Warren Buffett opined that the United States is already in recession, even if it's not in the sense that economists would define it: two consecutive quarters of negative growth, in an interview with the German magazine Der Spiegel on Saturday. Furthermore, Buffett argues the recession "will be deep and last longer than many think." 
Not writing a will, or not updating it, can be disastrous for those left behind.
By Emma Wall
Last Updated: 10:13AM BST 05 May 2009
Actress Natascha McElhone with her late husband Martin Kelly Photo: GETTY
Sounds pretty ominous. After all, Buffett is now the world's richest man - he recently surpassed Microsoft chairman Bill Gates - and is easily one of the planet's most successful investors. If Buffett himself thinks the economic outlook is lousy, the average punter thinks, maybe I should get out of the market.
If you have money in the stock market that you will need in the next few months ahead, you should. (Not because the market is about to go down - although it may - but because money earmarked for short-term expenditures shouldn't be in the market in the first place.) (Comment: The largest market losses, as you would expect, are in the beginning of any recession.)
However, if you own stocks to meet your long-term financial objectives, stay put. And look for fresh opportunities, too. After all, that's what Buffett himself is doing… (Comment: The largest gains come from staying invested through the entire period. The numbers show market timing would have given you an 8% gain at best and a -3% loss at worst. )
Warren Buffett's Global Investment Opportunities
One of the reasons Warren Buffett was in Germany is that he shares our view that you should search worldwide for the best investment opportunities. Right now Buffett would like to put Berkshire Hathaway's cash war chest to work in a few well-managed German family-owned businesses.
But why would Buffett buy companies if the economic downturn is likely to be deeper and last longer than generally expected? (Ooops. Same comment: The largest market losses, as you would expect, are in the beginning of any recession. The largest gains come from staying invested through the entire period. The numbers show market timing would have given you an 8% gain at best and a -3% loss at worst. )
Because he knows that nobody can accurately or consistently predict something as big, diverse, and dynamic as the global economy. (Work like this is better left to the experts: you know, palm readers and Ouija boarders.)
Warren Buffett knows that even if you somehow knew what was going to happen in the economy, you still wouldn't necessarily know what was going to happen in the stock market. Stocks fall during good times. They often rally during bad times. Money manager Ken Fisher doesn't call the stock market "The Great Humiliator" for nothing. (Same comment again: The largest market losses, as you would expect, are in the beginning of any recession. The largest gains come from staying invested through the entire period. The numbers show market timing would have given you an 8% gain at best and a -3% loss at worst. )
Buffett knows that the stock market is a discounting mechanism. It takes the news and reflects it into stock prices immediately. Who in their right mind would sell their stocks today because he realizes the economy is slowing down. We've known that for months already. (And again: The largest market losses, as you would expect, are in the beginning of any recession. The largest gains come from staying invested through the entire period. The numbers show market timing would have given you an 8% gain at best and a -3% loss at worst. )
And, finally, Buffett knows that nothing beats the long-term returns available in equities. Where else can you put your money to work today? In real estate that is in a death spiral? In bonds that pay less than 5%? In money markets yielding 2%?
Warren Buffett's Investment Strategy
In the same interview with Der Spiegel, talking about his investment strategy, Warren Buffett said "If the world were falling apart I'd still invest in companies." In other words, he gets it. There is no superior alternative to common stocks. The long-term returns of every other asset class pale by comparison.
In an interview in the April 28, 2008 issue of Fortune, Buffett said "I think we've got fabulous capital markets in this country, and they get screwed up often enough to make them even more fabulous. I mean, you don't want capital markets that function perfectly if you're in my business. People continue to do foolish things… and they always will."
Realize that when other investors sell too cheap or buy too dear, it creates opportunities for those of us on the other side of their trades.
Buffett ends his Fortune interview by saying, "Stocks are a better buy today then they were a year ago. Or three years ago… The American economy is going to do fine. But it won't do fine every year and every week and every month… The only way an investor can get killed is by high fees or by trying to outsmart the market." (And again the same comment: The largest market losses, as you would expect, are in the beginning of any recession. The largest gains come from staying invested through the entire period. The numbers show market timing would have given you an 8% gain at best and a -3% loss at worst. )
Amen. They don't call him the Oracle of Omaha for nothing.
Good investing,
Alex
Alexander Green's recommendations have beaten the Wilshire 5000 Total Market Index by more than 3 to 1 over the past five years. To get access to a steady stream of the companies he expects to outperform this year, consider joining The Oxford Club, our premium service. You'll have access to all of Alex's growth-stock recommendations in a matter of minutes. Learn more.
http://www.investmentu.com/IUEL/2008/May/warren-buffett-investing.html
0 comments 
Wednesday, May 6, 2009
Rules for Investing in the Next Bull Market
Rules for Investing in the Next Bull Market
Sponsored by by Brett Arends
Wednesday, May 6, 2009
provided by
How to be smarter when the market comes back � and it will.
Is this a new bull market? Nobody really knows for certain. But one will -- presumably -- come along in due course. Will investors make the same mistakes they made last time, or will they be wiser? Here are 12 rules for the next bull market -- whenever it turns up.
1. Go global.
Most investors prefer to stick to their "home" market. It's a mistake. America accounts for only a fifth of the world economy but a third of its share values. No one knows where the best or worst returns will be, so spread your bets across the board. And you already have an oversized bet on the U.S. economy:, because you likely live, work and own a home here.
2. Avoid big moves.
If you buy or sell heavily in one shot you're taking a needless risk. And waiting for the right moment to make your move is futile. You probably won't catch the bottom or the peak anyway. If a market trend has much further to run, then what's the rush? And if it doesn't … what's the rush?
