Guzzo the Contrarian

I don’t know anyone who isn’t happy to see 2008 come to an end. This full year of being in a ferocious bear market is taking it’s toll on our psyche, and it’s not only financially draining, but emotionally draining.

No one likes to experience or continuously read about the unfortunate consequences of unemployment, foreclosure, government ineptitude, corporate corruption, and outright fraud. No one also wants the sustained (realized or unrealized) losses in their savings and investments accounts.

So, on behalf of everyone who feels the same, let me just say:

WELCOME 2009! We’re expecting good things from you.

There’s been a lot of speculation that the economy, and the stock market, is due for turnaround before this time next year. I tend to agree with these speculators, but let me further go out on the limb and speculate that the stock market will turn around even sooner, by the middle of 2009.

I’ve got my reasons for such a bullish market forecast.

1. The longest duration for any recession since the Great Depression was sixteen months. We’re already reached twelve months duration into our current recession.
2. The stock market is a leading economic indicator. It usually reverses course months before the economy turns around.
3. As presented in my August 2008 post, junk bond movements (specifically VWEHX) can be used as a stock market indicator. After reaching a record low of $3.90 earlier this month, VWEHX has rebounded to close the year at $4.27. This tells me the fear factor has waned and that we’ve reached a stock market bottom.
4. While I may not agree with their actions, the government has taken control of the situation and is doing their best to limit bank failures, restore credit flow, and prevent further panic. They’ve even unprecedentedly extended bailout help into the investment banking, insurance, mortgage, credit card, and auto industries attempting to prevent overall economic failure. Failure is NOT an option.

While unreliable and highly speculative, my stock market forecast is just that, a guess. But, even though I feel confident in my guess, I don’t plan to change anything that I’ve been doing since the beginning of the crash. I’ve already moved my money from a cash position, back into the markets, and am continuing to DCA while everything is on sale. I’m also selectively trading/investing in individual stocks with a small portion of my portfolio.

It’s just nice to see a light at the end of the tunnel.

Happy New Year everyone!