Risk off?

[BlueKelah]

still waiting for SGX to drop 10%. No 10% down no point to enter. Continue keep some cash and collect dividend

[Dosser]

The macro view does not affect the entry point - agree this depends on the individual company, and the current price. However, it does affect my decision on overall cash reserves, cash reserved to invest when there is a good opportunity.

Big drops in the market (not the little correction seen so far) make things a lot easier as the good tends to drop as well as the bad when there is panic, and there are then a lot of real bargains to be had, provided that one does not get too caught up in the prevailing pessimism at that time, and provided one has the cash to make the most of the opportunity.

I tend to move between 10% and 30% cash on a long term basis, just my preferred style.

It has been an interesting week, with the expected downward trend, despite the rally on Friday. So is this just a taper tantrum, like we had last year, or a more sustained bear market, maybe even warning shocks before a crash? The crystal ball is very cloudy, because there are so many unknowns:

1. Will the FED resume QE? Personally, i think it very unlikely, as they will be seen by many to be bailing out investors/banks and/or reacting to European problems when the Europeans themselves won't. Odder things have happened, and maybe the Greenspan and Bernanke 'put' will be followed by the Yellen 'put'. I still doubt it; i suspect they will limit it to a few 'verbal hints' to jolt markets upwards when they are falling, without actually doing anything.
2. Will one or more of the weak EURO nations finally break free of the dead hand of the ECB, or will the ECB do a lot more (like real QE)? The trouble is, the EURO area has been limping on for so long, with nothing much changing. Draghi talks a good fight, but so far it hasn't been much more than talk.
3. Will the response to Ebola be any better than the fumbling efforts so far, and will the spread to the US/Europe become more than a few cases, will (or when will) it get to Asia?
4. How will all of the geopolitical crises from Ukraine to Hong Kong to ISIS play out?
5. The fall in commodity prices, from oil to iron ore, will give consumers more money to spend, but how much does this reflect slowing in China?

Personally, I am keeping my powder dry. I know that the STI is supposed to be fair value at the moment, but I can't see any screaming buys yet. If it just a short term tantrum/correction, I may miss out a little on the upside, but I would rather be cautious and wait until i see an opportunity that I just can't resist, even if it is a long, maybe very long, wait.

I look at different ball than the crystal ball

Instead of looking at macro factor to determine a entry point, I look at the individual preferred companies. Nothing done last week, because the preferred companies didn't drop much, and still not cheap enough

[Obama]

don't think anyone can time the bottom
can slowly buy as it gets lower

[Dosser]

Agree that no one can time the bottom. However, taking some money out of the market when things are hot (or beginning to look like cooling), and putting it back in when there are real bargains to be had helps the investor to ride the waves. It needs patience, as the big trends are typically over many months. I tend to err on the side of buying after the bottom, i.e. when there has already been movement upwards (just my personal style). Buying when prices have moved up quickly by 10% or 20% or more is hard, as instinctively one wants to wait for prices to go back down to the recent, lower amount, but then if they were real bargains at the lower price, there should still be still plenty of upside room. I see it as managing cash reserves, rather than timing the market, and making sure there is enough cash to take opportunities in individual companies when those opportunities are spotted - and there are likely to be more good opportunities at the start of a bull market than at the end. Historically, my timing of the general market has been OK, but often let down by poor choice of which shares to invest in - an area where following Valuebuddies discussions has been very helpful in improving understanding.

don't think anyone can time the bottom
can slowly buy as it gets lower

[specuvestor]

Market never demanded your actions to be binary. Thats what analysts are forced to do with their reports

Buying at absolute bottoms and selling at tops are cocktail talks to impress and of little value

[VIChris]

Agree that no one can time the bottom. However, taking some money out of the market when things are hot (or beginning to look like cooling), and putting it back in when there are real bargains to be had helps the investor to ride the waves. It needs patience, as the big trends are typically over many months. I tend to err on the side of buying after the bottom, i.e. when there has already been movement upwards (just my personal style). Buying when prices have moved up quickly by 10% or 20% or more is hard, as instinctively one wants to wait for prices to go back down to the recent, lower amount, but then if they were real bargains at the lower price, there should still be still plenty of upside room. I see it as managing cash reserves, rather than timing the market, and making sure there is enough cash to take opportunities in individual companies when those opportunities are spotted - and there are likely to be more good opportunities at the start of a bull market than at the end. Historically, my timing of the general market has been OK, but often let down by poor choice of which shares to invest in - an area where following Valuebuddies discussions has been very helpful in improving understanding.

don't think anyone can time the bottom
can slowly buy as it gets lower

No one can time the market. Buy when you see it is a value buy with good safety margin. That's my strategy.

[shn]

To me, the recent market turmoil shows that there is hesitance and fear amongst market players. The low volume suggests that some players have already taken some money (note that I did not say all the money) off the table and are watching by the side for the right moment to re-enter the market to pick up the bargains. As for whether the market has found the bottom, it depends on whether there are enough market players who believe that the present market (or an individual stock) offers them a good trade-off between risk and reward. If there are enough players thinking that a bottom has been found, it will swing those who sit on the fence to join the buy side and the market will continue to rise until it reaches another point or an event has occurred that will cause some players to change their positions. Of course certain market players such as fund managers and wealthy individuals have much more influence on the market sentiment than the retail investors because they have bigger buying and selling powers.

