Initially written in 2008 in the middle of the biggest stock market plunge (until then). Luckily things always get worse? The bottom for stocks is actually zero (see Nortel).
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 is “What is the Bottom?“.
The better question is, “Is now the bottom?”. My non-committal answer is, “For stocks, 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 (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 the 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 for disclosure’s sake in the past week.
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 possible and consult reputable sources for this information.
Hopefully, these depressed stock prices will hang around until 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 Stocks, Warren Buffett Says So
Is that reason enough to go out and buy equities? I have no idea. However, interestingly, Warren Buffett 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. Buffett 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.”Warren Buffett 2008 Berkshire Hathaway Letter to Shareholders
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.