3. Remember the market is just "us."
No wonder shares rose when everyone was buying, and fell when they were selling. That was the reason. And when everyone is trying to predict "the market," they are effectively chasing themselves through a hall of mirrors.
4. Don't get fooled, don't get tense… and don't get fooled by the wrong tense.
Wall Street is riddled with people who mistake the past perfect ("these shares have risen") with the present ("these shares are rising") or the future ("these shares will rise."). Don't get suckered.
5. Pay no attention to TINA.
Sooner or later someone will urge you to buy shares, even at very high prices, because There Is No Alternative. It is a popular hustle at the peak of the market. There are always alternatives -- like holding more cash until valuations are more attractive.
6. Be truly diversified.
That means investing across a spread of different asset classes and strategies. As investors discovered last year, "large cap value" and "mid cap blend" funds don't offer diversification. They're just marketing gimmicks.
7. Treat forecasts with a grain of salt.
Most economists missed the recession, most strategists missed the crash, and most analysts are bullish just before a stock falls. Even the good experts are prone to group think, office politics, career risk - and hall of mirror syndrome (see point 3, above).
8. Never invest in what you don't understand.
Be happy to underperform a bull market. During the last boom, many investors were advised to go all-in on shares to get the biggest long-term gains. But the stock market has infinite risk tolerance and an infinite time horizon. Real people can't compete with market indices, and shouldn't try.
9. Ignore what everyone else is doing.
It's natural to want to "join the crowd" and avoid being "left behind." Leave those instincts in eighth grade. When it comes to investing, do what's right for you and your family.
10. Be patient.
Investment opportunities are like buses. If you missed one, you don't have to chase it. Relax. If history is any guide, others will be along shortly.
11. Don't sit on the sidelines completely until it's too late.
You'll probably end up splurging at the last moment. If you are afraid to invest, do it early, little, and often.
12. And above all: Price matters.
After all, an investment is just a claim check on future cash flows, whether it be a company's profits, a bond's coupons or an annuity's income stream. By definition, shares in a solvent company are twice as good at half the price… and vice versa. It's amazing how many people get suckered into thinking it's the other way around.
I'd like to hear from readers: If you have any suggested rules of your own, let me know.
Write to Brett Arends at brett.arends@wsj.com
Copyrighted, Dow Jones & Company, Inc. All rights reserved.
http://finance.yahoo.com/focus-retirement/article/107035/Rules-for-Investing-in-the-Next-Bull-Market?mod=fidelity-buildingwealth
Sponsored by by Brett Arends
Wednesday, May 6, 2009
provided by
How to be smarter when the market comes back � and it will.
Is this a new bull market? Nobody really knows for certain. But one will -- presumably -- come along in due course. Will investors make the same mistakes they made last time, or will they be wiser? Here are 12 rules for the next bull market -- whenever it turns up.
1. Go global.
Most investors prefer to stick to their "home" market. It's a mistake. America accounts for only a fifth of the world economy but a third of its share values. No one knows where the best or worst returns will be, so spread your bets across the board. And you already have an oversized bet on the U.S. economy:, because you likely live, work and own a home here.
2. Avoid big moves.
If you buy or sell heavily in one shot you're taking a needless risk. And waiting for the right moment to make your move is futile. You probably won't catch the bottom or the peak anyway. If a market trend has much further to run, then what's the rush? And if it doesn't … what's the rush?
3. Remember the market is just "us."
No wonder shares rose when everyone was buying, and fell when they were selling. That was the reason. And when everyone is trying to predict "the market," they are effectively chasing themselves through a hall of mirrors.
4. Don't get fooled, don't get tense… and don't get fooled by the wrong tense.
Wall Street is riddled with people who mistake the past perfect ("these shares have risen") with the present ("these shares are rising") or the future ("these shares will rise."). Don't get suckered.
5. Pay no attention to TINA.
Sooner or later someone will urge you to buy shares, even at very high prices, because There Is No Alternative. It is a popular hustle at the peak of the market. There are always alternatives -- like holding more cash until valuations are more attractive.
6. Be truly diversified.
That means investing across a spread of different asset classes and strategies. As investors discovered last year, "large cap value" and "mid cap blend" funds don't offer diversification. They're just marketing gimmicks.
7. Treat forecasts with a grain of salt.
Most economists missed the recession, most strategists missed the crash, and most analysts are bullish just before a stock falls. Even the good experts are prone to group think, office politics, career risk - and hall of mirror syndrome (see point 3, above).
8. Never invest in what you don't understand.
Be happy to underperform a bull market. During the last boom, many investors were advised to go all-in on shares to get the biggest long-term gains. But the stock market has infinite risk tolerance and an infinite time horizon. Real people can't compete with market indices, and shouldn't try.
9. Ignore what everyone else is doing.
It's natural to want to "join the crowd" and avoid being "left behind." Leave those instincts in eighth grade. When it comes to investing, do what's right for you and your family.
10. Be patient.
Investment opportunities are like buses. If you missed one, you don't have to chase it. Relax. If history is any guide, others will be along shortly.
11. Don't sit on the sidelines completely until it's too late.
You'll probably end up splurging at the last moment. If you are afraid to invest, do it early, little, and often.
12. And above all: Price matters.
After all, an investment is just a claim check on future cash flows, whether it be a company's profits, a bond's coupons or an annuity's income stream. By definition, shares in a solvent company are twice as good at half the price… and vice versa. It's amazing how many people get suckered into thinking it's the other way around.
I'd like to hear from readers: If you have any suggested rules of your own, let me know.
Write to Brett Arends at brett.arends@wsj.com
Copyrighted, Dow Jones & Company, Inc. All rights reserved.
http://finance.yahoo.com/focus-retirement/article/107035/Rules-for-Investing-in-the-Next-Bull-Market?mod=fidelity-buildingwealth
0 comments
The dangers of failing to write your will
The dangers of failing to write your will
Not writing a will, or not updating it, can be disastrous for those left behind.