I ask myself who the sellers were when there was a heavy sold-down, says on last Wednesday. My answer was fund managers who faced fund redemption pressure, hedge fund managers and shortlists who sensed fear in the market and shorted the market, and fearful retail investors who tried to protect their gains or limit their losses.

I think few will believe that the market will keep going up when the end of the QE is in sight, not to mention about the Ebola; problems with Europe; geopolitical tensions in Syria, Iraq, Hong Kong and Ukraine; slow down in China; and drop in oil prices and other commodity that suggest the threat of a deflationary world economy.

The market uptrend has been driven by liquidity and not economic fundamental; the withdrawal of the liquidity will just kill the bulls.

My conclusion is that the market will remain weak and any rebound will be short-lived unless strong economic data, strong company earnings reports and/or the unlikely extension of QE take place (even then, there will be an end within the foreseeable future) can swing the sentiments in a big way.

Stock investment is a probabilistic game. No one can be absolutely sure what the market direction will be but one could win in the long run by betting on the side that has a higher odd - or choose not to place any bet when the odd of being right is not high enough.

[BlueKelah]

To me, the recent market turmoil shows that there is hesitance and fear amongst market players. The low volume suggests that some players have already taken some money (note that I did not say all the money) off the table and are watching by the side for the right moment to re-enter the market to pick up the bargains. As for whether the market has found the bottom, it depends on whether there are enough market players who believe that the present market (or an individual stock) offers them a good trade-off between risk and reward. If there are enough players thinking that a bottom has been found, it will swing those who sit on the fence to join the buy side and the market will continue to rise until it reaches another point or an event has occurred that will cause some players to change their positions. Of course certain market players such as fund managers and wealthy individuals have much more influence on the market sentiment than the retail investors because they have bigger buying and selling powers.

I ask myself who the sellers were when there was a heavy sold-down, says on last Wednesday. My answer was fund managers who faced fund redemption pressure, hedge fund managers and shortlists who sensed fear in the market and shorted the market, and fearful retail investors who tried to protect their gains or limit their losses.

I think few will believe that the market will keep going up when the end of the QE is in sight, not to mention about the Ebola; problems with Europe; geopolitical tensions in Syria, Iraq, Hong Kong and Ukraine; slow down in China; and drop in oil prices and other commodity that suggest the threat of a deflationary world economy.

The market uptrend has been driven by liquidity and not economic fundamental; the withdrawal of the liquidity will just kill the bulls.

My conclusion is that the market will remain weak and any rebound will be short-lived unless strong economic data, strong company earnings reports and/or the unlikely extension of QE take place (even then, there will be an end within the foreseeable future) can swing the sentiments in a big way.

Stock investment is a probabilistic game. No one can be absolutely sure what the market direction will be but one could win in the long run by betting on the side that has a higher odd - or choose not to place any bet when the odd of being right is not high enough.

With the FED taper, liquidity will dry up somewhat and current dip is basically the smart money selling off in anticipation of weakness after taper just like back in 2011/2012 time.

After economy gets worse in US, FED will have no choice but to QE again until Obama finishes office in Jan 2017 and then maybe the next president will do something about the debt.

That will be assuming no Black Swan event occurs before....

[greengiraffe]

http://www.valuebuddies.com/thread-5860-...l#pid97217

I think some of you have overlooked the improvements in US economy as a result of QE. Just like Dr M who was initially condemned for his extreme measures undertaken to shield Malaysia from AFC in 97, I don't think much credit has been given to Fed to undertaking QE.

IMHO, that is because the QE process is yet to be completed as it is just being wound off and already it is causing a big havoc that coincides with the traditionally weak Sept/Oct months.

Just like the "Euro Crisis" in 2011 and the anticipation of decelerating QE last year, I view stopping QE as just another milestone event.

Just ask yourself a simple question - if US economy is not strong enough, do you think FED will decelerate QE and in the midst of stopping it?

The road map is quite clear - Yellen already indicated that it take FED a considerable time to evaluate the economic response before hiking rates.

Markets are simply adjusting to a new norm. Just like climbing Everest, there is always a need to consolidate one's climb at a higher base camp before scaling new heights. As long as there are no avalanche then slowly but surely we will reach the summit.

Keep faith. The world is sick and hence need creditable leadership. No doubts there are consters globally but surely financial markets will always fall back on selected lesser devil leadership.

GG

[greengiraffe]

The economist, who developed his passion for markets as a farmer in Iowa before he trained as an economist, argues that the rally in US equities is not merely a function of the almost $US4 trillion ($4.57 trillion) in stimulus pumped into the economy under the Fed's quantitative easing program. The reality is American companies are doing better.

"I think there are an awful lot of ­people that really do believe the only reason stock prices have rallied so much. as they have since the March 2009 low, has been the creation of ­dollars by the Federal Reserve through quantitative easing. I tend to disagree with that," he said.

"I think there's a great deal of fundamental support for the US economy."

http://www.valuebuddies.com/thread-5475-...l#pid97354