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Buyer of the dips

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by Peter Switzer

I know the doomsday merchants trying to talk down the stock market are giving it another shot after 13 months of stock market gains and one guy tried to point to today as a sign that a sell-off is in the wind. Call me an economist but I just can’t buy this bad news story despite the fact that there are urgers out there trying to make it happen.

US rates rise call

In case your news service hasn’t told you this yet, the Wall Street sell-off was linked to the comments of Thomas Hoenig, President of the Federal Reserve Bank of Kansas City, who called for the US central bank to raise interest rates to avoid an asset bubble.

And while this could be a long-term problem, the call implies that the US economic recovery is becoming solid enough to cop higher official interest rates which are now at 0 to 0.25 per cent! This call is a good sign but it might have rattled some investors who have taken on board Fed minutes, which suggest no rate rise this year.

In fact, Ben Bernanke, the Fed boss overnight inferred at a conference he’s no hurry to raise interest rates because of headwinds such as the problems faced by US real estate right now.

Another good sign is that Wall Street finished off its lows, after the Dow was down around 120 points at one stage. It ended off 72 points or 0.66 per cent to 10,897.52, while the S&P 500 dropped 6.99 points or 0.59 per cent to 1,182.45.

Keep an eye on the data

Some “correction is coming” types are trying to spook the market and a pullback is possible after a good run up this year, however, the big watches for me are the US retail numbers out tonight and more importantly reporting season that starts next week in the States.

This will tell me how US companies did in the first quarter of 2010 and these will be market-makers or market-breakers.

Talk the book

Right now, the likes of Jim Chanos, the hedge fund guy, is emailing influential people on his database trying to talk down the market but he’s simply talking his book. He’s positioned to make money in a big sell-off and you have to hope he’s taken to the cleaners.

Only yesterday, a mate of mine emailed me and told me he heard investment gurus were cashing in their portfolios. So, I asked him where he heard that and who was doing that? That’s the old Margaret Thatcher debating trick which she once used to make a monkey out of George Negus in an interview for Channel Nine.

To date, I have not heard back from my mate.

When the economics turns, that’s when I will turn. Adapting another famous Thatcher line: “This man is not for turning, at least now”.

I am still a buyer of the dips in the market.

For advice you can trust, contact Switzer Financial Services.

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.

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Published on: Thursday, April 08, 2010