By: Clem Chambers
Clem Chambers is CEO of ADVFN (www.advfn.com). His book “101
Ways to Pick Stock Market Winners” was published on 24th February
As the flames lick higher, horrible headlines mean equities are cheap, argues Clem Chambers. Sometimes it would be better if we never picked up a newspaper or logged into a news site ever again. Keeping up with current affairs is depressing, and more so because there remains so little an individual can do about any of it. A far flung natural disaster induces a sense of acute helplessness;
similar to the way Chambers feels about the current global financial crisis, but is this actually the time to buy into equities?
Disaster Unfolding in Slow Motion
We can’t unfix Libor. We can’t sort out the banking system or singlehandedly bring down trillions of Dollars of global financial imbalances. Forcing oneself to watch the disaster unfold in slow motion via the media, meanwhile, is exactly the kind of masochism young people inflict on themselves via a screening of the latest horror movie. It’s simply not good for the soul! The current financial dramas are obscene and now’s the time to look away.
So overnight, I’m no longer a pessimistic ‘bear’. Instead, I’ve become a bull. When it comes to financial markets, a bullish viewpoint sees the world as being the best it can be – full of opportunity. And certainly, the world is a far better place than when we were born. Never has there been a better time for humanity; more ways to prosper. We’re not going to look on the bright side just for the sake of it, mind. Instead, we’re going to focus on the “strengths, opportunity” side of life, putting the “weakness and threats” theme so prominent these days, further into the background. Why should we view the euro crisis as such a bad thing, for instance? Bad systems are bad, yes, but then they break, and are remade better. It’s an unpleasant process and lots of people, especially those favored by the old, “bad” system, will complain. Yet, if you have faith in market forces, then that’s just white noise.
It’s blatantly obvious that the old system was always doomed to suffer this kind of crisis. It was just a matter of when. The new system that will emerge in time will produce a better, more sustainable Europe. What more could you ask for?
Bad News is Constant
Shouldn’t we be used to this by now? Remember, through both boom and bust, bad news is constant. So why pay it any attention? Instead, find the good news. Houses in the US are getting bigger, for example. The depressed market – glutted with houses no one
The time to load up on investments is during the ebb and this is the ebb, the “deep ebb”.
wants to buy – is responding by making bigger houses. That’s great news for Americans. Who wants to live in a rabbit hutch, after all, 0 even if its value is inflated? How rich is a person with lots of property equity, if they have to live crammed into a cardboard box? Wealth is not just about money. You should increase your wealth from now on by refusing to worry about the giant mess world economies are in. Instead, focus on opportunities to improve your lot as the game changes. Yesterday, you may have been unhappy by how depressed stocks and shares are. Today you could decide to be happy about it. Equities are looking very cheap! The Time for Equities? There is plenty of choice in the market. In the UK, there are so many companies at sub ten price/earnings ratios and with dividends over two per cent that we’re spoilt for choice. The German and French markets are looking like great value. Some are even tempted to put their toes into the Greek market, which is basically dead for now. Happily, there is no rush to pile in, as the current difficulties mean there is not going to be a giant rally any time soon. What about simply drop your savings into blue chip shares and not worry too much what happens next? However bad the world gets, there will still be Shell, Vodafone and AstraZeneca and they will do well in comparison to the rest. Why worry? The Maya were wrong. The world isn’t going to end in 2012. Economic life, too, will go on ebbing and flowing. The time to load up on investments is during the ebb and this is the ebb, the ‘deep ebb’.
Real money is made by buying at the bottom of the market. While we may not be there yet we are getting close. Fear is the only real enemy. It’s time to get over that fear, reclaiming the wealth that comes with having a positive mental attitude whilst continuing to try and lay the foundations of a prosperous future by investing carefully for the inevitable recovery. The bear market has gone on five years now. It will not continue forever. The recovery will be camouflaged with bad news and dire prognoses but it will come. Already, America is on the comeback path – a strong indicator that now is the time to look to the future. It’s
time to let the final year or two of the trough offer up opportunities that will define the recovery because when it comes it will be too late to catch the best of it.