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26-01-09, 02:34 AM
The banks again…
The ban on short selling of financial stocks was supposed to be lifted tomorrow. As you know, ASIC have instead lengthened the ban until 6th March.
It doesn’t seem as though the market cares. Instead of short selling, shareholders are just selling. Can you blame them?
All weekend I’ve been wracking my brain trying to think of one good reason why you should buy any blue chip shares at these prices.
You know what, I can’t think of a single reason.
The lows are being tested. Look at the components of the S&P/ASX200, barely a dozen of them finished in the black on Friday. And if you look at the chart of the bottom of this email you’ll see that 84 shares hit a 52 week low.
That may not seem like many out of the nearly 2,000 companies listed on the ASX. But when you consider the market is within a sniff of breaking through the November low, it only needs the market to fall a little further and a whole raft of companies will be hitting their low point.
Look at the chart again. Back in October nearly 800 share prices plummeted to a low. You’d be brave to bet against it happening again now.
But why is this happening? Isn’t all the bad news already factored into the share prices?
To be honest, we thought it probably was. Or most of it anyway. But looking at where the economy is now, and having done some digging around the banking sector, well, there’s still some pretty smelly stuff lingering around.
But you know the proverb, “Every cloud has a silver lining.” The only problem is these are some pretty big and dark clouds. And when they’re that big and dark only the brave (or foolhardy) have the gumption to take a stand.
Despite all this. And despite the natural reaction to look on the bad side it is remembering another well worn stock market cliché. That is “that the retail investor is always the last to get in on a bull market run, and always the last to get out.”
How many times have you heard that? Plenty.
Now, just to re-emphasise, looking at the market right this moment, it is hard to make a case for buying blue-chip stocks.
You only have to look at the newspapers, the television news and possibly even your own share portfolio to see that things aren’t looking that great at the moment.
But think about it another way. Why is it that the retail investor is always the last to get in on a market upturn? Is it because they are stupid? Is it because they are ill informed? Or is it because most investors - especially the novices - don’t watch the markets every day.
Or if they do then they don’t understand how markets work. Because of this, it is only when the mainstream press starts to scream and shout and get hysterical that these investors decide they need to do something.
When the front page of the newspapers is printing stories about job losses, companies folding and recession, the novice investor puts two and two together and then decides to bail out of the market.
They would have got out sooner if at that time the mainstream press hadn’t been printing interviews with over-bullish analysts claiming that each dip was just a “clear out” before the resumption of the bull run.
In a nutshell, this market isn’t out of the woods yet, but just as it would be mad to dive in with every last penny today, it would be equally mad to completely turn your back on it.
This article is contributed by Money Morning.
The ban on short selling of financial stocks was supposed to be lifted tomorrow. As you know, ASIC have instead lengthened the ban until 6th March.
It doesn’t seem as though the market cares. Instead of short selling, shareholders are just selling. Can you blame them?
All weekend I’ve been wracking my brain trying to think of one good reason why you should buy any blue chip shares at these prices.
You know what, I can’t think of a single reason.
The lows are being tested. Look at the components of the S&P/ASX200, barely a dozen of them finished in the black on Friday. And if you look at the chart of the bottom of this email you’ll see that 84 shares hit a 52 week low.
That may not seem like many out of the nearly 2,000 companies listed on the ASX. But when you consider the market is within a sniff of breaking through the November low, it only needs the market to fall a little further and a whole raft of companies will be hitting their low point.
Look at the chart again. Back in October nearly 800 share prices plummeted to a low. You’d be brave to bet against it happening again now.
But why is this happening? Isn’t all the bad news already factored into the share prices?
To be honest, we thought it probably was. Or most of it anyway. But looking at where the economy is now, and having done some digging around the banking sector, well, there’s still some pretty smelly stuff lingering around.
But you know the proverb, “Every cloud has a silver lining.” The only problem is these are some pretty big and dark clouds. And when they’re that big and dark only the brave (or foolhardy) have the gumption to take a stand.
Despite all this. And despite the natural reaction to look on the bad side it is remembering another well worn stock market cliché. That is “that the retail investor is always the last to get in on a bull market run, and always the last to get out.”
How many times have you heard that? Plenty.
Now, just to re-emphasise, looking at the market right this moment, it is hard to make a case for buying blue-chip stocks.
You only have to look at the newspapers, the television news and possibly even your own share portfolio to see that things aren’t looking that great at the moment.
But think about it another way. Why is it that the retail investor is always the last to get in on a market upturn? Is it because they are stupid? Is it because they are ill informed? Or is it because most investors - especially the novices - don’t watch the markets every day.
Or if they do then they don’t understand how markets work. Because of this, it is only when the mainstream press starts to scream and shout and get hysterical that these investors decide they need to do something.
When the front page of the newspapers is printing stories about job losses, companies folding and recession, the novice investor puts two and two together and then decides to bail out of the market.
They would have got out sooner if at that time the mainstream press hadn’t been printing interviews with over-bullish analysts claiming that each dip was just a “clear out” before the resumption of the bull run.
In a nutshell, this market isn’t out of the woods yet, but just as it would be mad to dive in with every last penny today, it would be equally mad to completely turn your back on it.
This article is contributed by Money Morning.