Is Bear's Woe a Good Sign for the Market?

Is Bear's Woe a Good Sign for the Market?
March 15, 2008; Page B2

Financial crises don't end until something gets broken. From the evidence of Friday, it looks like the something in question is going to be Bear Stearns.
What does that mean for your investments? The likely answer: The market may well be nearing its bottom.
A spectacular bankruptcy usually brings a crescendo of panicked selling and forces concerted intervention. Often, it marks the beginning of the end of a crash.
In this situation, the liquidity crisis is so bad that at one point early Friday a major bond institution couldn't even sell Treasurys for a bit. A senior figure there told me his usual buyers among the Wall Street houses had shut their windows in panic.
Successful investing isn't easy, but it's simple: Buy low, sell high. Steeling yourself to buy low, when everyone else is selling, is what makes it hard.
Think of how many people were telling you to buy the Dow at 14000. Think how few are telling you to take a look now at 11900.
Like many contrarians, I tend to call market turns early. I was certainly early in some of my bearish calls on certain overinflated assets, like housing, in recent years. Markets tend to overshoot in both directions.
But if you are trying to save college funds for your 8-year-old, or to retire in 20 years' time, that's a detail.
Large-cap U.S. growth stocks are, on the whole, looking like a pretty reasonable value right now, and if you are investing for the longer term, instead of chasing next week's stock performance, that's positive.
You're buying top-quality companies on historically reasonable valuations. That's rarely a bad bet to make. Simple exchange-traded funds Dow Jones Wilshire Large Cap Growth ETF SPDR and Vanguard Mega Cap 300 Growth Fund will spread your money across a basket of high-quality blue-chip growth stocks, from Procter & Gamble to Microsoft.
As ever, I make absolutely no predictions whatsoever about short-term performance. Wall Street could jump 1,000 points or fall 1,000 points next week. That's why you shouldn't commit all your funds at once.
As for current talk of a "depression," no less, remember that another sign of a market bottom is when apocalyptic predictions become widespread.
The Great Depression wasn't caused by the financial panic of 1929. It happened only because of a string of policy blunders including tariffs and a tightened money supply that followed the panic. Fed Chairman Ben Bernanke, a student of the Great Depression, knows this full well.
The worse the situation now, the more the federal government will have to step in to provide liquidity. And that can mean only one thing for inflation.
The big losers over time won't be those holding equities, which after all offer some hedge against inflation. It will be anyone rushing into Treasurys.