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What the 9th inning of this bull market will look like

Dr. Steve Sjuggerud
0 Comments|August 29, 2014

"CLOSE 'EM... CLOSE 'EM... CLOSE 'EM!" the other brokers screamed at me.
 
I was huddled under my desk to get away from them, trying to hear my first-ever client so I could finish filling out his account information.
 
I was 22 years old and in the first week of my first "real" job...
 
The screaming was the typical hazing of a new recruit. The prospective client didn't care about it, though – he barely asked me my name. He just wanted to buy two Hong Kong stocks – and he wanted to buy them NOW.
 
"Buy me Cheung Kong and Hopewell Holdings, RIGHT NOW!" he screamed.
 
"Sir, I can do that, but we need to fill out the account form first," I said. The roar from the brokers continued. ("CLOSE 'EM... CLOSE 'EM... CLOSE 'EM!")
 
I did nothing special to open the account that day, except pick up the phone when it rang. As anyone in commission sales can tell you, the phone ringing like that almost never happens.
 
But it sure was happening back then! Emerging-market stocks were HOT. And fortunately for me, I was in the right spot at the right time... The brokerage firm I worked for specialized in buying foreign stocks and bonds.
 
My phone was ringing every day. And I was making more money than I ever imagined.
 
In the last six months of 1993, Hopewell Holdings (a Hong Kong infrastructure and property firm) soared more than 100%. It wasn't just Hopewell – emerging-market stocks in general did well.
 
In the full year of 1993, the Templeton Emerging Markets Fund went up more than 100%. And in the month of December alone, the entire Hong Kong stock market (the Hang Seng Index) soared by more than 30%!
 
My friend, if you want to know what the ninth inning of a major stock market boom looks like – that's it. And that's what I expect will happen in U.S. stocks.
 
That was the first time I'd experienced "The Ninth Inning" of a major stock market boom. I sure got the full experience...
 
The "bottom of the ninth" was the most amazing part... As I said, the entire Hong Kong stock market soared by over 30%... in December alone!
 
Since then, a few decades have passed, and I've gone through many Ninth Innings – mainly because I am willing to consider investing in just about any asset class, and in just about any country.
 
You have probably experienced at least one major stock market boom and one Ninth Inning in your investing lifetime... and that was probably the Nasdaq boom that peaked in March of 2000.
 
The bottom of the ninth inning was amazing in that boom – the entire Nasdaq stock index was up more than 60% in the final four months before the Nasdaq peaked on March 9, 2000.
 
In 1994, I learned firsthand just how painful the aftermath of a major stock market boom is. I was personally crushed...
 
My monthly income fell by roughly 90% – and stayed that way for the next nine months.
 
The phone didn't ring anymore. It was a bad year for me. Fortunately, I learned a lot of life lessons from that experience.
 
I remembered reading a quote from legendary fund manager Jim Rogers in the 1988 book Market Wizards, where he said:
 
Markets often rise higher than you think is possible, and fall lower than you can possibly imagine.
 
"Boy, that's an understatement," I thought in 1994. That lesson has stayed with me since.
 
In Hong Kong in 1993, I learned that stocks can keep going up and up, beyond all reason. You probably learned that lesson with stocks in 2000, or real estate in 2006.
 
In 1994, I learned that Jim Rogers was exactly right – that stocks could fall lower than I could possibly imagine.
 
I urge you to commit that phrase to your memory. It will serve you well.
 
Fortunately, right now I think we're still in the first half of that quote. Someday we will face the second half of that quote. Someday the high-flying stocks will come down to earth.
 
The thing is, we can't know when that day will arrive. And importantly for your wallet, there could still be a lot of upside between now and when that day comes.
 
The biggest gains typically come in the final innings of a stock market boom. Remember, the entire Hong Kong stock market soared more than 30% in one month – December of 1993. And remember, the Nasdaq index soared more than 60% in the last four months before it peaked.
 
Many people worry that the U.S. stock market is "in a bubble" or "approaching bubble territory." Many people worry that the end is near for the U.S. stock market boom.
 
I disagree. I expect we'll see "fireworks" here soon, like Hong Kong in 1993 or the U.S. in 1999, and that will signal the end of the boom. We are not there yet...
 
This year, U.S. stocks are up just 5%. (If you add in dividends, they're up 6%.) Does that sound like fireworks to you? That is not 30% in one month, or 60% in four months. That is not a Ninth Inning.
 
The Ninth Inning of this great stock market run, in my opinion, is ahead of us... not behind us. Now is not a moment to be timid. Stocks could still go on a big run! So be bold! Take a deep breath, puff your chest out! And take advantage of it!
 
I wish someone would have drilled the Jim Rogers quote into my head 20 years ago. Let me share it one more time, so you can really commit it to memory:
 
Markets often rise higher than you think is possible, and fall lower than you can possibly imagine.
 
Don't forget it!

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