Why Your Investment Advisor Was Dead Wrong

by Alexander Green, Investment U’s Chief Investment Strategist
Monday, March 7, 2011: Issue #1463

Happy two-year anniversary!

What? You say this isn’t your anniversary? Sure it is. Two years ago, the S&P 500 – after falling 48% from its October 2007 high – hit bottom. It was one of the great buying opportunities of your lifetime.

The only question is: Did you take advantage of it?

Some folks tell me they were too scared. Others say their trusted advisor told them to sell their stocks… and certainly not to invest precious cash in the market. In other words, at the point of maximum opportunity, their advisors told them to do precisely the wrong thing.

How about us here at Investment U and The Oxford Club? What did we say at the time?

Ignore “The Great Humiliator” and Buy Anyway

I have a fairly good memory, but I didn’t want to trust it. So I recently dug back through the archives to see exactly what we told readers to do.

Was it good advice? You be the judge. Here’s what I said in Investment U articl on the stock market rally dated March 23, 2009:

“Let’s consider what many investors simply refuse to believe: That we’ve seen the market lows.

Why are so many skeptical on this count? Because virtually everything they see and hear tells them the economy is going to get much worse in the months ahead.

And they’re right. It will. The economy is losing 600,000 jobs a month. The banking system remains dysfunctional. Real estate is mired in quicksand. Retail spending is anemic – and still falling. And consumer confidence is at record lows.

It doesn’t take an Isaac Newton to see that the economy will get worse. If there were a direct correlation between the economy and the short-term direction of the stock market, we’d know just what to do with our money now.

But there isn’t. Perversely, the market often tanks when times are good and rallies when the outlook is poor. Money manager and Forbes 400 member Ken Fisher doesn’t call the stock market ‘The Great Humiliator’ for nothing.

Should you buy into this market? Of course you should.”

Skepticism Reigns… But Ignore That, Too

At The Oxford Club, we were busy grabbing many of the market’s most flagrant bargains. (No wonder the independent Hulbert Financial Digest just reaffirmed that our Oxford Club Communiqué is one of the top investment letters in the nation over the last decade.)

Yet I was bombarded with more than a little skepticism:

“I’ve tried to get this message across to members over the past few weeks. Yet many react as if I’m asking them to stick their heads in an oven. Certain that I must be living on the dark side of the moon, they keep insisting that we’re in a Depression. I disagree.

What some fail to realize is that the severity of the economic downturn is universally recognized. It’s fully apparent even to those who have never invested a penny. Yet too many investors are sitting in cash and talking about ‘how bad it is’ as if they’ve suddenly grasped something the rest of us still haven’t cottoned onto.

The bleak economic outlook is fully discounted in stocks. The Dow hasn’t dropped below 7,000 because the world is wearing rose-colored glasses.”

The Simple Equation That Creates Huge Moneymaking Opportunities

I don’t cite these quotes to make it sound like we had a crystal ball. We didn’t. In fact, I wrote a column just last week explaining how many investor gurus and forecasters claim that their prognostications were right when their reasoning was dead wrong.

Ours wasn’t. And in recent months, I’ve spoken to hundreds of investors who made boatloads of money following our advice.

Any investment advisor worth his salt should know that whenever you have extreme valuations combined with extreme sentiment, it creates an historic opportunity.

If your advisor didn’t know that, shame on him (or her). But if you’re still taking advice from that same advisor today, shame on you.

There’s a good reason why we’re the world’s largest investment club. If you’re not currently a member, I invite you to join us now. I think you’ll be surprised by what we see just ahead.

Good investing,

Alexander Green