Value investing ultimately wins, but in the process it passes through a wild circus of lunacy.
-- Ron Suskind
January 2013 has gone down in the books as having the highest levels of inflows into U.S. equity mutual funds since March 2000, the dying
days of the dot-com bubble. The week ended Jan. 11 alone saw net inflows
into funds of $8.9 billion -- the fourth-largest amount ever recorded,
according to B of A Merrill Lynch Global Investment Strategy, EPFR
Global, and Lipper FMI. This, of course, came right on the heels of the
legislative agreement to avoid the fiscal cliff that solved the most
recent in a too-long series of macroeconomic crises that threatened the
Well, consider us saved -- at least for a few months.
Take a look at that opening paragraph again and consider the
implications. The last time so much money came pouring into stocks
(using stock mutual funds as a reasonable proxy), valuations were
really, really high. About that time, Warren Buffett said stocks were so
richly priced that he expected the overall market returns for the
decade to be in the low single digits. For this, and for his
unwillingness to buy into the "New Economy" companies, Buffett was
derided as having lost his touch. The scoreboard suggests otherwise.
It's my observation that intelligence and analytical firepower are
less important for long-term investing success than simply having the
confidence to invest when others are fearful. Those who bought in March
2000 have, on average, suffered more than a decade's worth of negative