Is it time to enter the stock market now?
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Is it time to enter the market now? -------------------------------------------------------------------------------- This is one of the news letter I subscribe to and it recently released a letter to all about a pertinent question that keeps coming up. I think this is a great article to share plus maybe give us all a little bit of fair headed perspective as to the current turmoil.. Is it still too risky to enter the market? “Lance, you are a big advocate of buying stocks now, even though it seems things are just getting worse, why?� A good question, that’s been asked in different ways, but the question remains the same, “Why am I talking people into investing now?� Here are my reasons. All recessions end, and this one will as well, but about 6 to 9 months before they do, the stock market moves up in anticipation. It happens every time. The matter is when this recession will end. The optimists, think late 2009, the pessimists think it may extend into 2010, making this the longest recession since the Great Depression. The reality lies somewhere in between. Let’s expect an end in the first quarter 2010, which is on the “gloomy side�. If that were the case, then stocks, based on history, could start moving up as early as June or as late as September 2009. So, this means you realistically will be able to buy stocks at around these prices for at least the months of March, April and May, maybe a little longer, After that, the stock market may move higher in anticipation of an end to the recession. Next, the various stimulus packages could have an effect in coming months and may increase the earnings outlook of various companies involved in the construction and infrastructure industries (which we are targeting among others). Based on history, and the Chinese experience, it takes 3 to 6 months before you start seeing some economic movement (a little sooner if it includes cash bonuses or tax cuts, as it does in Australia and the US). Again, this puts us seeing some “stimulus traction� in say, 3 to 6 months in around May to September. If that’s the case, the stock market will react in that time period, it always does. While we are still hearing about unemployment getting worse, and that the financial system is blocked up with bad loans and banks in the US still need more money, the market will sit exactly where it is, right? That’s true, however a survey just released (late February) from workforce consulting firm, Watson Wyatt Worldwide in the US concluded that more companies are resorting to pay and hiring freezes, rather than payroll reductions, to weather the recession. More than half, or 52% of the 245 companies surveyed, said they've already made job cuts. Job cuts were still being planned by 13% of respondents, but that’s down from 23% in December 2008. While all these surveys have a margin of error, it does show a trend that maybe the worst of the job losses may be over, or at worst, stabilised. Of course, there’s always an increase in risk to employment in regard to unexpected bankruptcies of companies, but at least there are signs of the trend bottoming. Companies like Caterpillar in the US are already talking of re-hiring sacked staff. As far as the US banking woes go, the Obama administration has implemented a system of stress testing of banks which will gauge the banks ability to safely operate in much worse conditions than they are currently facing. It will then let the government know which banks could be in trouble and what they need to do to fix their capital situation. This will conclude for all banks in the US by April. Now, once this is done, we will hear some good news and some bad news up until late April as regards the banks. After that, we’ll have a great deal of clarity as to what banks are good, and which ones are in strife. The market will react and buy up good banks and sell down banks that fail the “stress test�. The market overall will move strongly up on the basis of “now knowing�. The market does not like uncertainty. Once they have certainty, we may see a rally set off by US financials in late April or early May. By then Obama’s Housing Bailout Program should be arresting the foreclosure problem as it will have been in place for at least a month. This will start to add confidence to the average people on the street and give consumers just a little confidence to open their wallets. This should occur by May. Also, by May, we should have heard all the worst on the unemployment front, if we haven’t already. By this stage, the banks will have already passed their stress tests and have all the capital they need to start lending again, which will also help stressed homeowners renegotiate mortgages, the thing that started all this in 2006/7. So, to sum all this up, we may see the start of a stock market recovery as late as July 2009 or as early as April 2009. This gives you the opportunity to buy stocks at around these prices for at least another 2 months or possibly 5 months. Now, I could be wrong and the rally could start next week, or could start as late as August, but remember, when news is at it’s darkest and worst, that is the time to act. Yes, it’s also a time when you take the biggest risks, but reward, never comes without some risk. Consider this. Many stocks are down by around 55% from their highs in October 2007. In those days, many stocks had PE ratios of 15 to 20+, now they are much lower, around 6 to 10 and that’s after factoring in recent drops in earnings, which as you know always recover after a recession (for good companies anyway). Do you think these good companies (forget the bad ones, we don’t want invest in those) will ever get back to their former valuations of a PE of 15 to 20 with growing earnings and a new all time high for their share price (I’m only talking about the good companies here)? Of course you do, but it’s the time frame that’s the problem right? Well, let’s have a reality check and you’ll see why I’m always going on about buying stocks. Just say a company’s share price has fallen 55%, it will take a rise of 122% to get it back to it’s high, correct? If you bought it now, and it reached a new all time high in a year you’d make 122% on your money. But what if it took 2 years? You’d make 61%pa on your original purchase price. What if it took until 2012, 3 years from now? You’d pick up 41% each year. Amazingly good returns in anyone’s language. Even if you asked the question, “But what if it took until 2019, ten years away, to get back to a new high?� I would respond by saying, it doesn’t happen if you pick the right stock, but then you would have earned over 12%pa on your original investment. See my point, the rewards are there waiting. This opportunity, may not happen again in your life. The trouble is people can’t see past the current situation. They become “myopic�, they only see what’s right in front of them, not a little farther out. They are overcome with fear, and that’s what stops them doing anything in times like this, and it’s also the reason they will never do really well out of investing in stocks. Billionaires like Buffet and Soros are aggressively buying right now, will it be another case of looking back in years to comes and wondering, “What if……� Until Next time, Lance Spicer Editor, Trident Confidential 27 February 2009 NB.I personally bought 20,000 Citibankshares at USD $1.22 on March 5 and has yet to cash out...thinking of buying good quality S shares as they have fallen alot..eg Cosco,ChinaFish,SinoEnviron,Yangzijiang.etc..what's your view on the above article
