Suffice it say that in January 2001 the world looked quite bright to many. An epic bull market had made your everyday day-trader a self-proclaimed genius stock-picker. The individual investor learned how truly easy it was to make money in the market: Simply buy the latest dotcom and jackpot!, you’re rich… As you know, things didn’t turn out so good, not so good at all…

Suffice it say that in May 2012 the world looks quite dim to many. The market just made a sucker out of the retail investor sporting too-many shares of thatonline place where he chats with the cousin who warned him not to put all his eggs in one basket. The cousin who lost his life’s savings day-trading dotcoms back in the day. The individual investor learned, alas, that making money in stocks is not all about buying the hot new issue…

So then, if it’s not all about buying hot stocks, what is it all about? Well my friend, it’s all about asset allocation, temperament and time horizon… And I guess, in terms of timing, which I suspect you’re concerned with, it’s also about the fundamentals. And here’s how they (courtesy of Davis Funds Spring 2012 Review) stack up today versus 2001:

S&P 500 Index
1/1/2001: 1,469
4/1/2012: 1,408
(A lost decade plus 2 years? Yeah, but if you count dividends and if you did a little rebalancing…….)

S&P 500 Index Earnings Per Share
1/1/2001: $48
4/1/2012: $99 (est)
(I.e., for the S&P today to match its 2001 price to earning’s ratio, it would have to be pushing 3,000 as we speak)

S&P 500 Earnings Yield
1/1/2001: 3%
4/1/2012: 7%
(Considered one of the best measures of value when compared to the 10yr treasury. With a 1.45% 10yr treasury, stocks, by this metric, are historically very cheap)

S&P 500 Dividends
1/1/2001: $17/share
4/1/2012: $30/share
(Dividends are up 76%. This speaks to a substantially healthier corporate America. And that’s a 50% higher yield than the current 10yr treasury offers)

S&P 500 Debt to Equity Ratio
1/1/2001: 4x
4/1/2012: 2.5x
(Companies currently carry substantially less debt at substantially lower interest rates than they did in 2001. Does wonders for profit margins)

Bottom line: Stocks, historically speaking, are a bargain. That doesn’t mean however that they can’t remain (or become more of) a bargain (for the time being) in this world of uncertainty. But then again, stocks are a bargain thanks to this world of uncertainty. I.e., the best time to own stocks is when nobody else wants them. But you gotta have a stomach that can stand the volatility…