Many people think that the stock market only moves when prices are pushed in a certain direction, i.e, buying and selling  drives prices.  But that’s not really true.  Investors will pay for an asset what they believe it is worth.  When Satyam computers (ticker: SAY) opened for trading last Tuesday investors were willing to purchase the stock for roughly $9.  Then the news hit that Satyam was a fraud.  Overnight the stock dropped 90% to $1.  There was no push in prices.  Investors were suddenly only willing to pay for the perceived value of the stock.  We are seeing a similar thing occur in the broad stock market right now.  There is no massive rush for the exits.  There are no huge volume sell-offs.  There is simply no demand for stocks and the bids are getting crushed downwards and in my opinion for good reason.

The only reason I would ever purchase a stock and hold it for any extended period of time is if I believe the future cash flows of that stock are going to improve.  Value is in the eye of the beholder.  I don’t only buy value and I don’t only buy growth.  I buy what I believe will be worth more in the future because of improving future cash flows.  As of now, there is practically ZERO transparency into the earnings situation. For the first time in many years I am almost completely unable to find a single industry with positive future cash flows.  And until this situation begins to rectify itself (or stock prices fall to much more attractive levels) I find it difficult to see this bear market ending any time soon.