Why it’s the Right Time to Buy US Stocks |
10 Comments |
I’m watching Mad Money right about now and Jim Cramer seems to be claiming that the US Stock market is set for a big recession. The reason? The sub-prime lending that has sent stock down over the last couple of weeks is not going away any time soon.
I just don’t see a recession coming. CNBC just got through saying that the sub-prime mess only applies to a small subset of those who have bad credit and leveraged too much. I think that they might have underplayed it a little bit, but not too much. This means that there are a number of companies that are getting punished whose business shouldn’t be affected by it. In short you have an opportunity now to buy quality businesses at a discount. Try doing that in true bull market.
If I had money on the sidelines, I’d divide it up into 3 to 6 equal parts and invest it over the next 3 months in equal increments. Of you could potentially buy some index stocks each day with Zecco.com, and not pay any commissions.
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August 13th, 2007 at 8:48 pm
I completely agree that now is the time to buy stocks. I think they are trading at a discount. I just bought in to a couple that, based on all my fundamental analysis, seem to be great companies but as of lately have been dropping off due to the volatile market. Now is the time to buy.
August 14th, 2007 at 4:19 am
Over the long-haul, I’m sure most of them are a great buy.
I will just keep buying and pretend they are on sale - if they go lower, I will just pretend that they are on clearance. When (not if) they go higher, I will sit back and smile.
August 14th, 2007 at 8:29 am
I do think it’s time to scoop in potential undervalued companies as the market doesn’t differentiate between good and bad when the whole market swings down. That said, I think the credit issues in the market are large ones. The the fact the central banks have had to prop them up is warning. It’s not just about subprime, and even the fallout from subprime dervied instruments (such as CDOs), but the fact that credit has been to easily extended across the board. Credit spreads have been too narrow for too long.
August 14th, 2007 at 9:08 am
“If I had money on the sidelines”
If you don’t have money on the sidelines, you aren’t investing the proper way.
August 14th, 2007 at 9:42 am
I’d stay away from REIT’s, but several banks are trading about 20-30% below average. These stocks should turn around later in the year once they’ve fully come clean with how much of their business is still relying on their lending. I’ve just put in another 10% in to regional banks.
August 14th, 2007 at 11:21 am
Dave: “Money on the sidelines” means extra money that I’m not already investing or have other plans for. I’m saving for a house in two years, and I can’t count that money as “on the sidelines.” I’m investing each month automatically, so there’s no money there that I can add in.
If you suggest that one should stay out of the market to time it for these circumstances, I’d suggest that’s not the “proper way” to invest.
August 14th, 2007 at 4:39 pm
I’m continuing to buy because I will put more in the next few years than I currently have — so hence, recession/drops will be good for my purchases.
But if you haven’t already planned on how to deal with drops, do some serious research before just blowing this off as a “subprime-only” problem. Remember, this is what every talking head claimed back in February. Now the mortgage companies imploding are in the Alt-Prime arena and defaults are creeping up in prime. Huh — I thought the problem was contained? Didn’t Bernanke state so on TV in Feb?
On Boggleheads, there’s been several threads about this subject already. Read the dicussions carefully:
http://diehards.org/forum/viewtopic.php?p=60731#60731
http://www.dealbreaker.com/images/pdf/HaymanJuly07.pdf
August 14th, 2007 at 9:25 pm
Hmm… I think the best way is to stick to a good scheduled investing plan since anything else is really trying to time the market.
August 15th, 2007 at 8:19 am
No, it’s not the right time to buy. $521 billion in ARM resets are due in the first six months of next year. That’s more than all of 2007. So we aren’t quite at the bottom yet. It’s okay to start looking for bargains now but do not commit all your cash yet because there’ll be more to come.
August 15th, 2007 at 8:37 am
That’s true, but who knows if some good news will come out to offset that next year? I try not to forecast whether stocks will start going up or down in 4 months. It’s difficult enough to try to figure out where it’s going in the next month.
If you need an example, last month we passed Dow 14K, about 30 days later we are passing 13K on the downside.