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Friday, 14 December 2007

Good comment by a forummer: Puntfast

Markets sold off sharply on Thursday because the DOW +300pts up followed by the swing back down reminded many investors of the Aug volatility.

Many sold simply to avoid volatility rather than on any fundamental reasons. The US economy whether it gets closer to recession but avoid one or goes into a mild recession.

The main danger is inflation which will limit the Fed ability to cut rates. So far core-CPI has been tame. Investors should keep some cash because of opportunities in financials in the US. Banks are not like manufacturing companies, they recover from a bad patch quickly once they writeoff the losses.

This is a classic straightforward play that long term investors should miss. Refer back to the Asian crisis, the Asian banks were in worse shape than the American ones now but within 1 year the stock bounced back. Banks unlike manufacturing companies who get stuck with inventory and cyclical downturns recover much faster.

Once there sufficient visibility on its losses JUST GO AND BUY...don't miss this one when the opportunity comes. As for the HSI, my take is the recent selling is due to hot money pulling out - it goes up fast, falls fast. ...then goes up fast again.

I pick today to do some intra-day trades on the HSI after watching the trades for some time over the week even though today is friday. The worst case for the US is a mild recession. Even in such a scenario US equities should fall about 10-15%, the reason is the market is not overvalued, and investors have repositioned their portforlio for a recession/slowdown.

If you look at stocks in discretionaries vs staples they have moved in completely opposition directions, staples (being more or less defensive necessities PG, Coke, etc) have risen. This tells you the fund managers have position themselves for a slowdown and will not be caught by surprise. Also, stocks that faced slumping industries like home builders, financials have sold off by 30-70% - there is no illusion of a fast recovery among investors.

Unlike 911, or the bursting of dot.com bubble, this recession is one of the most talked about and speculated on, it will not result in a crash ....every piece of news subprime, housing slowdown, credit crunch has been digested and digest again. A slowdown in the US economy will only shave of 2% off China's growth....when helps to moderate China's growth & inflation. I believe the US slowdown itself, will not cause equities to fall too much.

On the other hand if the Fed lose control of inflation, that will be a major problem and they will be force to raise interest rates - that will kill stocks. The Fed move on Tuesday & Wed I believe are the best in the current situation - many short term speculators view it negatively and were disappointed with the Fed for being "behind the curve". I believe they themselves are "behind the curve" in understanding what the Fed is trying to do.

Despite all the volatility, we see basically markets moving very little when the upswings offset the downswings. The volatility is short term and correct themselves because they are generally caused by short term speculation. For Warren Buffett watchers, the genius has been accumulating healthcare stocks and defensive stocks.

He is not selling. The fear of recession, has cause recession to be priced in and for very long term investors like Buffett, it becomes an opportunity. Short term, I will see if I can squeeze in a few intraday long trades on the HSI which basically got bashed down too far down.

4 comments:

Anonymous said...

Привет. Странаня ситуация, пытаюсь зайти на блог, меня постоянно выкидывает. Сейчас зашел через прокси и все нормально. Можно попросить разблокировать ип адрес 192.48.250.80
Так уже с недели две не могу попасть со своего ип в блог.

Anonymous said...

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Anonymous said...

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