then a few days later a massive retail buying rally begins. This study demonstrated that there is no relationship between consumer confidence indices and consumer behavior, a belief that I subscribed to even before reading this study. 2) Bull markets follow bear markets. Astute observation! And bear markets follow bull markets as we are now seeing. But what’s the time lag and how much lower will the bear market go before it bottoms? I always favor waiting for the elevator to arrive before stepping into the elevator shaft. 3) Lower oil prices are ahead. Try reading the news, Martin! Last Friday, the Republicans blocked the Democrats bill, which would have prevented the CFTC from classifying pension, mutual, etc. funds as “commercials”, a position which currently allows then to drive the oil price higher and higher by throwing tons of money at long futures contracts. There will be no cheap oil till well after the election, when the Democrats will have better political control. 4) There are truckloads of money sitting on the sidelines. And why is it sitting there? Because as Edwards and Montier have shown us, the fundamentals of the economy are appalling and as Yamda has demonstrated, the current charts of the market resemble those of 1929. What’s wrong with being bearish, if the circumstances warrant it. Tune into reality! It may save you a lot of money.

  • That Being Said

    Pring published “Return of the Bear” a full year and a half before the market peaked in 07, he’s probably a year early here too.

    He has spoken a lot about valuations in his past work, I am kind of surprised that he believes a new bull is right around the corner considering our present day valuation.

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