Too Late to Sell, but Calmer Markets May Lie Ahead

It may be easier said than done, but market experts are saying that now more than ever is the time to be rational.

“Yes, the bill didn’t pass. Yes, the Dow was down more than 700 points. The Republicans and Democrats are probably going to revise the bill, but you can’t wait for them to do that. In this type of market, you stay calm,” said Tommy Nguyen, associate portfolio manager at Palos Management Inc.

He said it is basically too late to sell now. But is there any more downside? Maybe, but Mr. Nguyen suggests investors look at the VIX, the Chicago Board Options Exchange Volatility Index, which hit 46 on Monday. The last time it was this high was 9/11, after which the market calmed down, he noted.

“We are at the extremes in the market right now,” Palos said, and he is simply waiting for things to calm down. “Obviously nobody expected the bill not to pass. I think traders in New York and Canada – nobody actually predicted this,” Mr. Nguyen said.

The only counsel he offers to investors is to stay calm. “The VIX is really high, so we could have maybe a rebound coming in, but do not count on that. In this type of market, if you were positioned defensively, you should be doing okay.”

Comments

[willyboy:]

Simple, it's all p.o.v.

2008 Sep 30 08:39 AM

[Mr.G:]

actually I would say you can expect bumpier rides ahead -another vote on the bailout might just do the same where you have people jumping ship before the vote -giving major buy opportunities if it passes this time around-especially in commodities(oil ag metals) -it is a trade that would take a lot of courage but more likely than not it would reap rewards at the end of the day -
another question to ask is did the fed know the vote wasnt going to pass and that is why they sent 630 billion into markets as insurance? or were they counting on a rally expecting it to pass and at the same time injecting that $ to get as much lift as possible ?

2008 Sep 30 08:42 AM

[montyman:]

9/11 was a singular event. This is an ongoing crisis that's getting worse by the week.

There is more downhill from here.

2008 Sep 30 09:26 AM

[sdcougar:]

Speaker Pelosi killed the bill with her bitterness.

She should watch this:
www.youtube.com/watch?...

2008 Sep 30 09:39 AM

[Dean Plassaras:]

Hope u r right.

2008 Sep 30 10:01 AM

[AlexS:]

We should take a page from Mao and send the traders and the politicians out into the fields to harvest the crops and shovel all the night soil they created.

2008 Sep 30 11:48 AM

[Orange2:]

Too bad, Palosi hurt the feelings fo few republian guys ! They should wipe there noses and fight back , and let the bill fail again now by the bigger margin.

I dont know if McCain and Obama voted for this bill??

2008 Sep 30 01:05 PM

[daytrader:]

MONTYMAN IS RIGHT!

how come the good people who respond to these articles seem to know what they are talking about,and the people who write these articles don't know squat?right.because they are just like the people on cnbc.they are on the side of wall street,compared to montyman who seems to be on the working people's side.

OUR SIDE!!!

2008 Sep 30 01:10 PM

[Mioracle:]

As a long time investor, I am furious over the non-passage of the bailout bill. Consequently I am on a buyers strike until this thing gets passed, and I urge all my fellow investors to do the same

2008 Sep 30 01:58 PM

[hrant:]

I too can see Russia from my house !!!
I am not buying what this administration or Bush 3 is selling .

2008 Sep 30 02:14 PM

[Help!:]

Dear Julian Murdoch,

Please help me understand something (I think this is something that some of your other readers might be interested in as well). The issue is the huge variance in trading values between open end mutual funds and closed end ETF’s.

The open end mutual funds essentially trade once per day at the closing net asset value (NAV) of the fund. The closed end ETF’s trade all during the trading day, often at large discounts to their NAV. In this extremely volatile market, why would an investor want to be forced (by utilizing open end mutual funds) to wait until the end of the trade day to get in or out of a security?

In addition, why would an investor want to pay par value (NAV) on an open end mutual fund rather than purchase something with a built-in gain (a closed end ETF at a significant discount)?

For example, the world stock open end mutual fund Capital World Growth & Income Fund (symbol CWGIX) from American Funds trades once a day at its NAV (0% discount) and yields about 2.80%. Conversely, the world stock closed end ETF BlackRock Global Equity Income Fund (symbol BFD) trades during the day at around $11.22 (a 20% discount to its NAV) and yields around 17.00%.

Would you recommend that I buy CWGIX or BFD? Please explain this phenomenon. I do not understand. Thank you.

Sincerely,
Mark J. Mohr

2008 Sep 30 02:22 PM