Reality Bites: prudence required

Reality Bites: prudence required Tuesday, November 25, 2008

Posted by ei-forum in Miscellaneous.
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wall_st We keep on getting questions about when to get back into the market….. well, we do not want to drive sentiment down even further but we are just starting to get an idea of the implications of the crisis. A brief look at some of the recent headlines:

New York May Lose 225,000 Jobs in Market Slump
U.S. Sets $800 Billion Credit Program
BHP Billiton abandons bid for Rio Tinto, shares drop 35%
Cisco shares fall after report of 4-day shutdown
Economy’s tumble even worse than expected in 3Q
Oil falls below $53 after rising overnight

It’s going to be a long road to recovery but we may be reaching the bottom in terms of all the bad news that is priced into the market – we are not there yet but we feel that we are starting to get there. As we approach the end of the year, we would definitely consider starting to put some money to work at the beginning of Q1 2009 with the aim of establishing initial positions in companies we like throughout the first quarter… hopefully, we should be able to have a better understanding of how long the recovery will take by Q2 2009.

As already discussed in the past, if you are worried about missing the initial rally, you could simply by an index fund that tracks the market but we prefer to pick our companies carefully and have a better outlook before adding any news funds, even if it means missing an initial 10-15% move…