Monday, January 21, 2008

Time to Start Buying? Maybe, Maybe Not

Update:
Trading was halted Tuesday on the Sensex after 9.5% drop in market value.
The Nikkei, Hang Seng, and other Asian indexes are also down dramatically in Tuesday trading.

Keep your powder dry.

The TSX is down nearly 5% this morning and down well over 10% year to date. We are back into 2006 territory for the level of the TSX and I am getting calls from clients now to sell everything. This is, from my past experience, the time to start buying. Most people are their own worst enemy to their long term financial health. They buy when they should be selling and the sell when they should be buying.

19 comments:

mohican said...

I am not suggesting that the down days are over here, it just seems to me that people are getting panicky and generally this is an indicator to me that it is time to start buying.

Newcomer said...

So you don't see us at the top if a 1929 type event then?

Fencesitter said...

But isn't that the same psychology that would cause a dead cat bounce? If the majority of lemmings are going to be selling today and tomorrow (when they read tomorrows newspaper headlines), wouldn't the slide continue for some time?

BTW, we are also approaching not just 2006 levels, but also summer of 2000 levels.

M- said...

FWIW, I don't think the market has priced in the problems coming down the line, in terms of US-induced weakness. While there may be some good deals to be had during this selloff, I'm not confident enough about the market to get back in for a while still.

It also causes me a great deal of concern that lots of retirees are selling their mutual funds and moving into GICs, since that money's lost from the market for a long, long time.

Dignan said...

With The TSX being highly weighted in commodities I see more downside than upside potential with weakness in commodity prices and demand just starting to show.

Warren said...

Tough to catch a falling knife. With that in mind I'm still going to look for deals, and I'm not selling anything.

With the RRSP deadline approaching I'm going to add to my position in a few dividend stocks I like long term, otherwise I'm holding cash.

Like in real estate, I think its better to try and get in during the trough or just as things begin to rise again. Its too tough to call how low things will go.

condohype said...

It's panicky now and it's interesting to see how the market is reacting. Once again, investors don't seem to understand that stocks are for the long term.

mohican said...

Averaging into a market like this one would seem to be a wise idea. Yes, equities are a long-term investment and if you can't handle these sorts of swings, you shouldn't own too many stocks.

Roger said...

Something to consider from this newspaper article: Don't crash amid turmoil


Excerpt
And let me remind you: Among the 10 worst crashes in history, Black Monday on Oct. 19, 1987, didn't make the list. Why? It was a one-day plunge, followed by a decent correction.

It's the silent killers, like years of volatility after the hi-tech bubble burst in 2000, which hurt the most. Though markets went on to score new highs, some investors have yet to make up their losses.

Here's something to think about: With the Great Crash of 1929, which ushered in the Great Depression, a $1,000 investment in September 1929 was worth only $108 by July 1932, and a full recovery wasn't made until 22 years later.

Metaldwarf said...

It's going to be a bumpy ride. there will be big down days and there will be big up days, but overall there are going to be more down days. does anyone care to speculate on how low and how long?

I think the US is already in recession mode. When the USA coughs Canada gets a cold, I think we will be following suit by late spring but wont go as deep or as long as the USA. There is going to be a lot of volatility over the next 3 months as emotion gets the best of people, followed by a smoother decline for about 6 months after. The market will level out in the fall and will turn the corner and start to climb in December.

That, or stagflation will eat us all for lunch.

Metaldwarf said...

Oh I forgot to mention

Dollar Cost Averaging is your friend right now.

Aleks said...

I still think the market has more downside risk than it has recovery potential, so I'm not going to move any of my cash or bonds into stocks. Mostly I just stick with monthly contributions and rebalance every six months or so. The professionals can try to guess where the market is going, I'll just stick with my plan.

solipsist said...

I think that this is just the beginning.

I'm calling a low of 8700 @ TSX, but it might stay there a long while.

It's not just RE that is over-priced.

I am not selling any of my stocks right now. They are all down.

exvancouverite said...

I think that this is just the beginning.

Well, like they say.

Easy come. Easy go.

Strataman said...

mohican "it just seems to me that people are getting panicky and generally this is an indicator to me that it is time to start buying." I have to disagree on this one, when people stop selling and buying, in another words when people are apathetic towards the market, that is when you should buy. However many will do exactly what you say and many dead cat bounces will occur. Stay out of it or buy shot for the long term!

Strataman said...

Sorry SHORT for the long term (3 years)

Roger said...

mohican said
it just seems to me that people are getting panicky and generally this is an indicator to me that it is time to start buying.

I think the bulk of the trading so far has been the big players - hedge funds, institutionals, program trading etc. The retail investor is being assured by the investment community to hang in there and not panic sell. Most interviews on TV have shown the typical investor is worried but not paniced yet.

Tuesday is a different story. The US retail and institutional investors have been on the sidelines today watching it all. There will be another plunge tonight in Asia and Europe and tomorrow the NA exchanges (NYSE, Nasdaq, TSE) will tank. On Wednesday the first big wave of retail investors will unload and we will be close to the bottom.

Interesting to see that common shares of some banks (BoM, CIBC) are yielding over 5% at their new price

freako said...

I think it is way to early to be buying, but that is just my honest opinion. This party is just getting started, and it will affect ALL of us in a very severe way. Yes, even those of us who lived within our means and have few risky investments.

The ultimate culprit is of course the excess liquidity and the related housinb bubble. And I am doubly frustrated with the talking heads who keep assuring us that all is well because of our strong economy and all the Chinese resource buying blah blah blah.

The other thing is that we the financial news will be jam packed with "experts" who will try to convince us that we have reached bottom, or that we have strong fundamentals. Heck, I wouldn't be surprised if some dousche bag suggests we buy RE because it is safer than equities.

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