Vitaliy Katsenelson recapitulates his secular range-bound market
thesis on GuruFocus today (
"Welcome to another Lost Decade"), this time with a slight twist: he thinks a 1990-? Japan-style bear market is also a possibility going forward. As I noted in the comments there, Katsenelson's diagnosis makes sense, but his prescription ("active value investing") seems limited:
why rely on any form of long-only investing -- even his active value investing -- if we are in for possibly another decade like the last one? How did long-only value investing fare in 2000-2002 or 2007-2008? How will it fare when the current cyclical bull rally inevitably leads to another cyclical bear correction?
I totally agree with the secular bull market and secular bear market distinctions and suspect we've a ways to go before we enter the next secular bull market.
ReplyDeleteIf history is any guide, valuations will have to get a lot lower for a longer period of time before the next sustainable secular bull arrives.
But I disagree that such a reality negates the benefits of long term investing in individual high quality companies.
It's only a "lost decade" if you're betting on both earnings growth and a P/E expansion of the entire market in order to get rich via capital gains.
In contrast, dividend growth investing (in high quality companies), I argue, is immensely superior to simple growth investing, and especially so during secular bear markets.
Why? Your income/cash flow/returns continue to increase regardless of which market season it is.
In contrast, dividend growth investing (in high quality companies), I argue, is immensely superior to simple growth investing, and especially so during secular bear markets.
ReplyDeleteI had the same thought five years ago, when I bought shares of PFE, GE, AB, etc. and set them up for dividend reinvestment in an IRA. Take a moment to pull up the five year charts on those stocks.
Any form of un-hedged, long-only investing insufficient in a secular bear market, unless you time your purchases so you make them at our near the secular market low in valuations.