Surprise find. Today I was looking for an old article on my hard drive and found a long-lost copy of the second segment of a two-part interview I did with Jon Chevreau of the Post on February 6, 2008. The first segment was uploaded to YouTube long ago and many viewers have asked me since for the second part. At that time, we were not able to upload segment 2 to YouTube as it was over 10 minutes in length and the Post somehow lost part 2 of the video from their website.
I did not think we had retained a copy until I found it in an unlikely file today. In any event, here it is at long last.
As I watch today, I am struck by a few things. At that time I was being labelled a bear and a pessimist because I was warning that asset prices were over-valued and at risk of the next big cyclical decline in the secular bear that began in 2000 and that in that environment, stock prices had the potential to retest the 2002 cycle lows. Most financial folks scoffed that this was ridiculous. We are no clairvoyants. But because we are humble market historians and disciplined risk-measurement takers at our firm, we were able to get a top down view of probable outcomes. In doing so one can take proactive steps to protect capital before the carnage.
When Jon says that the decline of then 20% on the S&P was already big and surely P/E’s of “14” were attractive and a buying opportunity, I said that the problem with that argument was that the “E” or expected earnings of the “P/E” quoted were overly optimistic and likely to decline further which would expose stock prices as still being too rich. This is precisely my concern again today.
Mostly I am struck today by how my comments in February 2008 (the S&P went on to lose another 30% and the TSX another 35% before they bottomed 13 months later) are very applicable to our concerns about the downside risks from where we are today in September 2011. Time will tell…
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