The bottom of the market as we can\'t see it
(2008-10-09 13:46:16)
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The market slide seems non-stopping that scared most of investors. Without knowing the market forces, we can only watch and wonder, where is the end of it? People do not know the forces that drive the market. The deflationary forces due to asset bubble burst are pushing the over leveraged companies and hedge funds to de-leverage, meaning fire sale whatever is valuable in their hand, thus drives down the market. If people have a clear mind, they could see through the smoke that economy is weak but some key companies are still profitable. Hence, this is time to buy, although market can slide another 2000 or so. For the long run, the key companies will recover, possiblly recover very soon. People also do not understand the other force that is slowing down the slide, which is monetary inflation.. Inflation? People would say, we have deflation! True we have asset class deflation, but we have monetary inflation. When the deflation slows down, the ugly face of inflation will pop its ugly head out. Stocks are usually inflationary friendly, which is why buying stocks at this time becomes a key strategy that most people scared to the hell and shy away from it. If one does not believe that, just look back the market in Turkey, Zimbabwe, etc. But not so quick to buy the broad market, it is time to be selective. Agricultures, mining, export oriented companies, commodity ETF will fare much better than the broad market. So to have guts, do not use margins, just buying into this sliding market and hold for next two years. The winners are always those moves ahead of crowds. Take my words for it.