FORBES CONTRIBUTOR KEN FISHER BULLISH

In the early 80's, I read "Finding the Next Super Stock" by Ken Fisher. He immediately became one of my favorite gurus. One of the things that he understands is that when the sentiment for a stock or the market is far more negative than the actual numbers, it is time to buy and, conversely when the sentiment is far more positive than the actual numbers it is time to sell.

In his recent articles in Forbes magazine, he has detailed just how negative European thinking has become. Similarly, he notes that Americans are on balance very negative about the market prospects for 2005. He notes that although everyone seems to know that the first year of a presidents second term has averaged low returns; the public does not seem to realize that this first year is anything but average. It is usually a very strong year or a very weak year.

Based on his study of the yield curve, he forecast a very strong market for 2005. I have often written that one key to good investing is to never fight the treasury yields. Today we have a highly unusual situation. Short rates after 4 months of increases are still historically low. The economy is still being stimulated! At the same time, productivity is so strong that inflation is relatively tame. The bottom line is simply that stocks are paying more than bonds. Any stock that has a PE of less than 16, is a value stock in today's market. Mr. Fisher reports that when the yield curve shows a spread of greater than 2%, the market is typically positive for another 2 to 5 years.

I continue to trade away from high flyers. I have added several lower beta stocks to my portfolio in recent weeks. I have mentioned them in previous blogs.