“Imagination is more important than knowledge. For knowledge
is limited , whereas imagination embraces the entire world,
stimulating progress, giving birth to evolution.”
– Albert Einstein (1879 – 1955)
When the Market Shows Weakness
We start with a famous quote from Albert Einstein. Normally people attribute the meaning of the quote to someone searching for the unknown or for advancement.
We like to think it means that we should be able to look past the clouds of misleading information available to us; that the parties imparting that cloud of mis-information have only limited knowledge.
Today’s Headlines
Today’s headlines speak of Greek financial default, downgrading of some French banks’ credit rating, inflation in China, etc, and the markets continue to slide a bit.
The investor must not fall prey to this current cloud of gloominess.
Buy Low, Sell High
We are in a classic case of “buy low, sell high”. Shares of companies with great prospects are slowly falling.
In our last blog, we talked about seasonality and reaction, and suggested the reader not be confused by the mass of gloominess surrounding us.
We remind the reader of the amazing world class airports, office buildings and infrastructure have been created in the Far East, as well as the commencement of the rebuilding in the West. We remind the reader of the hundreds of millions of new middle class spending consumers recently created around the world and the demand this creates. We remind the reader of the changing technology growing all around us – just look at the devices you use daily today and compare them to those devices used ten years ago.
The genie cannot be squeezed back into the bottle.
How many companies were recently doing offerings of their stock at prices substantially higher than their prices today? If those stocks were such a bargain six months ago that the offerings were snapped up, what makes them so unattractive now?
This is a buying opportunity !
Pick a few of your favorite stocks, watch their charts, and when the slide stabilizes, jump in and buy them. They are on sale. BUY LOW, SELL HIGH.
Are Stocks Attractively Priced Now?
We are not believers in picking “the bottom”. Anyone that tells you he can pick the bottom through his charts or technicals is deluding himself. In most situations, waiting to pick the bottom, is similar to waiting for the opportunity to pass you by.
Buy when the value is there. Even if there is a further slide, when the upturn occurs it will occur with speed and it will jump past you.
China
We have often mentioned the dangers of investing in China and recent events are an illustration. Because of Sino Forest, most Chinese related stocks have slipped on Western markets.
There is a gigantic difference between investing in places and situations where risk is higher, and on the other hand, failing to recognize the enormous new consumer and industrial demand metrics created by the new middle class world wide – especially in China – in the last ten years.
Demand is growing and value stocks, especially in commodities, will grow as a result of this demand.
You should choose stocks that 1) feed this increasing demand, and 2) avoid the most common and obvious risks – most of which we have previously mentioned.