By Emma Wall
Last Updated: 10:13AM BST 05 May 2009
Actress Natascha McElhone with her late husband Martin Kelly Photo: GETTY
The actress Natascha McElhone feared she might lose her home after her husband died without leaving a will, she has revealed.
Although in the end McElhone managed to keep her property with the help of a lawyer, her fears illustrate the dangers to a family's finances if one of its members dies intestate.
Although in the end McElhone managed to keep her property with the help of a lawyer, her fears illustrate the dangers to a family's finances if one of its members dies intestate.
A survey by Standard Life, the insurer, revealed that only a third of people aged 35 to 44 had a will and, perhaps more surprisingly, one in five people aged 65 or more did not. But only with a valid will can you be certain that your estate will go to the right people.
If you do not draw up a proper will, you risk depriving your spouse or partner of their home, increasing the inheritance tax (IHT) burden and leaving parts of your estate in the wrong hands.
On a brighter note for people who fail to make a will, the rules governing an intestate death have been changed to their benefit. People who die without making a will shall now have more of their estate given to their spouse or civil partner.
Previously, if you did not have children, £200,000 of your estate was awarded to your spouse should you die without a will. This figure has now been increased to £450,000. The remainder of an estate is then halved between your parents and your spouse.
Should the parents be dead, it is divided between siblings and the spouse. If you do have children, £250,000 (previously £125,000) of your estate will be awarded to your spouse, before being divided between your children.
The changes mean that inheritance tax liabilities are reduced because the spouse (who is tax exempt) will inherit more, and so the amount going to non-exempt beneficiaries is reduced.
Experts worry, however, that these changes will create a false sense of security and people will feel they do not need to make a will. People may consider their estate to be covered under the law change, when it is still just as important to draw up a will. Failure to do so can cause acrimony and complications.
Look no further than famous stars such as Barry White, Bob Marley and Jimi Hendrix whose families squabbled for years because they all died intestate.
Paul Bricknell, private client associate for Mace & Jones, warned that the increased limits did not mean that a will was now unnecessary. "There are so many reasons to try and avoid the intestacy rules. Failing to make provision for a partner will almost certainly lead to unnecessary legal costs in trying to rearrange an estate after death," he said.
There are many eventualities that are not covered under intestate law. For example, if you die without making a will the rules of intestacy award none of the estate to stepchildren and live-in partners, regardless of the longevity of the relationship.
Unless you have a joint mortgage, the house that you share with your live-in partner, even if they have lived there for 20 years or more, could potentially be passed onto your children, parents, siblings or the state, leaving your partner homeless.
Leaving no will can also mean extensive legal costs for your beneficiaries; failing to provide for a partner or dependent will mean they will have to hire legal help to contest the state's decisions, with no guaranteed result. Complex cases can require the hire of a genealogy expert, at great cost, to clarify relatives' rights to your estate.
Julie Hutchison of Standard Life said making a will and keeping it up to date could save family and friends a great deal of distress and, potentially, money, so it should be regarded as a priority.
Aside from the legal implications, there may be personal wishes that cannot be fulfilled without a will. You may not want your children to inherit at 18 � the set inheritance age in intestate law � considering it too young, or you may not want parents or siblings to benefit at the detriment to your spouse.
If you draw up a will, you can specify how long funds must be held in trust for children, to any age you deem appropriate. You may also exclude family members who you don't want to benefit from your estate in a will.
Stepchildren or live-in partners can only inherit part of the deceased's estate if specified in a will, as is the case for friends or charities. You may also want to outline personal wishes, such as funeral arrangements or who should inherit particular property or items of worth.
Drawing up a will also prevents assets being claimed by the state at the cost of loved ones. Ms Hutchison urged people to make sure they had an up to date will. "A will should be part of bread-and-butter financial housekeeping," she said.
"Once you've bought your first property you should draw one up, regardless of your age."
Even if you have made a will, you need to ensure it is updated. Family make-up can change after the birth of a child or the breakdown of a marriage, but if a will is not updated to include or remove beneficiaries, they will have little or no claim to the estate should you die. The late Heath Ledger's daughter Matilda was left out of a will completed before her birth.
Neither, in the event that both you and your spouse dies, will you have any say in who becomes your children's guardian. If your child or children are under the age of 18 it is essential you have a will for this reason. This also applies to a family member or dependant with special needs.
Nearly half of all marriages end in divorce, meaning that not updating your will can have devastating effects for your spouse and any new children or stepchildren. It is also vitally important that family members know where your will is kept and that a duplicate is stored with a solicitor or financial adviser.
Mr Bricknell cautioned: "Many people's estates are administered as if they are intestate, even if they have a will, simply because no one knows where the will is kept."
If you do not draw up a proper will, you risk depriving your spouse or partner of their home, increasing the inheritance tax (IHT) burden and leaving parts of your estate in the wrong hands.
On a brighter note for people who fail to make a will, the rules governing an intestate death have been changed to their benefit. People who die without making a will shall now have more of their estate given to their spouse or civil partner.
Previously, if you did not have children, £200,000 of your estate was awarded to your spouse should you die without a will. This figure has now been increased to £450,000. The remainder of an estate is then halved between your parents and your spouse.
Should the parents be dead, it is divided between siblings and the spouse. If you do have children, £250,000 (previously £125,000) of your estate will be awarded to your spouse, before being divided between your children.
The changes mean that inheritance tax liabilities are reduced because the spouse (who is tax exempt) will inherit more, and so the amount going to non-exempt beneficiaries is reduced.
