The Investing Geek

Petition to send world leaders message about the financial crisis

2008-09-17T14:35:00.001-07:00

If you think the current financial crisis was driven by politically-driven greed, then you want to sign this petition.

While I am not a big fan of regulation, I am a big fan of responsibility.

GLOBAL FINANCIAL CRISIS: ACT NOW!

Is it time to buy?

2008-07-24T08:09:00.000-07:00

Maybe. But obviously not if your margin is already extended to the point of being called.

Here is a good indicator: The price of oil and other commodities are dropping, which is a sign that stability is on its way. This is likely to take the pressure off the spectre of stagflation. Also since most of the hot companies are making statements about lower earnings, share prices for many companies are dropping to the point where P/E ratios are approaching 10% (and in the single digits outside of north America).

I predict that a rally is forthcoming as many investment managers are sitting on lots of cash because of market volatility. Since margins are tight, the smaller investors will most likely not be able to participate in the rally (but will have to sell instead, at lower than expected prices). The big thing to watch for in the coming weeks (days) will be volume of trading, which will indicate that institutional investors will be re-entering to scoop up some bargains.

Timing may not be perfect, but this coming together of events will be inevitable.

The risk of buying now is that commodity prices (oils and metals) rally instead.

John Templeton, father of contrarian investiing - has passed away

2008-07-23T07:10:00.000-07:00

John Templeton passed away this month at age 95. Along with Benjamin Graham, he was a pioneer in the investment strategy known as contrarian investing. I had not realized this until I read his obituary.

Contrarian investing, to sum it up, is buying when prices are lowest and selling when prices are highest, which sound correct in principle and not very contrary. What makes it contrary is that prices are lowest at extreme points of pessimism, usually when people have had enough and decide to liquidate and get out of equities. Benjamin Graham added a lot to this strategy by looking at other indicators, such as market capitalizations that are below intrinsic book value.

The reverse is also true. This means selling at extreme points of optimism. Usually people don't, because they get carried away with their "winning streak" and don't really know when to fold the cards, in a manner of speaking.

The other thing I did not realize was that he was following a spiritual strategy that closely resembles my own. Briefly, the true rewards come from a willingness to take the road less traveled. In other words, by not following the "experts" wisdom or putting faith in the crowd, or trusting that the crowd is taking the correct decisions.

So far this has worked for me, although it is difficult at times.

The Market correction - buy or sell?

2008-07-15T18:58:00.000-07:00

Always an interesting question.

I have lost 15% on two of my top performing value funds... A U.S. value and international value fund. My strategy was buy and hold, and it still is.

My advice is ride this out unless you have exposure to companies that are in financial difficulty. If you are holding mutual funds and they are not energy or metals, I would hang on.

Metals and energy are still doing well, but will be next in line for a big drop. I’d sell these now.

Coming Soon....

2008-07-14T14:53:00.000-07:00

Adventures in contrarian investing.

Privacy Policy

2007-08-20T11:17:00.000-07:00

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