“Go to where the puck is going to be, not to where the puck is.”
Amid widespread market selling, March 9, 2009 marked the bottom of the market and the start of a 3 year bull market ride. Three years later the S&P 500 is within 10% of its all time high, but many investors still remain cautious and more comfortable in bonds or cash. The Investment Company Institute shows that equity funds had $410 billion in outflows from 2008-2011, while bond funds had $770 billion in inflows during the same period. It’s obvious that many investors have not “warmed” to stocks, despite their impressive rebound during the last three years.
We believe that FEAR is driving the exact opposite response you need to be successful. In our world, great investors take advantage of this emotional situation because prices are lower when no one else wants it. This reminds me of the Wayne Gretzky story of him being asked by a reporter, why he is the best player in hockey when he is clearly shorter than most players, not as fast as most, and is not strong enough to shoot the puck really hard. His response is that, “I go to where the puck is going to be, not where the puck is.” You have a chance to make a Wayne Gretzky move and that is to look at the long term secular trend in bonds and understand that the next 30 years are not going to be anywhere close to how successful bonds have been; equities are the place to be. A $401 billion outflow from equities presents a great alternative to buy when no one else is there. Go to where the puck is going to be and you will always score.
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The All Star Team