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Short-term rallies
Nov. 12th, 2008 07:45 amIt's the time of contradictions. One would have thought that the short-term deleveraging effect -- the return of funds to the dollar as money repatriates and hedge funds collapse -- would have been over by now, but there still seems to be a correlation between a stronger dollar and tanking equities.
The recent FTSE and S&P 500 rallies are beginning to look increasingly shaky, although it might hold on until Christmas. Subsequently, January through to May looks horrific, and may provide buying opportunities. Some dreadful numbers are going to come out and, once again, while these should be factored into share prices because we all know that they are coming, you can bet your top dollar that the full effect has been far-from factored in. The buying and selling of shares is based on more important factors than whether a company is fundamental value (such as, "I need money to pay the kid's school fees").
I really expect a fall in the FTSE to 3000 or thereabouts at some time in the not too distant future. Perhaps around late February to late March, when FY figures will be in full flow and General Motors might have gone tits up.
A long-term chart was produced in the FT this week which showed that shares were, for the first time in more than a decade, fundamentally good value. What the long article accompanying the chart failed to point out was that a similar situation was reached in 1932, and if you had invested all of your money in equities at that point, it would have been 20 years before you broker even. Mind you, the next 48 years would have been good.
For a physical example of this, just look at how long it took for the Empire State Building (completed 1932?) to get into profit.
So, as I sit here, thinking that shares yielding 10% are fundamentally good value, I have to remind myself that the really good time, when the entire world is so fed up with equity that no-one is recommending it and no private investors will touch it with a barge pole, could be three, four, or eight years away.
__________
The recent FTSE and S&P 500 rallies are beginning to look increasingly shaky, although it might hold on until Christmas. Subsequently, January through to May looks horrific, and may provide buying opportunities. Some dreadful numbers are going to come out and, once again, while these should be factored into share prices because we all know that they are coming, you can bet your top dollar that the full effect has been far-from factored in. The buying and selling of shares is based on more important factors than whether a company is fundamental value (such as, "I need money to pay the kid's school fees").
I really expect a fall in the FTSE to 3000 or thereabouts at some time in the not too distant future. Perhaps around late February to late March, when FY figures will be in full flow and General Motors might have gone tits up.
A long-term chart was produced in the FT this week which showed that shares were, for the first time in more than a decade, fundamentally good value. What the long article accompanying the chart failed to point out was that a similar situation was reached in 1932, and if you had invested all of your money in equities at that point, it would have been 20 years before you broker even. Mind you, the next 48 years would have been good.
For a physical example of this, just look at how long it took for the Empire State Building (completed 1932?) to get into profit.
So, as I sit here, thinking that shares yielding 10% are fundamentally good value, I have to remind myself that the really good time, when the entire world is so fed up with equity that no-one is recommending it and no private investors will touch it with a barge pole, could be three, four, or eight years away.
__________
