With three consecutive days of loses on the TSX, suddenly investors are starting to cash out their bets while they are still ahead. What precipitated the original selloff is not entirely clear, since there really was no bad news that justified a sudden downturn. Perhaps Mark Carney pistol whipping investors might have spooked a few of them? Infact all economic indicators were pointing to a strong economic recovery, especially in Canada. Then last Friday, Potash and Agrium announced their massive declines in revenue due to a farmer's boycott, and that seemed to lead a selling frenzy. I'm not certain how much longer this sell-off will last, but one thing is for certain it will deflate some prices at strong companies that will create buying opportunities.
I know, I know; somebody plug Peter Man-bridge's ears with bees wax because as soon as he catches wind of an economic panic, he flees like George Castanza at a Birthday Party. Canada posts 3rd quarter GDP growth technically ending the recession, and the next day the markets plunge 150 points for no apparent reason? The underlying data does not support a market sell-off, except that a number of investors are likely taking their gains and leaving. There is speculation a plenty of what has caused the last 3 days of losses, and the one with the most traction is a deflation of precious metals prices. It could also be the Law of Averages influencing investors who have convinced themselves that after several months of solid gains, failure becomes more probable. Of course in mathematics we call the "Law of Averages" the "Gambler's Fallacy", but it does serve to explain "a massive movement of people acting stupid" (co/ Eminem).
As Warren Buffet says, no expert can reliably predict a peak or bottom of a market, but investors should always be greedy when others are fearful and fearful when others are greedy. There is a lot of greed in the gold market these days. I'm just pissed that I signed up for the FP Stock Market Challenge a week ago before the price deflation. This will correct itself. The economy is stronger than anyone predicted, and a significant number of investors are selling their positions while they are still in profit. I will tell everyone to brace for buying opportunities, I just can't forecast the bottom of an otherwise irrational short term selling trend. It could be tomorrow, it could be a month from now. The data is not driving the market on this one, the investors are.
Is it possible when Flaherty announced last year that we would be in good shape to weather the storm, he might have been right?
I hope you make money as you invest but I wouldn't touch the ponzi-scheme (aka the Stock market) with a bargepole. I distrust it so much and with such a passion that I wouldn't even invest with YOUR money.
ReplyDeleteNot ONE of the structural problems that led to the melt-down have been addressed ant the ONLY thing sustaining the uptick is the cash thrown around by the various World Governments. Of course the market is going to go 'up' when everything is quantitatively eased to a degree heretofore unseen, and the interest rates are pretty much at ZERO. It's not fundamental valuations at all that are driving the silliness; It's just nowhere else to place cash.
The 'recovery' is merely another slight of hand and it won't (can't)last. I would rather tuck cash under the mattress. At least I know what the mattress is doing with it.
I completely disagree with most of what you said. However I just got out of bed and don't want to debunk your post right now. Yes there are still problems, but I choose to be optimistic. It hardly benefits society if I as an "expert" say "we're all fucked, get out while you can." I don't want to be like George at the kids birthday party.
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