Experts worry, however, that these changes will create a false sense of security and people will feel they do not need to make a will. People may consider their estate to be covered under the law change, when it is still just as important to draw up a will. Failure to do so can cause acrimony and complications.
Look no further than famous stars such as Barry White, Bob Marley and Jimi Hendrix whose families squabbled for years because they all died intestate.
Paul Bricknell, private client associate for Mace & Jones, warned that the increased limits did not mean that a will was now unnecessary. "There are so many reasons to try and avoid the intestacy rules. Failing to make provision for a partner will almost certainly lead to unnecessary legal costs in trying to rearrange an estate after death," he said.
There are many eventualities that are not covered under intestate law. For example, if you die without making a will the rules of intestacy award none of the estate to stepchildren and live-in partners, regardless of the longevity of the relationship.
Unless you have a joint mortgage, the house that you share with your live-in partner, even if they have lived there for 20 years or more, could potentially be passed onto your children, parents, siblings or the state, leaving your partner homeless.
Leaving no will can also mean extensive legal costs for your beneficiaries; failing to provide for a partner or dependent will mean they will have to hire legal help to contest the state's decisions, with no guaranteed result. Complex cases can require the hire of a genealogy expert, at great cost, to clarify relatives' rights to your estate.
Julie Hutchison of Standard Life said making a will and keeping it up to date could save family and friends a great deal of distress and, potentially, money, so it should be regarded as a priority.
Aside from the legal implications, there may be personal wishes that cannot be fulfilled without a will. You may not want your children to inherit at 18 � the set inheritance age in intestate law � considering it too young, or you may not want parents or siblings to benefit at the detriment to your spouse.
If you draw up a will, you can specify how long funds must be held in trust for children, to any age you deem appropriate. You may also exclude family members who you don't want to benefit from your estate in a will.
Stepchildren or live-in partners can only inherit part of the deceased's estate if specified in a will, as is the case for friends or charities. You may also want to outline personal wishes, such as funeral arrangements or who should inherit particular property or items of worth.
Drawing up a will also prevents assets being claimed by the state at the cost of loved ones. Ms Hutchison urged people to make sure they had an up to date will. "A will should be part of bread-and-butter financial housekeeping," she said.
"Once you've bought your first property you should draw one up, regardless of your age."
Even if you have made a will, you need to ensure it is updated. Family make-up can change after the birth of a child or the breakdown of a marriage, but if a will is not updated to include or remove beneficiaries, they will have little or no claim to the estate should you die. The late Heath Ledger's daughter Matilda was left out of a will completed before her birth.
Neither, in the event that both you and your spouse dies, will you have any say in who becomes your children's guardian. If your child or children are under the age of 18 it is essential you have a will for this reason. This also applies to a family member or dependant with special needs.
Nearly half of all marriages end in divorce, meaning that not updating your will can have devastating effects for your spouse and any new children or stepchildren. It is also vitally important that family members know where your will is kept and that a duplicate is stored with a solicitor or financial adviser.
Mr Bricknell cautioned: "Many people's estates are administered as if they are intestate, even if they have a will, simply because no one knows where the will is kept."
http://www.telegraph.co.uk/finance/personalfinance/consumertips/5277201/The-dangers-of-failing-to-write-your-will.html
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0 comments
When investing in stocks control your greed and fear
Wednesday May 6, 2009
When investing in stocks control your greed and fear
Personal Investing - A column by Ooi Kok Hwa
We need to know who we are in order to do well in stock market investing
THE recent strong market rally caught many investors by surprise again.
Most investors, including some analysts, predicted earlier that it was just a bear market rally. They have been hoping the market will turn down again. Unfortunately, it has been moving up strong without looking back.
For investors who have not invested during the recent low in March 2009, they are getting very worried as they are not benefitting from the recent rally. They may even wonder whether they should jump in now in order not to miss the boat.
Another group of investors, who have managed to catch some stocks at cheap prices during the previous market low, are also facing the dilemma of whether to lock in their gains now or continue to hold on to their gains. Some even regretted selling their stocks too early last month.
We all know that it is very difficult, in fact impossible, to predict stock market movement. Most investment gurus will refuse to time the market.
Howard Kahn and Cary Cooper published a book titled "Stress in the Dealing Room" in 1993. According to their surveys done on 225 dealers, 73.8% of them suffered from fear of "misreading the market." Most dealers have the same problem of acquiring and handling information.
We believe that in order to do well in stock investing, we need to know ourselves, especially in controlling our emotion on greed and fear.
Due to information overloading, our emotion is highly influenced by the news that we read. Each time we feel that the market is getting bullish and time to buy stock, the overall market will collapse the moment we enter.
On the other hand, the moment we fear that it will drop further and we have decided to cut losses, we will notice the market will recover after that. Most of the time, the prices of stocks that we sold were at the lowest of the recent fall.
In order to control our greed and fear, we need to ask ourselves whether the market has discounted the news that we have received.
For example, many analysts have been bullish lately, having the opinion that the worst may be over for the market based on the recent economic indicators which showed that the overall economy may have stopped contracting or is on its way to recovery.
Nevertheless, the recent strong market rally would have discounted this bullish news. In fact, we need to ask ourselves whether the current stock prices can be supported by the fundamentals for certain listed companies.
In our experience, in most cases, the moment we feel like buying stocks is the best time to sell them while the moment that we feel like selling them is in fact the best time to buy. We can apply this contrarian theory quite successfully in most periods.
Sometimes, if we are taking in too much contradicting information and, as a result, get confused over the market direction, we feel that the best strategy is to stay away from the market until we have a better and clearer picture of the overall market or the economic situation.
We should not be influenced by other opinions.