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Remember the Asian Crisis of 97..Do not miss the boat again!!! To all my fellow investors out there, I am writing this message to remind everyone about the past two crashes we had over the past decade. While stocks were decimated, many of us took flight and joined the mass exodus exacerbating the already dire situation. What most of us failed to realized was that there were a few brave souls who boarded the boat of opportunity and bought shares while everyone was getting out. With the benefit of hindsight, those who dare made a huge fortune while those who got out, missed the boat of opportunity a few years later. This boat right now is almost empty and it is sitting in your back yard with almost no takers. This boat is even bigger and it will be a once in a lifetime event (my life at least). I know that I may be a lone voice in this mega mess but without it, the opportunity boat would not have arrived. Call it the half empty or half full cup syndrome. Or better still is the cup 1/4 full or 3/4 empty...take your choice. I'm sure that most will see this as 3/4 empty going to oblivion... BTW: Did you know notice that Berkshire Hathaway close up when the DOW melted away last night? Don;t get me wrong. I am as fearful as everyone out there and as conservative to my next door neighbor. But that doesn;t mean that I would avoid stocks altogether...it is just the opposite. Just at the beginning of last year, I was lamenting to my better half that to get outsize returns (over 15% pa) from the market over the long term is difficult when the SGX, DOW and the HKSE was in record territory. Now it seems that the outsize returns are more than possible and maybe 15% pa is far too low..I can even see many potential 10 baggers (in 5+ years)with reasonable valuations. Again although I may sound contradictory my advise to everyone is continue to be afraid...be very afraid as this will heightened your sense of choosing only the best stocks BUT start now...in batches. If you have $10,000 to invest choose a minimum of 10 stocks and allocate an equal amount weighting to each meaning $1,000 exposure or 10% of your total portfolio for each stock. Buy using time as your friend in batches of 25% (or $250 worth) every 3 months for the next one year. In a year you should have reach the maximum single limit exposure to the stock. This method is probably the safest route as there is no telling where the bottom is and it is easier to catch the bottom this way than timing it all at once. Of course the above is only a guideline and feel free to modified it according to your own risk profile. (FYI...I only do longs and do not trade which I consider gambling plus I do not put my children's future at risk.) Once again everyone, the boat has no takers now and my bet is that it will leave with only a few passengers. Take care everyone... Please note, although no boardcode and smiley buttons are shown, they are still useable Rep
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Biosensor with its heartstent biz shd be good as it is recession proof...shd turn around for FYE 31 mar 2009...receive USD 40mil from a licensee offset by non recurring restructuring charges for the US and netherlands ops..shd turn around even if exclude the one time capital gain...linited downside 35cts..upside at least 55cts
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Maybe if we invest in small amounts .. it's ok...
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time to enter?
I'm planning to exit soon for those with profits.
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The market seems to be recovering now... See more green nowadays....
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ya... haven't close some positions yet like capitaland
and today did guerilla on olam earn some kopi money... :(
Dun dare to hold current prices for too long...
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Still got risks of profit-taking and stuff.... vicious cycle...
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Time to invest? U already miss the boat my friend..
Now is only a short term correction.
The WORST is not over yet! YES, the WORST is not over yet!
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o.0
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Originally posted by CannyOng:
Time to invest? U already miss the boat my friend..
Now is only a short term correction.
The WORST is not over yet! YES, the WORST is not over yet!
depends...
I took up long positions in St Engg and Starhub recently when bad news brought them down even though STI was green... They went near to their lows...
You will never know if they will come down again... If you wait and wait and wait and wait, might wait till the cow comes home and the next recession comes before it repeats all over again.
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loaded K1 Ventures this morning at 0.145
TA shows it at the support of an upchannel. 0.14 would be an ideal price, but I missed it
:(
Wish me luck. -
loaded another 3 lots of A-REIT at 1.37
also nicely sitting on the upchannel. Hopefully it will work out :D
Just my 2 cts :(
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Good luck....
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A-REIT down a bit, but it's for long term
CitySpring up quite a bit, but it's for long term too
K1 Ventures took profit at 0.155 :(
I think I took profit too early... still sitting nicely on the uptrend support, but I too scared :( -
someone playing NOL by selling 1 lot by 1 lot at 1.36
So I position myself queue for 3 lots at 1.36
Wish me luck :D
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notice
STI broke 2280 resistance, 2280 should theoretically stay as support now
Next stop 2390 :D
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Cityspring up, NOL up
A-REIT still mild down.... A mistake on my part in the charting.... :(
but nevertheless still ok... heng... -
All in green :D
Sometimes hor... when stocks are already cheap, pple scared buy will drop further then dun buy, e.g. Capitaland at $2, pple say expensive, and will drop further to $1.50, don't buy.
Now at $3.7, pple say $3 is very cheap, must buy
Funny guys...
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Originally posted by eagle:
Cityspring up, NOL up
A-REIT still mild down.... A mistake on my part in the charting.... :(
but nevertheless still ok... heng...mistake sold A-reit 1.46
NOL bull run, CitySpring bull run
Can't load more liao
Add: Sold NOL 1.71 -
in an ideal world, last march prices were the lowest and that was the time to buy.
now is still considered cheap if you compare them to the highs of 2007.
the market is still volatile, as the worst is not over yet. but if you hang them on for the long term, the price will rise in the long term.
but prepared to ride them out in this volatile market.
if you are not sure if this is the time to buy, then stay in the sidelines and observe.
avoid penny chip and buy blue chips in this climate.