I've got questions.
One thing I've been taught from a young age is that asking the right questions can be more helpful than simply looking for answers. The wisdom here is that asking questions requires a certain amount of patience that simply looking for answers doesn't warrant. At the same time, asking the wrong questions can lead one down the wrong path. In this piece, I ask a lot of questions. Some may frankly be stupid, while others may be poignant and helpful. My hope is that we'll have more useful questions than garble, and more insight and patience than simple answers.
With the pessimism that seems to be dominating the markets, one has to wonder if things could continue in a train wreck fashion. I was surprised at today's sell off. I know, that gives away the fact that I don't do this full time. I'm an average person with an average job, but whom is intensely curious when it comes to the stock market, and also interested in discovering the reality of the markets, and the facts that make-up that reality. I'm learning more every day, and this little blog is my way of sharing the process with anyone curious enough to lean in and listen.
Would I now be surprised to see another sell-off tomorrow? The answer is that it depends what caused today's sell off. Investor fears? DE-leveraging? Short Covering? Margin Calls? Even a worse sell-off than today would surprise me to some extent, perhaps because I'm a hopeless optimist at heart. To be sure, one must try to understand the big picture to even begin making guesses on what will happen tomorrow, and that isn't easy. It more often than not eludes me, to be honest. I thankfully have friends who are way, way smarter than I am, and whom I trust for advise. If you don't already have a friend like this, find someone knowledgeable and trustworthy to discuss your ideas and prospects, even if it's a good investment newsletter. You'll be happy you did! And don't fall for ANY investment newsletter claiming to give you major returns. Dig around and find the best of the best.
Is it possible that as things get more serious with the debt crisis, that the lows of today could be the highs of tomorrow? That thought might be a little extreme - but considering that people are bailing on some really good companies makes me wonder.
There will be huge gains in the future, but what entry point will make those gains possible? If one gets into these markets now, how will one know when the time is ripe to get out? After all, buying low is no good if you end up selling low as well. One must also consider volume: a stock with low volume will be significantly harder to enter and exit than a stock with high volume. So for anyone still picking stocks out there alone, this is for you: consider limiting yourself to long-term holds with high volume, little-to-no debt, good cash flow, and a proven track record. We're getting to the point where well-respected companies in every sector are trading lower than they have in a long time. This also comes with a warning: if the economic conditions across the globe worsen considerably, even good companies will falter and perhaps even fail. You want OUTSTANDING companies. Again, this is where a quality newsletter or a proven investment adviser can come in very handy. A talented adviser can help you choose stocks that are valued low, and positioned to grow.
Interestingly, even with today's massive sell-off there were some big winners. The irony here is that the big winners aren't necessarily the ones who win big over the long term. The stock market is NOT a place to gamble. You could lose everything this way. So be diligent, be patient and be prudent!
So ... how far could this looming debt-created disaster realistically erode the demand on commodities, and the markets? Do the markets paint a realistic picture of supply and demand, or is there a psychological wild card factor in play? Is there current (i.e. up to the week) data on supply/demand, or are we relegated to making decisions based on last quarter's numbers and guessing what will happen in the long term based on trends that develop in the markets?
And what about the 1.5 trillion dollar housing market? According to this article over at MSNBC, it's far worse than you might think.
There are so many talking heads out there who want nothing more than to give their two bits about WHY things are happening in the markets. I want to focus on what is happening in the markets in order to decipher how we can best position ourselves to profit from it. This of course, will be in the realm of "generally". I am not a technical analyst nor a stock market guru who knows all the ins-and-outs. I am simply looking for big trends. My advice is to not pay any credence to talking heads, other than perhaps to realize that for every talking head there tends to be a crowd of followers. If we can at least stay ahead of the followers, we will be in good shape.
