Tuesday, August 14, 2007

Time to Buy Financials?

Is there actually a global credit crunch? Is there a major economic crisis in the making as a result of the US sub-prime mortgage market? I don’t think anyone really knows but if I was a betting man I’d bet YES to the above two questions. Ok, so now that we’ve established that there might be a legitimate credit crunch what do we do? Panic? Sell all our holdings? Never buy another stock? That might work for some people but what I’d suggest is scan the market, identify which sectors and companies are taking the biggest hits and evaluate whether or not these out of favour stocks might be a good fit for your portfolio. The recent market declines are eminiscent of 2002 when I picked up TD. With many of the Canadian banks hitting 52 week lows I think that the time might be near for Canadian investors to get their fingers back on the buy button. Remember...BUY ON FEAR, SELL ON GREED.

13 comments:

moneygardener said...

Yesterday just before the close there was some interesting action on BMO and BNS. I think they may gap up today though.

I may buy BNS if this continues.

Thicken My Wallet said...

Canadian mutual fund sales tripled from a year ago last year with most of the banks reporting substantial year over year sales. The market may be trading on fear and not fundamentals right now when it comes to bank stocks.

Quarterly reports come out beginning next week. Do you buy before or after the release?

moneygardener said...

I just bought some BNS at $47.56. It went as low as $47.35 though.

moneygardener said...

make that $47.05....I can never pick the bottom...

Lucky Luke said...

I would say that buying now, _would_ be buying on greed.

Let's face it, you just admitted you (and everybody) else doesn't know how deep this supposed credit crunch is, and you are buying already?

I'm expecting every other day for the next few weeks that some financial institution is going to announce their negative pie in the sub-prime nightmare, and with each announcement indexes will take a hit.

My personal position? I sold out & moved everything to T-bills on Friday. It's way too early, but so far I'm smilling.

Lastly, don't forget "patience is a virtue", wait till things settle down, then buy back in. The worst that can happen is you will lose 1,2 or 3 months worth of potential profits, but that's nothing in the long term and can save you years if all hell breaks lose.

Here's a few videos that might make you think twice about buying now.

1. http://www.youtube.com/watch?v=KfqrrhwWirY

2. http://www.youtube.com/watch?v=07Lcj0al2wE

3. The Jim Cramer Meltdown: http://www.youtube.com/watch?v=Pd5zAbDKZEg

4. http://www.youtube.com/watch?v=vbqRwxK7frA

5. And lastly, a little bit of much needed humour....
http://www.youtube.com/watch?v=nTDZU56jLoM

Good luck everyone! (you'll need it!)

moneygardener said...

The Banks can not all be taken as a single entity. Washington Mutual and Bank of Nova Scotia operate in very different markets and thus have differnt exposure to the problem areas.

An argument against market timing can not be based on market timing!

Lucky Luke said...

moneygardner,

In the short term (next couple of weeks) it won't matter much. Most banks still have not disclosed their impact, and that makes a LOT of investors nervous. And most definitely they CAN be taken and ARE being taken as a single entity. For the time being, it is guilty until proven innocent.

Further, most people don't invest in individual stocks, they invest in mutual funds. So when they sell a fund with 20 stocks in it, losers & winners all get dumped equally.

This is all just getting started.

Will there be a lot of cheap, undervalued stocks later on? Absolutely! But it is way too early. I think a lot of people are underestimating the size & length of this downfall of the market.

It's going to be as big or bigger than the .COM bust... and try to recall how many months that went on for. Remember the days of the Nasdaq at 5,000? Only this time it will be every index in every single sector in just about every country!

In the last 20 days, 13 days have been negative across most indexes.

The DOW has shaved off 5 months of gains. The TSX lost 1500 points in the last month alone.

Unless you are a day trader, making a killing off all the whipsaw action, or shorting mortgage stocks... you had better just wait on the liquid cash sidelines, until at the very least all the banks declare their losses.

Lucky Luke

telly said...

Lucky Luke,

Are you shorting stocks like mad these days?

moneygardener said...

Well MCM....have you bought anything yet?

Lucky Luke said...

Last night the Asian stock market fell on average 4% across all indexes, across all sectors. (South Koreak almost 7% in 1 day!)

http://www.stockhouse.ca/quote/asian_pacific_indices.asp

This morning we wake up to the TSX being down 373 points at Noon toronto time.

(look on right side)
http://www.canada.com/nationalpost/financialpost/index.html


I have 2 things to say:
1. I told you so.
2. This ain't over yet, not even close.

Lucky Luke.

PS. My day job is IT related, so no I have no time to day trade or short sell.

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