Tuesday, February 15, 2011

market madness

The stock market is a skittish, paranoid, insanely crazy beast.  And no doubt you've all heard the media blathering on about the doom and gloom of the market.  Mainstream media however rarely reports on when things are good or chugging along status quo.  Sensationalism in the media is key these days so if it's bad they report it...  If it's good, they don't give a crap.

However, this is good for YOU!  Yes, you.  Why?  Simple.

The more the market panics (which it does with nearly systematic frequency) this is your opportunity to buy.  I can hear you shaking your head, "RED means STOP!"  True, it does if you're driving a car, and true but it's also a signal to buy.

Sure, the market might continue to go down more (and you shouldn't put all your chips on the table at any one time anyway) but every time you see red, this is opportunity.  GOLDEN opportunity.

You have to remember who you're up against...  day traders are skittish.  They want to get in and out in a matter of minutes (or even seconds) so they are the first to bail when things go south.  Next along the food chain would be hedge funds and then next the big institutional holders.  Eventually this pops up in the media and then joe-6-pack decides to check his holdings, discovers they have gone down considerably and then makes the call to sell everything to preserve what little he has left.

Are you making money of misery?  Perhaps, but everybody who sells any kind of investment product or sells any kind of investment advice (and me who's giving it away for free) all have disclaimers, warnings and liability covering statements: past performance is in no way indicative of future performance.  So if Joe's Manure Inc. has been going skyward for the last 3 years doesn't mean anything.  If all Joe's cows get mad-cow disease and get destroyed by the government, Joe is up the creek until he can get new cows.

But, if you can wait, Joe's business will be full of crap in no time and you'll be back on track to gains.  There would of course be a crash in his stock price while he gets his new stock ready for action, and then a slow recovery.  So if you wait it out you'll still be in the game.  If you panic and sell at the bottom, you're up the creek without a paddle!  (And yes, the thought of coming up with a pun regarding the contradictory aspect of "up the creek without a paddle" vs Joe's main industry... har de-har har.)

The same can be seen time and time again in the stock market history.  Provided of course you're not buying fly-by-night operations.  (This is essentially almost the entirety of the junior mining/exploration sector)  If you stick to a core holding of the big Canadian banks then you won't have missed a beat.

If you examine the American banks during the financial disaster, they stopped paying out dividends, the stock prices collapsed and many of them exploded completely.  Meanwhile, the Canadian banks were unable to continue raising dividends...  They kept them the same!  They were still making money hand over fist so they naturally distributed the profits to share holders.  The share prices did fall however with the world market.  Why?  The market is insane.  However this represented a HUGE buying opportunity.  I did manage to buy some shares of TSE:BNS for about $27 each.  I sold them a few months later for $43.  Yes yes, I should have held on to them and I'll buy some more of BNS again.  But I had some bills to pay.

Disclaimer: I'm offering free advice.  Bear that in mind before you wager your entire life's slavings.  (Yes, slavings)  If you lose it all, don't come to me and say I didn't warn you.  I try to make that painfully clear EVERY post of this blog.  You may lose money in the market.  I'm offering up what I'm doing with MY money.  If you choose to take my advice then do so at your own risk.

No comments:

Post a Comment