With the recent crash and failures in the stock market many people are wondering what’s the next step. Why are the markets freaking out? Whose to know, could it be the German short-selling ban, the Greek debt crisis, falling value of the Euro, China’s tightening its monetary policy, U.S. budget deficit, falling crude oil prices, or the Goldman Sachs scandal, I don’t care pick one to blame. All I do know is if you are a long-term investor I see this as a great buying opportunity. The Dow Jones has fallen 1,000 points (9.5%) in recent weeks and many stocks have dipped down to levels where they valuations have become very attractive. Evan Newmark analyses this situation best saying “A hint of uncertainty begets volatility which begets hysteria which begets panic which begets Armageddon.” If you are a trader I would suggest being cautious and buy only while protecting yourself. However if your looking at the long run buy strong value equities and let them sit and a year from now you’ll be happy with the decision. What makes me optimistic is the cash is following around in big Fortune 500 companies. Free cash flow of the market capitalization of the S&P 500 is near a two-year high. This bodes well for companies looking to expand and move forward. In fact, combined Microsoft, Google, Cisco, Apple, and Intel have enough cash on their balance sheets to finance the Greek bailout. That’s some serious amount of cash. As for the U.S. economy we have seen moderate improvements in the past months that bodes well for the long run. In my opinion, the markets have recent stumbled due to the new dynamics of Wall Street and the markets themselves. We are now dominated by traders and supercomputers, which in milliseconds can make a nervous market super vulnerable. Our markets have shifted from investors to traders, and frankly traders don’t care about fundamentals and use their crazy mathematic computer algorithms to trade the markets and make small profit margins. What you should look at is the strong P/E in many companies along with high yields and upbeat expectations all, which will help stock prices long-term. Do I believe the market might go lower? Yes it very might well, if so I’ll buy more and more. We need to start mimicking the principles placed by Warren Buffet not some computer. Invest wisely, invest smart and in the long run it will pay off. As Warren Buffet once said, “Beware of geeks bearing formulas.” Instead follow his philosophy of “If a Business does well, the stock will soon follow.”
Read more click on: stocksonwallstreet.net/2010/05/25/invest.../
Disclosure: "Long GOOG"
Disclosure: "Long GOOG"