Invest Now!! - Financial Analysts say

[HeartThais]

Care to explain your rationale? Considering all the negatives on the horizon - credit card debt, potential Corporate bankruptcies, entire countires overextended (debt), increased unemployment.....

 

There are definitely headed for a lot of negatives and I don't argue we're headed for global recession (which btw, I think is good for the dollar). However, my view is that a stock price isn't really a valuation measure. It's a measure of how invested people want to be and right now a ton of money has flowed out of equities. I believe the entire market is positioned for risk aversion and the people with a little stomach for it stand to gain much.

 

First, there are the classic signs of capitulation evident. Very low consumer sentiment, high trading volume and very high levels of volatility measured by the VIX. Second, treasury yields are very close to 10 year lows indicating massive flight to liquidity/safety. Third, hedge fund redemptions have been crippling that industry with some major players like SAC having moved 50% or more into cash. To me, all of these are signs that we're establishing a bottom. It also tells me that there's a lot of money waiting in highly liquid securities waiting to get back in when the mood changes.

 

Also, step back for a second. US equities, in one year, have gone from a market cap of about 15.5T to 8.5T. A broad-based devaluation like that just leaves me scratching my head.

 

I don't pretend to be able to time the market but I do sense a ton of fear everywhere. When people are fearful, it's time to start getting greedy. That said, I think investing in this climate isn't for the faint of heart. Anyway, I intend on moving 80% back into equities over the next 3 months.

[Tiger Moth]

When people are fearful, it's time to start getting greedy. That said, I think investing in this climate isn't for the faint of heart. Anyway, I intend on moving 80% back into equities over the next 3 months.

 

On the other hand, it could be "like a nightmare that keeps getting worse". I have no doubt that in 5 - 10 - 20 years time, your investments will pay off. Hope you are young and don't expect to touch any of your investments for a long time...

[unit731]

GENERAL ELECTRIC CO

GE

Stock price

18.34 -1.59 -7.98%

 

[Tiger Moth]

Most analysts now assume we are headed into a global recession....the question is ,have the markets priced this in fully already ?

 

Have the markets priced the global recession in already? It seems reasonable that in a situation of normal up and downs, with reasonably certain historical info to estimate the impact, it's reasonable that some astute analysts could determine approximately when the market has priced an event into current market values. But, are you under the impression that anyone knows how deep the recession (depression) will go and how long it will last? I haven't seen any evidence that Bernake or anyone in the US has a clue. And, the US economy and markets lead the global economy and markets.

 

Are you of a different opinion? Do you think anyone has any idea what will happen and thus the ability to price the unknown into the market?

 

I havent' read one financial whiz, including Buffet, who says one can have any certainty in the 5-10 year horizon.

 

 

[HeartThais]

[Are you of a different opinion? Do you think anyone has any idea what will happen and thus the ability to price the unknown into the market?

 

I don't think any analyst, no matter how astute can "price" an unknown into the market. I just think that risk premiums are extremely high at the moment and that people have a tendency to overreact to extreme events. It's a good market to be the insurance seller rather than the insurance buyer.

 

Don't interpret that as me saying the risks aren't real. In addition to the news in the daily rags, the thing that keeps me up is the serious risk of currency crisis in the EU emerging markets. Not only are the conditions there similar to Asia in 97, there is an added problem. Many banks had hedges set up through Lehman which are now gone. Very scary situation.

 

It's a crazy market. According to the VIX, the market expects bigger than +/-3.5% daily moves in the S&P 500 about 1/3 of the time just from statistical noise. About once a month, it predicts a +/- 7% daily move. These are just rough and tumble napkin calculations. I don't want to debate whether returns are normally distributed or the liquidity of index vs. equity options. My point is that this environment isn't for the soft-hearted or the retiree that depends on a steady income.

[Tiger Moth]

I don't pretend to be able to time the market but I do sense a ton of fear everywhere. When people are fearful, it's time to start getting greedy. That said, I think investing in this climate isn't for the faint of heart. Anyway, I intend on moving 80% back into equities over the next 3 months.