There are times that we need to follow our heart. Sometimes, our hearts try to warn us from taking hasty investment decisions. However, we refuse to follow our intuition but instead, choosing to get influenced by others or the information that we read and ending up making mistakes.
In conclusion, we need to maintain our concentration.
We should not be led by the market sentiments regardless whether it is on the way up or crashing down fast. We need to go back to the fundamental of economic situation and the companies' performance and future prospects.
One way to minimise the feeling of regret is to stagger our purchase and selling. We will only know the peak when the market starts turning downwards and vice versa. Therefore, by staggering, we will have an averaging effect rather than taking a one-time hit, especially if it is at the wrong timing.
Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting
http://biz.thestar.com.my/news/story.asp?file=/2009/5/6/business/3838362&sec=business
When investing in stocks control your greed and fear
Personal Investing - A column by Ooi Kok Hwa
We need to know who we are in order to do well in stock market investing
THE recent strong market rally caught many investors by surprise again.
Most investors, including some analysts, predicted earlier that it was just a bear market rally. They have been hoping the market will turn down again. Unfortunately, it has been moving up strong without looking back.
For investors who have not invested during the recent low in March 2009, they are getting very worried as they are not benefitting from the recent rally. They may even wonder whether they should jump in now in order not to miss the boat.
Another group of investors, who have managed to catch some stocks at cheap prices during the previous market low, are also facing the dilemma of whether to lock in their gains now or continue to hold on to their gains. Some even regretted selling their stocks too early last month.
We all know that it is very difficult, in fact impossible, to predict stock market movement. Most investment gurus will refuse to time the market.
Howard Kahn and Cary Cooper published a book titled "Stress in the Dealing Room" in 1993. According to their surveys done on 225 dealers, 73.8% of them suffered from fear of "misreading the market." Most dealers have the same problem of acquiring and handling information.
We believe that in order to do well in stock investing, we need to know ourselves, especially in controlling our emotion on greed and fear.
Due to information overloading, our emotion is highly influenced by the news that we read. Each time we feel that the market is getting bullish and time to buy stock, the overall market will collapse the moment we enter.
On the other hand, the moment we fear that it will drop further and we have decided to cut losses, we will notice the market will recover after that. Most of the time, the prices of stocks that we sold were at the lowest of the recent fall.
In order to control our greed and fear, we need to ask ourselves whether the market has discounted the news that we have received.
For example, many analysts have been bullish lately, having the opinion that the worst may be over for the market based on the recent economic indicators which showed that the overall economy may have stopped contracting or is on its way to recovery.
Nevertheless, the recent strong market rally would have discounted this bullish news. In fact, we need to ask ourselves whether the current stock prices can be supported by the fundamentals for certain listed companies.
In our experience, in most cases, the moment we feel like buying stocks is the best time to sell them while the moment that we feel like selling them is in fact the best time to buy. We can apply this contrarian theory quite successfully in most periods.
Sometimes, if we are taking in too much contradicting information and, as a result, get confused over the market direction, we feel that the best strategy is to stay away from the market until we have a better and clearer picture of the overall market or the economic situation.
We should not be influenced by other opinions.
There are times that we need to follow our heart. Sometimes, our hearts try to warn us from taking hasty investment decisions. However, we refuse to follow our intuition but instead, choosing to get influenced by others or the information that we read and ending up making mistakes.
In conclusion, we need to maintain our concentration.
We should not be led by the market sentiments regardless whether it is on the way up or crashing down fast. We need to go back to the fundamental of economic situation and the companies' performance and future prospects.
One way to minimise the feeling of regret is to stagger our purchase and selling. We will only know the peak when the market starts turning downwards and vice versa. Therefore, by staggering, we will have an averaging effect rather than taking a one-time hit, especially if it is at the wrong timing.
Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting
http://biz.thestar.com.my/news/story.asp?file=/2009/5/6/business/3838362&sec=business
0 comments
Economist cautions on equities market
Economist cautions on equities market
Wed May 6, 2009 6:47am
SINGAPORE (Reuters) - Rallying global stock markets will likely reverse trend later this year when weak earnings and economic news surprise investors, Nouriel Roubini, a well-known economist who predicted the credit crisis, said on Wednesday.
"This is still a bear market rally," Roubini told a financial seminar. Roubini is chairman of independent economic research firm RGE Monitor and professor of economics at the Stern School of Business at New York University.
He gave three reasons why investors ought to be cautious about the rally that has seen the Dow Jones Industrial Average .DJI rise 27 percent in two months and taken Asian stocks 42 percent higher over the same period.
Roubini expects macroeconomic news to be worse than expected, lower than expected earnings, and more bad news from the banking sector or an emerging market crisis.
"We will discover soon enough there are a lot of financial shocks.
"While financial markets are mending, we are going to see negative surprises in the next few quarters," he said.
"Markets are getting ahead of themselves."
(Reporting by Vidya Ranganathan and Kevin Lim; Editing by Tomasz Janowski)
http://uk.reuters.com/article/businessNews/idUKTRE54514W20090506?feedType=nl&feedName=ukdailyinvestor
Wed May 6, 2009 6:47am
SINGAPORE (Reuters) - Rallying global stock markets will likely reverse trend later this year when weak earnings and economic news surprise investors, Nouriel Roubini, a well-known economist who predicted the credit crisis, said on Wednesday.
"This is still a bear market rally," Roubini told a financial seminar. Roubini is chairman of independent economic research firm RGE Monitor and professor of economics at the Stern School of Business at New York University.
He gave three reasons why investors ought to be cautious about the rally that has seen the Dow Jones Industrial Average .DJI rise 27 percent in two months and taken Asian stocks 42 percent higher over the same period.
Roubini expects macroeconomic news to be worse than expected, lower than expected earnings, and more bad news from the banking sector or an emerging market crisis.
