Bar­ton Biggs at Traxis Part­ners believes that equi­ties could be set­ting up for ‘the mother of all bear mar­ket rallies.’

The piece, writ­ten Nov. 24 by Bar­ton Biggs for the Finan­cial Times, is timely — Here are some excerpts:

... there is com­pelling evi­dence that investors, hedge funds, pen­sion and mutual funds, and the pub­lic are not just talk­ing bear­ish, they have raised astound­ing amounts of cash.

... I’ve never seen capit­u­la­tion and despair like this. We must be pretty close to max­i­mum bearishness.

... Sec­ond, val­u­a­tions are cheap. There’s no point in going into an elab­o­rate dis­ser­ta­tion; it’s an inex­act science.

... If emerg­ing mar­ket equi­ties, where the growth is, at six to eight times earn­ings are not cheap I don’t know what is.

... His­tory shows that even in endur­ing, sec­u­lar bear mar­kets there are not just 20 per cent bounces but usu­ally one 30 to 50 per cent rally. We should be due.

... I would like to see the credit mar­kets unclog and spreads come in more. At the bot­tom of a panic, the news doesn’t have to be good for stocks to rally, it just has to be less bad than what has already been discounted.

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Comments

One Response to “The Mother of All Bear Market Rallies?”

1. Sahaj Agrawal Says:
   December 9th, 2008 at 4:48 am

   We could already be in the midst of "mother of all bear mar­ket ral­lies" after hav­ing made a panic low at around 7500. The trend even on basis of day count is pos­i­tive and spec­u­la­tors seem to have long posi­tions. We do not expect pos­i­tive news flows but lack of strong neg­a­tive news is act­ing as a pos­i­tive catalyst.