Sunday, November 30, 2008

So when will the market bottom out?

The bottom will be somewhere in the next 12-24 mths. ie Dec 09 to Dec 10. What? 24 mths? So my portfolio has to suffer another dunno how many % downside? What kind of prediction is that!?? Well, let's start with the disclaimer first, nobody ever predicted nothing. Bell said nobody needs phones, Ford said nobody needs cars, and the most famous one: Bill Gates said nobody needs computers. So that is just my contribution. It won't be right. Maybe we have already seen the bottom. Who knows? Maybe we didnt avoid the Great Depression scenario. We just don't know yet. 

Ok, let's get to the facts. 

Few trillion dollars have been forked out. Wall Street will be rescued. Global coordinated efforts to help stabilize the whole banking and credit system have done the trick. The life-and-death crisis has been resolved for now. We are out of the ICU, for now. But the stock market keeps tanking! Well, the patient is still very sick. Still on drip and breathing weakly. It takes time to heal. There are still bad stuff in the financial system that needs to be cleared. More disposals and write-off before we are good to go. May go back to ICU again also. But chances not high. Hopefully! We don't want Great Depression II. Check this post

As for the "real" economy, it has started to slow and will continue to slow. Esp US. It is said that we need another few trillion dollar fiscal packages for Main Street. The common folks stuck with paying mortgages that cost more than their homes need money. And those pple using credit card loan lines to buy food and pay bills. So wait for some help to come in the next few weeks. Then we need to wait for China to come back. The credit bubble that fuelled part of China's spectacular growth has burst, so China feels some impact, but it's economy is robust enough to withstand the negative impact. 

Given a few quarters, it will come roaring back. And hopefully, it will lift the rest of the world up. In terms of magnitude, we are probably not far from the bottom. Or may already be at the bottom. But in terms of time, things need time to recover. Positive catalysts on the REAL economy must appear before the market can move up. They won't appear so soon but quite a good likelihood it will come in the next 12 to 24 months. 

So time to open the purse strings, it's the great Singapore sale on SGX coming up!

4 comments:

  1. With fingers and toes crossed, it appears that we have hit bottom in the existing-home market.

    MyInvestorsPlace - trading, value, investing, forex, stock, market, technical, analysis, systems

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  2. We would be very lucky if that's the case. Not even close to the bottom of Asian Financial Crisis nor even the Sars Crisis. STI boleh!

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  3. Ultimately, I won't bother to even attempt to guess where the "bottom" will be. The aim of investing is to purchase good companies at fair value over the long-term. But too many people in the media and even the general public turn it into a sort of game, all trying to guess the bottom. Commentators and analysts have a field day trying to pinpoint when stocks may bottom and when rallies may begin; this can be treated as Reality TV cos it's all quite fruitless and serves better to entertain than to inform.

    All an investor has to do is to think indepedently, read a lot and be able to clearly define his financial goals. If we can all do this, the commentators and forecasters will be out of a job. Too many people rely on these "gurus" to predict their own financial lives, which is clearly dangerous because no one cares more about your own money than you do !

    Cheers,
    Musicwhiz

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  4. Hihi, thanks for the comments. Prediction is largely a futile exercise. As pointed by my eg.s in the post. One recently popular book "Black Swan" basically renegaded predictors to scum of the earth. Nevertheless, humans just like to predict I guess.

    I do agree that most stuff vomitted out by commentators are garbage. More knowledge can be gained counting stars. Well, its up to us to discern that teeny bit of wisdom from tonnes of crap I guess.

    Value investing doctrine dictates that we need not know anything about the general economy when investing. I think learning more about economics, a subject that I really sucked, can be of much help. E.g. how will China recover based on economic theory. That should be an investment opportunity of a lifetime.

    Buffett once mentioned that when it is a superior manager up against a crappy industry economics. Usually the industry wins. Eg he tried to invest in airlines, dont think he made much money.

    Well this post talks about some general stuff remotely related to economic knowledge. And the core of it was prediction! Very off tangent, but my msg would really be

    1) Don't try to predict too much
    2) Learn Economics 101

    Cheers!

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