Markets: global sell-off Monday, October 27, 2008
Posted by ei-forum in Investing.trackback
As the street seems resigned to the idea of a deep and severe recession, markets around the world are not offering any comfort – as Barron’s says, there is nowhere left to hide in equities.
As we have been saying in the past, things will probably get worse before they get better but how bad can they get? Despite being cautions about the current situation, it does look like we have probably seen most of the sell-off… we should be about 80% done, don’t you think?
Investors should remember that despite the fact that we are in unchartered territory, the world is not going to end. Sooner or later people will have managed to get their finances back on track and and they will start to buy clothes, laptops, go on holiday and maybe even go out and buy a car! Naturally, this is not going to happen overnight but some of the equity prices out there seem to suggest just that it will never happen….
Having said this, we would like to add a world of caution. We feel that there will be very interesting investment opportunities out there but it will be extremely important to do your homework on the companies you plan to invest in. The recent turmoil has changed so many assumptions, forecasts and business realities whilst sparking a negative domino effect that very few people truly comprehend … understanding what impact these events will have on future company/industry prospects will be crucial.
Make sure you do your homework before getting back in!
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For several years the market was “drunk” with profits made by mergers and the bottom lines of corporations, not taking into account the consumers that are the driver of the economy. Middle income wage earners have seen their wages drop significantly in their buying power, while CEO’s have seen their income sky rocket. Until we allow the consumers to recover their ability to purchase, we’ll only be digging the hole deeper.