Are you ready to add some serious arsenal to your investment portfolio? Sick of hearing about all this gloom and doom on Wall Street? Honestly, I can’t blame you and it certainly appears to be the grim reality we face today.

Heck, even the presidential candidates cannot escape the market’s wrath in defining our political discourse. Your friends, neighbors, and co-workers have probably all regurgitated this information to you at some point.

So what’s an investor to do?

The simple answer is to buy. Yes, you heard me correctly. Start nibbling on cheap shares of quality companies today. Many companies that are leaders in their respective industries are trading below book value!

Now, I realize that the market today is not what it used to be. Volatility and emotion have taken valuations hostage and technical analysis is becoming a popular method and alternative for determining buy and sell points.

However, once the dust settles, I believe the market will once again look to fundamentals for long-term guidance. There will simply be too much value on the table to be ignored.

There’s always a bull market happening or about to happen somewhere — and the current market environment is no exception.

You see, most investors are sheep and we all know what happen to sheep. Playing contrarian now will be one of the best decisions you could make. Let me explain.

I recently attended an Equities Investor Conference in New York City. The NASDAQ closing was hosted by our partner Equities Magazine and I was happy to be there and share this moment with them.

More importantly, I found that many of the world renown presenters, like Ken Fisher of Fisher Investments, were actually bullish. We were told that institutions are buying and that a bottom was in the near future. This unwavering belief proclaimed with, as Joe Biden would say, “steel in their spines.”

So, you’ve heard the proclamation. Where’s the beef?

Well, it’s simple really. The crystal ball answer may lay with a simple monetary indicator as it relates to the S&P 500 market capitalization. See the chart below:

Look at the blue line. Whenever the Total U.S. Market Fund / S&P 500 market cap ratio approaches levels that near 28% or more, you should be bullish.

Money Market Funds: When enough is enough

In looking at this ratio, I’d encourage you to spot the peaks and the corresponding year below. You’ll notice that every major rally predictively came at the end of recessions (’80-’81, 90′-’91, ‘01-’02) or shortly after the brief market crash we had in ‘87.

Similarly, market tops are often found when this ratio falls into the 12-16% range.

During a recession, the major indicies tend to cough up between 35-40% before tacking on gains in a year or two that would leave you kicking yourself for being a sell-out. I’m talking of gains anywhere between 80-150% within one or two year’s time.

Just look at the recent poll on our Jutia Group site. Although I’d like to have a bigger sample, 180+ voters speak a similar story. 16% have shifted their money into CDs. 15% placed their faith in the money markets. So 31% of voters are playing it safe. Eventually, I believe this money will come back into the market as investors are lured back into equities and rewarded with higher returns.

Good investing,

Stephen Oakes
Founder, Jutia Group