"We will discover soon enough there are a lot of financial shocks.
"While financial markets are mending, we are going to see negative surprises in the next few quarters," he said.
"Markets are getting ahead of themselves."
(Reporting by Vidya Ranganathan and Kevin Lim; Editing by Tomasz Janowski)
http://uk.reuters.com/article/businessNews/idUKTRE54514W20090506?feedType=nl&feedName=ukdailyinvestor
0 comments
Tuesday, May 5, 2009
****Investing Lessons From Benjamin Graham
Investing Lessons From Benjamin Graham
By Motley Fool Staff May 5, 2009 Comments (1)
A dictionary will tell you that investing involves putting money into assets with the intent of making a profit. But that's not the whole story. Speculating, for example, involves the very same process.
The legendary Dean of Wall Street, Benjamin Graham, differentiates the two approaches in his seminal work, Security Analysis, and in the process offers one of the best definitions of investing. Ever.
Graham says an investment is something that "upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative." [Emphasis added.]
Given that definition, a lot of us who think we are investing may come to discover that we're engaging in what I would call intelligent speculation.
So let's briefly review Graham's three criteria for an investment.
1. Thorough analysis : Do your homework
Warren Buffett used to write down why he was making an investment. If what he wrote wasn't crystal clear, he either did more research, or he'd decide that he simply could not understand the business well enough to make an investment.
Imagine you're buying a house. You'll make sure it's in a nice, safe neighborhood with a good school system before you put down your money. Buffett puts that kind of prudent diligence into his stock research, and so should you.
Really good investments are really hard to find. So when you find one that looks interesting, do your homework. Study the industry. Examine the competition. Find out everything that could possibly go wrong through boom and bust cycles.
2. Safety of principal : Never lose money
Buffett says he has two goals when making an investment.
Rule No. 1: Never lose money.
Rule No. 2: Never forget Rule No. 1.
There are three types of stocks:
One way to keep attuned to that goal is to focus on value over price.
Apple (Nasdaq: AAPL), for example, is a great business that has done all the right things to ensure its long-term success. Yet when it traded early last year at more than $200 a share, Apple had an extremely rich earnings multiple. As the ensuing year proved, even as Apple continued to exceed analyst expectations on earnings, you didn't have much safety of principal at $200.
But after the stock suddenly shot down to below $100, if you believed the economic characteristics of the business remained intact, then your investment thesis was entirely different.
The one variable is the price. As Buffett once said, "Price is what you pay. Value is what you get."
3. Satisfactory return : Risk versus reward
Any time you commit capital to one business, you are forgoing the opportunity to commit that capital to any other business. But that's OK, because if you are rational, the investment you choose will be better than all other alternatives.
So what should you be looking for? Well, you can always invest in the market through index funds and earn, on average, about 10% a year without exerting any effort.
Whatever you do, you should at least expect a higher rate of return than 30-year U.S. Treasuries, commonly referred to as the risk-free rate, which currently stands at around 4%.
A reasonable goal is to make investments that you think can exceed the market rate of return by 3 percentage points over the long run.
John Bogle once stated that more than 85% of active money managers fail to beat the stock market by 3 percentage points, so making investments that can yield you 13%-15% a year is a great return, given your alternatives.
Meeting the Graham threshold
So how do you find good prospects for stocks Graham might approve of? Using Motley Fool CAPS, the Fool's free online investing community, you can run a simple screen to find some reasonably valued stocks that have earned the attention of Foolish investors.
Stock
Current P/E
Estimated Future Earnings Growth
Accenture (NYSE: ACN)
10.9
13.3%
Cameron (NYSE: CAM)
10.3
12.0%
Enbridge (NYSE: ENB)
10.6
11.2%
GameStop (NYSE: GME)
12.2
17.0%
Nokia (NYSE: NOK)
12.7
13.8%
Raytheon (NYSE: RTN)
11.5
11.7%
Source: Yahoo! Finance, Motley Fool CAPS. P/E = price-to-earnings ratio.
Of course, screen results alone aren't enough to conclude that these are truly Graham-quality stocks. Rather, these give you a place to start your own research.
You can rely on CAPS to give you plenty of good ideas whenever you want to look. Just be sure to keep Benjamin Graham's lessons in mind when you're ready to make your next investment.
For more on value investing:
This Rally Is Ridiculous
The Best Opportunity This Decade
How Low Can Stocks Go?
This article, written by Sham Gad, was originally published on June 12, 2007. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned. Apple and GameStop are Motley Fool Stock Advisor selections. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.
By Motley Fool Staff May 5, 2009 Comments (1)
A dictionary will tell you that investing involves putting money into assets with the intent of making a profit. But that's not the whole story. Speculating, for example, involves the very same process.
The legendary Dean of Wall Street, Benjamin Graham, differentiates the two approaches in his seminal work, Security Analysis, and in the process offers one of the best definitions of investing. Ever.
Graham says an investment is something that "upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative." [Emphasis added.]
Given that definition, a lot of us who think we are investing may come to discover that we're engaging in what I would call intelligent speculation.
So let's briefly review Graham's three criteria for an investment.
1. Thorough analysis : Do your homework
Warren Buffett used to write down why he was making an investment. If what he wrote wasn't crystal clear, he either did more research, or he'd decide that he simply could not understand the business well enough to make an investment.
Imagine you're buying a house. You'll make sure it's in a nice, safe neighborhood with a good school system before you put down your money. Buffett puts that kind of prudent diligence into his stock research, and so should you.
Really good investments are really hard to find. So when you find one that looks interesting, do your homework. Study the industry. Examine the competition. Find out everything that could possibly go wrong through boom and bust cycles.
2. Safety of principal : Never lose money
Buffett says he has two goals when making an investment.