 

I don't want to be argumentative or impolite, but, in my opinion you are contradicting yourself. Because you are of the opinion that there is a ton of fear everywhere and you are of the opinion that when people are fearful it is the time to start getting greedy, you have concluded this is the "time" to get back into the market. So, while you say you don't pretend to be able to time the market, this is exactly what you are trying to do.

 

For what my opinion is worth, which isn't much, I accept that you and Warren B are correct. I really do believe that those who enter the market today and stick with it (even if the market goes down much further), will benefit when the market goes up astronomically (which I agree it eventually will). The question is, in 5 years, if you are down 25% and others have made profits on precious metals or whatever, will you stick with it or will you say, the heck with this and pull out?

 

I honestly don't know the key to Warren's success, other than he is an extremely bright guy. But, the idea that he doesn't time the market is BS. I have heard him say, at this time we don't see anything worth investing in and now is a good time to invest in the market. In each case, timing is mentioned. So, good old Warren does in fact time the market.

 

Anyway, while I value my opinion less than I value Warren's opinion, things are clearly messy and getting worse. I am retired but have a retirement income that is well beyond my needs. So, I could lose all my investment funds and still lead a comfortable life. But, I would rather my investment funds increase rather than decrease and my opinion is that the likelyhood of that happening in equities in the next year or 2 is very low.

 

I will make low risk investments and won't be upset if I could have made a bundle but didn't. I hope you make a bundle. But, more than likely you will have to be very patient.

[HeartThais]

Not a contradiction. It's because I don't try to time the market that I feel confident that now is a good time to enter. I have no idea whether the market will go up or down. I think there is a pretty good chance that there are at least two more disasters looming - consumer credit and emerging markets. When I say the market is cheap, I'm saying it's laying you a good price to play the game not that you are likely to win.

 

Let me give you an abstract example. We flip a coin and we can each bet 100k USD on that coin flip. Most people wouldn't take that bet because most people are risk averse. That risk aversion is the source of the risk premium and directly affects the price of the stock. Now, what if I offer you 400k vs. 100k? A lot of people might take that bet. We could then poll a million people to set the odds. We could poll the same million people everyday and the odds would surely change. To me, that's what the stock market is. A million people setting odds for each other. Can you separate trying to predict the coin flip from trying to figure out whether you want to play the game? I don't mind playing a game where the I lose 80% of the time as long as the payoffs sufficiently compensate me.

 

What was happening in the market over the past 5 years was that people were being more and more risk neutral. You could see the signs everywhere, especially in credit markets where the credit spreads were incredibly tight. People were being paid very poorly to take risk. In fact, it was the worst time to be invested in stocks if you were risk averse!

 

What I'm suggesting is that the opposite has happened and people are extremely risk averse. So, I'm not trying to tell you if the coin is going to land heads or tails. I leave that to the market timers. I'm just saying the odds you're being given are likely to be the most favorable in a decade. As you see from my posts, the stats I focus on aren't so much the economic indicators than the risk aversion indicators (vix, treasury rates, cash positions, etc.). And that's what I perceive as the great value in equities.

 

This doesn't mean you have to move 100% of your portfolio into equities. I just don't want to be characterized as the type of person who approaches investment like some kind of forecasting science because I think they are pure BS 99% of the time. I try to approach the markets like a professional gambler.

[cavanami]

Buffet has said that he has been successful because he studies the investments *** before *** he makes the investment. He knows the investment inside and out. Hard work and then make an inellignt investment.

[Dexi]

I like to work on the principle that markets always over-react,so the recent low point of c.3650 on the FT100 ( Oct. 27 )would have been a good buying oportunity,similarly Angloamerican at c.1000 was good value ( was c.3600, not so long ago) :thumbup: .....The rally from this recent low point represents relief that the financial system hasnt gone into meltdown,however there is probably more bad news to come so I would not be surprised to see the recent low point re-tested next spring as the global economy falls deeper into recession...

[steve48]

The best investment a Brit can make is in the good old premimum bonds, you are allowed to invest up to 30000 pounds i believe and your money is protected. I invested in 10000 pounds in june this year and have so far won money every month total so far is 2050pounds not to bad plus the chance to win the big one. far better than putting it in banks stocks etc