Numbers Talk

If we are to let the numbers speak to us, could it be that better times—both globally and domestically—lie ahead? Delineated by dozens of ratios, relationships, and relative comparisons, markets are also discounting mechanisms; that is, they anticipate the future.

One of the preeminent investment research shops in the United States is the Leuthold Group, a research and investment firm in Minneapolis that collects enough data on the markets to put Bill James (the guru of Major League Baseball statistics) to shame while also managing a portfolio of mutual funds that seek to capitalize on that research.

Doug Ramsey is the director of research of the Leuthold Group, charged both with co-managing the firm’s Global Fund and also sorting through and making sense of the mountains of data collected each day, month, year, and decade by the 28-year-old firm.

Are we at a market bottom now in mid-November?

Ramsey: If not today, within the next one or two months.

What tells you that?

Ramsey: A number of things. Where we are in terms of the economic cycle. Our shop believes that we’ve been in a recession since the fourth quarter of 2007 [confirmed now by the National Bureau of Economic Research], and we are conceding that this is going to be a very deep U.S. and global recession. The historical relationship between the stock market and the economy is that the stock market will typically turn up 55 or 60 percent of the way through a recession, so to wait for signs that the U.S. economy is turning up or that the global economy is turning up means you’ll likely miss the first half of the gains in the next bull market.

How is this market different from other bear markets?

Ramsey: This is the first time in 25 years where you can be a value buyer of stocks globally. Stocks certainly went up in the late ’90s, and they went up from ’02 to ’07 because of liquidity and strong earnings. But this is the first time since the early 1980s where you can look at absolute values in the stock market both in the U.S. and around the world and strongly believe that your returns three, five, and 10 years out will not only be positive, but positive in a big way.