Rule No. 1: Never lose money.
Rule No. 2: Never forget Rule No. 1.
There are three types of stocks:
- the overvalued type,
- the fairly valued type, and
- the undervalued type.
One way to keep attuned to that goal is to focus on value over price.
Apple (Nasdaq: AAPL), for example, is a great business that has done all the right things to ensure its long-term success. Yet when it traded early last year at more than $200 a share, Apple had an extremely rich earnings multiple. As the ensuing year proved, even as Apple continued to exceed analyst expectations on earnings, you didn't have much safety of principal at $200.
But after the stock suddenly shot down to below $100, if you believed the economic characteristics of the business remained intact, then your investment thesis was entirely different.
The one variable is the price. As Buffett once said, "Price is what you pay. Value is what you get."
3. Satisfactory return : Risk versus reward
Any time you commit capital to one business, you are forgoing the opportunity to commit that capital to any other business. But that's OK, because if you are rational, the investment you choose will be better than all other alternatives.
So what should you be looking for? Well, you can always invest in the market through index funds and earn, on average, about 10% a year without exerting any effort.
Whatever you do, you should at least expect a higher rate of return than 30-year U.S. Treasuries, commonly referred to as the risk-free rate, which currently stands at around 4%.
A reasonable goal is to make investments that you think can exceed the market rate of return by 3 percentage points over the long run.
John Bogle once stated that more than 85% of active money managers fail to beat the stock market by 3 percentage points, so making investments that can yield you 13%-15% a year is a great return, given your alternatives.
Meeting the Graham threshold
So how do you find good prospects for stocks Graham might approve of? Using Motley Fool CAPS, the Fool's free online investing community, you can run a simple screen to find some reasonably valued stocks that have earned the attention of Foolish investors.
Stock
Current P/E
Estimated Future Earnings Growth
Accenture (NYSE: ACN)
10.9
13.3%
Cameron (NYSE: CAM)
10.3
12.0%
Enbridge (NYSE: ENB)
10.6
11.2%
GameStop (NYSE: GME)
12.2
17.0%
Nokia (NYSE: NOK)
12.7
13.8%
Raytheon (NYSE: RTN)
11.5
11.7%
Source: Yahoo! Finance, Motley Fool CAPS. P/E = price-to-earnings ratio.
Of course, screen results alone aren't enough to conclude that these are truly Graham-quality stocks. Rather, these give you a place to start your own research.
You can rely on CAPS to give you plenty of good ideas whenever you want to look. Just be sure to keep Benjamin Graham's lessons in mind when you're ready to make your next investment.
For more on value investing:
This Rally Is Ridiculous
The Best Opportunity This Decade
How Low Can Stocks Go?
This article, written by Sham Gad, was originally published on June 12, 2007. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned. Apple and GameStop are Motley Fool Stock Advisor selections. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.
0 comments
Stop Worrying About the Rally
Stop Worrying About the Rally
By Dan Caplinger May 5, 2009 Comments (0)
Everyone seems convinced that the recent rally in stocks has absolutely no chance of holding up. Yet a few years from now, what's happened since March -- and what's yet to come over the next few months -- will be just a bump in the road compared to the overall fortunes of the stock market.
Guts and glory
During times like these, it's tough not to think like a short-term trader. After the market was cut in half in just 15 months, stocks have now jumped by over a third from their March lows. In just two short months, the S&P 500 has erased all of its losses for 2009.
Moreover, those traders who picked the exact bottom have seen some of the worst-hit stocks during the bear market shoot back up with amazing gains. Take a look at some of the top-gaining stocks since
March 9:
Stock
Gain Since March 9
1-Year Return
5-Year Avg. Annual Return
Las Vegas Sands (NYSE: LVS)
569%
(87%)
(28.1%)*
Office Depot (NYSE: ODP)
374.6%
(79.1%)
(30.6%)
USG (NYSE: USG)
295%
(55.4%)
3.9%
International Paper (NYSE: IP)
221.6%
(40.8%)
(15.6%)
Bare Escentuals (Nasdaq: BARE)
218.5%
(50.9%)
N/A
Citigroup (NYSE: C)
204.8%
(87.2%)
(39.6%)
Dow Chemical (NYSE: DOW)
163.1%
(57.3%)
(12.9%)
Source: Yahoo! Finance.*4-year average return.
Profits like those we've seen from these stocks in the past two months often take years for long-term investors to earn. So it's no wonder that the rally has taken many unprepared investors by surprise -- and left them wondering whether they've made the wrong decision with their long-term investing strategy.
Irrational in two directions
Of course, as the table above shows, there's nothing particularly extraordinary about how these companies have performed when you look at them on a longer-term basis. They've all done worse than the S&P over the past year, and all but USG have underperformed the index since 2004.
The real question, though, is which is more irrational: the plunge in these companies' stock prices, or the ensuing recovery. Clearly, during times of panic like we saw in early March, investors believed that many of these companies were in danger of falling apart. Now, shareholders seem convinced that their failure isn't imminent -- yet they certainly haven't bid shares back up anywhere close to where they traded last May.
In that light, a small rally like this doesn't seem all that ridiculous -- especially in light of the bigger picture.
A little perspective
In late 2007, investors still believed the future would stay bright forever. When that scenario proved grossly incorrect, stock prices took a 57% haircut, most of which has happened just since last September. Now, after a seemingly huge rally, the S&P 500 is down "only" 42% from its record highs.
That 42% drop doesn't come as a shock to anyone. With unprecedented government intervention and uncertainty about whether the economic cycle is broken for good, lower share prices only make sense.
But the way we got there -- with an even bigger plunge and a subsequent bounce -- is what people are focusing on. And that's the wrong focus.
