Ken Fisher manages $35 billion in individual and institutional funds and is value-focused. His father wrote a terrific investment book discussed here, but this book is about Ken's investment philosophy, which evolved over his career. This book chronicles that value-focused evolution over his 25 years as a Forbes columnist.
As the bull market continued through these years (having begun in 2003), Fisher continues to remain bullish. His primary arguments are that sentiment is still not prevalently bullish, and that yields on bonds remain lower than yields on stocks. Ten-year bonds yielded about 5% at the time, while market earnings over price (the inverse of the P/E ratio) yielded about 6.5%. Fisher argued that this would result in more M&A and more buybacks, since the cost of funds was lower than the return on their investment.
Fisher also made the call in 2007 that housing is not in a bubble. He believed the market pessimism surrounding sub-prime was overblown and would be over shortly, and took all the pessimism as a bullish signal. He cited the fact that housing stocks were out-performing as a sign that the fears that there is a bubble in housing have no basis! In September of 2007 he writes "a few months from now, we'll be wondering what all the fuss was about".
In his final column of 2007, Fisher disagrees with those who say that after strong returns of the last few years, the market is ripe for a correction. Fisher writes "I want to be the first to say we definitely are in a New Era of above-average returns." He doesn't believe the end of the bull market can happen without extreme positive sentiment. Finally, he rifles off a few factors that he doesn't fear heading into 2008, including further collapses in the mortgage market and a credit crunch.
Fisher made a lot of correct calls over the years, but he was clearly off during this period, and not just by a little bit.