Buy now, get richer later
by Peter Switzer
It looks like there are plenty of investors who don’t think Japan’s social and economic tragedy is going to derail the global economic recovery and that’s why the US stock market was up more than one per cent overnight.
And this has to be the right attitude for long-term investors that if you believe the Japanese hit to economic growth will have a smaller impact on global growth and will give way to a boom in economic activity as the country rebuilds, then you shouldn’t be scared to buy on the dips.
On Wall Street, the panic days are making it easy for value investors to go after the companies they like and want to hold for the long-term. Now they could be wrong in the very short-term as the market could go down some more but they can buy again at lower levels.
However, provided I’m right that Japan won’t KO the comeback of global economies and stock markets, then these investors buying now will eventually be right.
George Boubouras, head of investment strategy and consulting at UBS, pretty well said this on my program on Sky News Business Channel last night and he agreed with me that this is the year for big cap, blue chip companies, while last year was for the stock picker who could see the value in beaten up small cap companies.
US data watch
Helping Wall Street’s gains was some more good economic news on jobless claims and the VIX or fear index dropped about nine per cent to less than 27, which is still much higher than a couple of weeks ago but it’s measured fear and not panic.
CNBC reports that “the four-week average for claims dropped to 386,250, the lowest level since July 2008, according to the Labor Department. The news provided further assurances the job market is stabilising".
In addition, factory production rose 0.4 per cent and the Philadelphia Fed Survey's index of manufacturing rose to 43.4 in March from 35.9 in February. This is the best reading since January 1984!
Also, the new orders index rose 17 points and is now up six months in a row.
Finally, the leading economic indicators index was up 0.8 in February compared to a rise of 0.1 in January, which are signs that the US recovery, despite bad housing news yesterday, is on track and Japan, I suspect, won’t kill off this recovery. In fact, through demand for reconstruction products, it will actually help it.
The courageous can buy shares and the nervous should stay put but you shouldn’t panic. That’s my best guess.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Friday, March 18, 2011
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