Forum Archive Index - June 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi nick, nick, hugh, steven etc.
 
Looks like all the doom and gloom is catching then?

It is rather unfair to say the other Nick K is too jittery 
for shares? 
 
This is what Nick K wrote:
"I am selling everything on Monday (loss or not).  I am
into Gold and cash.  Cyclone 'Greenspan' is heading our
way.  Expect it to arrive this time next year."

A declining US sharemarket is not news.  The DOW and NASDAQ has been 
fairly toppy for a couple of years now.  So 'suddenly realizing this' 
to the extent that you must sell everything on Monday is, I believe, 
an expression of extreme jitteriness.  If you are an investor you 
need to be disciplined.  Nick's post shows no sign of discipline.

There are two end game scenarios for your sharemarket invested 
capital if you are disciplined.  Either you: 

1/ need your capital out, or 
2/ you don't.

If you need your capital from the sharemarket within the next couple 
of years, you should have been thinking about it for the last two 
years.  There have been opportunities over the last two years to exit 
many shares at good prices.  

What if you don't need your capital in the next couple of years?   
The market might drop 10-20% over the next year, but this is well 
within the bounds of normal market fluctuations.  This in itself is 
no reason to sell.  If you don't realize that is a possibility, you 
shouldn't be in the market at all IMHO.

"When the market is this nervous there will be opportunities and cash 
is the best way to be able to take advantage."

Now this is something I agree with, as would Buffett I think.  You 
never know when a mini crash might happen, so it is good practice to 
have a wad of funds in cash on hand.  You shouldn't have to sell all 
your shares to have cash on hand though.   So I would regard being 
100% invested in the market as also lacking discipline.  If you do 
that, then you are forgoing unexpected opportunities, and we all know 
that in the market the unexpected does happen!

The 'traditional October slump' is a myth.   The market is not 
required to fall in October or on September 11th or any other day. 


>
>It would only take another terrorist attack  and the
> markets would tumble.  
>


Maybe.  It would only take Osama Bin Ladin to be captured and the 
market would soar!


>
>Add to this that P/E levels are still around 20 as profits are
>falling as fast as shareprices so that although stocks appear
>cheaper they are still overvalued.  
>


I agree that falling profits and high P/E levels are a hazardous 
combination.   So my solution is to buy shares with low P/E levels 
and rising profits.  Like my so called 'income shares'.



>
>Then there are accounting issues, 
>



These should be considered , but this is not in itself a reason not 
to invest.


>
>
>flaky tech stocks 
>
>



Investing in any share that doesn't have an ongoing ability to create 
profits is always a gamble.  The solution is don't invest in such 
shares!  Not don't invest in all shares.



>
>
> The terrorist threat is also worse than ever before, 
>
>



The potential impact of terroism was much greater *before* September 
11th because not many people took it so seriously.   The threat of 
terroism has hardly changed in fact.  The likelihood of a terroist 
plan being successful is lower than last year because of all the 
extra security.



>
>
>However a contrarian might well point to all this gloom and
>say now is the perfect time to buy. Trouble is you could have
>said the same in April and the same in May and still the
>markets fall.
>
>



So don't invest in 'the markets' then.   Do a bit more homework and 
do some 'stock picking'.   I've done just fine in the NZ  market 
since April/May thanks.  If an investment meets your target criterion 
today and the market falls tomorrow, you have forgone an opportunity 
to buy your investment at a better price.  But so what?   You have 
still met your target investment criteria.  Short term volatility 
does not change this.



>
>
>The only people making money in this market are short term traders
>using hit and run techniques, with survival the key concern.
>
>



Complete bull.  I'm not a trader at all but if I did decide to cash 
up I'd be doing OK.

And as for Hugh's comment on the likelihood of a hung parliament.  
Well guess what Hugh?  MMP is *designed* to give hung parliaments.  
So nothing unexpected at all in that.

Worried about the rising $NZ?   Then invest in shares that *benefit* 
from a rising $NZ.  There are such shares out there.

SNOOPY



---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
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----------------------------------
"Stay on the upside of the downside, 
Anticipate the anticipation!"



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