The right thing to do
Long-term investors know better. They realize that over the long haul, it makes absolutely no difference whether stocks take a straight-line path down or take investors on a roller-coaster ride. The important thing is figuring out which stocks have solid business foundations and taking advantage of attractive valuations when they come to buy.
You might be tempted to wait until this silly-looking rally ends and share prices on your favorite companies fall back toward their lows. That may even turn out to be the right call. But if you play that timing game, you're doing exactly the same thing as the speculators you've criticized -- and if your stocks don't cooperate, you may miss out entirely on a huge opportunity. Just as Warren Buffett missed out on Wal-Mart because of a fraction of a point, you could miss the next big growth stock.
As we know well by now, markets will plunge and soar from time to time. But you don't have to get caught up in the hype. Stick with the investing strategy you've developed for your long-term goals -- it'll serve you better in the end.
For more on making the right moves with your investments, read about:
Three investing tips you need right now.
One stock that'll change everything.
Buying stocks with room to run.
Join Motley Fool co-founders David and Tom Gardner as they seek out attractive stocks every month in their Motley Fool Stock Advisor newsletter. You can try it out free for 30 days with no obligation.
Fool contributor Dan Caplinger bought a little in March, bought a little in April, and plans to buy a little in May. He doesn't own shares of the companies mentioned. Bare Escentuals is a Motley Fool Rule Breakers recommendation. Wal-Mart and USG are Motley Fool Inside Value recommendations. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy pays attention to the right things.
By Dan Caplinger May 5, 2009 Comments (0)
Everyone seems convinced that the recent rally in stocks has absolutely no chance of holding up. Yet a few years from now, what's happened since March -- and what's yet to come over the next few months -- will be just a bump in the road compared to the overall fortunes of the stock market.
Guts and glory
During times like these, it's tough not to think like a short-term trader. After the market was cut in half in just 15 months, stocks have now jumped by over a third from their March lows. In just two short months, the S&P 500 has erased all of its losses for 2009.
Moreover, those traders who picked the exact bottom have seen some of the worst-hit stocks during the bear market shoot back up with amazing gains. Take a look at some of the top-gaining stocks since
March 9:
Stock
Gain Since March 9
1-Year Return
5-Year Avg. Annual Return
Las Vegas Sands (NYSE: LVS)
569%
(87%)
(28.1%)*
Office Depot (NYSE: ODP)
374.6%
(79.1%)
(30.6%)
USG (NYSE: USG)
295%
(55.4%)
3.9%
International Paper (NYSE: IP)
221.6%
(40.8%)
(15.6%)
Bare Escentuals (Nasdaq: BARE)
218.5%
(50.9%)
N/A
Citigroup (NYSE: C)
204.8%
(87.2%)
(39.6%)
Dow Chemical (NYSE: DOW)
163.1%
(57.3%)
(12.9%)
Source: Yahoo! Finance.*4-year average return.
Profits like those we've seen from these stocks in the past two months often take years for long-term investors to earn. So it's no wonder that the rally has taken many unprepared investors by surprise -- and left them wondering whether they've made the wrong decision with their long-term investing strategy.
Irrational in two directions
Of course, as the table above shows, there's nothing particularly extraordinary about how these companies have performed when you look at them on a longer-term basis. They've all done worse than the S&P over the past year, and all but USG have underperformed the index since 2004.
The real question, though, is which is more irrational: the plunge in these companies' stock prices, or the ensuing recovery. Clearly, during times of panic like we saw in early March, investors believed that many of these companies were in danger of falling apart. Now, shareholders seem convinced that their failure isn't imminent -- yet they certainly haven't bid shares back up anywhere close to where they traded last May.
In that light, a small rally like this doesn't seem all that ridiculous -- especially in light of the bigger picture.
A little perspective
In late 2007, investors still believed the future would stay bright forever. When that scenario proved grossly incorrect, stock prices took a 57% haircut, most of which has happened just since last September. Now, after a seemingly huge rally, the S&P 500 is down "only" 42% from its record highs.
That 42% drop doesn't come as a shock to anyone. With unprecedented government intervention and uncertainty about whether the economic cycle is broken for good, lower share prices only make sense.
But the way we got there -- with an even bigger plunge and a subsequent bounce -- is what people are focusing on. And that's the wrong focus.
The right thing to do
Long-term investors know better. They realize that over the long haul, it makes absolutely no difference whether stocks take a straight-line path down or take investors on a roller-coaster ride. The important thing is figuring out which stocks have solid business foundations and taking advantage of attractive valuations when they come to buy.
You might be tempted to wait until this silly-looking rally ends and share prices on your favorite companies fall back toward their lows. That may even turn out to be the right call. But if you play that timing game, you're doing exactly the same thing as the speculators you've criticized -- and if your stocks don't cooperate, you may miss out entirely on a huge opportunity. Just as Warren Buffett missed out on Wal-Mart because of a fraction of a point, you could miss the next big growth stock.
As we know well by now, markets will plunge and soar from time to time. But you don't have to get caught up in the hype. Stick with the investing strategy you've developed for your long-term goals -- it'll serve you better in the end.
For more on making the right moves with your investments, read about:
Three investing tips you need right now.
One stock that'll change everything.
Buying stocks with room to run.
Join Motley Fool co-founders David and Tom Gardner as they seek out attractive stocks every month in their Motley Fool Stock Advisor newsletter. You can try it out free for 30 days with no obligation.
Fool contributor Dan Caplinger bought a little in March, bought a little in April, and plans to buy a little in May. He doesn't own shares of the companies mentioned. Bare Escentuals is a Motley Fool Rule Breakers recommendation. Wal-Mart and USG are Motley Fool Inside Value recommendations. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy pays attention to the right things.
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