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Stocks: What is the Bottom?

in Bank, BCE, Federal Reserve, Foreign Investment, Nortel, Stock Market

Initially written in 2008 in the middle of the biggest stock market plunge (until then). Luckily things always get worse?

Buy Low and Sell High is the trite advice any moron will give you about the stock market or any other major purchase, but the more important question isWhat is the Bottom?“.

The better question is, “Is now the bottom?” and as usual, my non-committal answer is, “It depends.”

Is it the bottom for IBM? Most likely, it is near the bottom for them, they have announced good numbers, have a sound business model and look like they have a plan for the next five years, and the same can be said for companies like Cisco too since they have such a large monopoly in their area of high tech.

Is Google at the bottom? I have no idea since I still have no idea how Google can be worth that much, but that is my opinion as a High Tech Skeptic (maybe an honorary title, but well deserved). I don’t believe in their business model, and I have no confidence in making money, aside from Advertising. 

Is Nortel at the bottom? I asked that same question when the stock was at $90 in 2000, so you can guess what my answer might be today as well (given they are at $0.19 compared to that $90 today). Remember what Garth Turner said in my post, “And He’s An Expert?

Are Canadian Banks at the bottom? Hard to tell. Some seem to be, TD Canada Trust and RBC seem to be near a bottom, as does BMO, but CIBC’s continued exposure to the mess in the states makes them a little more enjoyable too. I have invested in banks in the past week, just for disclosure’s sake.

Please do not take these opinions as advice. They are simply me stating my opinion. You should (as always) make your decisions with as much information as you can and consult reputable sources for this information.

Hopefully, these depressed stock prices will hang around ’til the new year. That would be a great time to open a TFSA and then take advantage of lots of growth in a sheltered account like that (wouldn’t it?).

Buy Equities, Warren Buffet Says So

Is that reason enough to go out and buy equities? I have no idea, however, interestingly, Warren Buffet is saying in an article in the New York Times, “Buy American I am,” that he is putting his money into U.S. equities now. 

The article does have a Canadian Financial Angle, as Mr. Buffet points out here:

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

Anybody who quotes Wayne Gretzky can’t be wrong, can they?

Then again, some might say, “Equity Investment is the Devil’s Work!” only time will tell who is right.


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