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01 April 2020VALUE
The markets are currently some 20%+ lower than they were at the start of the year. Those invested are nursing considerable losses which demonstrates the benefit of being patient this past few months as we waited, cash at the ready, for something like this to happen.
The question now is focused on trying to measure the extent of this downturn, and this is not easy. One method that may give you some assistance is the so-called "Buffett Indicator" which is the Total Market Index Value/GDP. When applied to the US this stands today at about 119% which means that despite the large falls to date the market is still overvalued. If you believe that where the US markets go the world tends to follow then this indicator may be helpful. In 2009 this number fell to as low as 51% so by that yardstick this current fall is not yet over.
We should keep in mind that within this there are many good companies shares currently representing excellent value so opportunity abounds.
01 March 2020THE CRASH?
We have been in cash for many months awaiting the appearance of value, and lo and behold in the last few days that is what has happened.
It has taken the appearance of a nasty virus that may threaten the health of the world, but it is these types of events (the financial crash in 2008 threatened the financial health of the world) that cause violent movements in the markets around the world, which in turn creates opportunity for the prepared investor.
It would not be a good idea to try and pick the bottom of this downturn which may last a few days or a few months, start to invest in quality companies at bargain prices as they are offered to you. Do this with care and the benefits will be with you for years.
01 February 2020CAN THIS CONTINUE?
We are in cash and have been for the past many months. It is a historic fact that markets have continued to rise far beyond the rational argument that they should.
Here are the current reasons why – most have been in place for months:
Markets have risen for a continues period the length of which has not been seen before.
As a result of 1 (above) markets are at record highs.
We all know that records cannot keep being broken repeatedly over short periods – it is not the way that the world works.
The global geopolitical situation continues to be uncertain as to what lies ahead.
China, which it could be argued, now one of the main drivers of the world economy is slowing down. Can its record breaking growth continue and if not what are the consequences for the rest of us?
We know that when a crash/correction occurs in the markets it can be fast and brutal, frequently wiping out years of gains. Those on the other side of it can take advantage of the opportunities it creates, while the majority survey the wreckage of their ruined savings.
For these reasons we remain in cash.