The U.S. Stock Exchange Market is undergoing what most people would call a crisis period, prices have been lower and lower during the year and several stocks are just falling down. Can anyone profit from this economic difficult situation? This is the question common people, newly amateur investors who do not speak the “stock” language ask themselves. And the answer is: they certainly can.
What is happening?
It is no news the U.S. economy has been tumbling somewhat during the recent past, and the Stock Market shows definite symptoms. Stocks that analysts rated as definitely target to buy are going down. So what can us common people, amateur investors, stock enthusiast with no experience, sufficient knowledge or time can expect? What’s in store for us?
Well, here is the good news. Even we can profit from this market. And we don’t have to be savants, clairvoyants, nor lucky. We just need to be patient.
As in many other aspects of life, globalization and the media-boom are influencing investors’ (and why not general public) confidence in world’s economy and the stock exchange markets. It’s plain to see.
If you look at the market during the past few months, and more noticeable during the past few weeks, you will notice a change.
A year ago, a stock would go up or down significantly in a given day as a result of either the Company’s situation or some specific factor affecting its sector. Apple launched its iPhone, and the stock skyrocketed from $60 to $120 and then reached $160. But there was a real reason, a tangible factor. Or a company was a takeover target, and its stock would show it. Or fuel would go up, then the automobile sector would go down.
Most probably we could not anticipate it, but at least we could understand it. There were reasons.
Now there are only fears. It’s a psychological war. The last few weeks I have been looking at my portfolio and the only reason I could find to my stocks’ ups and downs were those of the market as a whole.
It is like it doesn’t matter if the company is doing things right or wrong; don’t even bother to consider that, the only factor affecting its stock price seems to be the market. Revenues of a company are above expectations and the outlook seems pretty good, yet it would go strongly down with the whole market. Analyst say “buy” and for a month it would fall because of the crisis fear.
And even the opposite reaction. A company is performing poorly, but it looks like fuel drop a cent and now everybody thinks we are heading out of the crisis, so the stock goes up.
It seems nonsense, and most probably it is.
What can we do?
So what can we do? Shop. Of course, we have to have two factors that are not so common on common people: money and time. Money to purchase stocks that are now at record lows (it’s like they are on sale, some even on a garage sale), and time to wait for the market to correct itself, which it certainly will.
And this is one thing that you will hear from most analysts, who are excited at this time, as we should be. There are excellent stocks at bargain prices, and you can take this opportunity to shop on the ones you like. The Freddie Mac’s and Fannie Mae’s for a single-digit price, maybe a tenth of what they were worth (or at least sold) less than a year ago. Do you really think they won’t go up eventually?
So we will need the money to shop. And we will certainly not getting it back soon. But we will be getting back more. And that is why we will need the time as well. So we can wait. That’s our edge, we choose when to sell.
The reason is simple. It’s human nature to think that one is always the one that is worst, as is human nature to fear for the worst.
At a municipality or a state, you will hear things like “the local government needs to change, our economy is going down”. Guess what? It’s not the municipality. It’s not the state. It’s not even the country, although the sensationalist media (almost all media nowadays) will tell it is. It’s just the whole world. Or is it Europe better off for mentioning an example?
But crisis? Crisis with the airports full of people, no vacancy in the best hotels and shopping centers flooding with people? Maybe it’s not at the same level it used to be, but the definition of crisis for most countries of the world is not having anything to eat, or people not being able to find a job for two years, while looking for one twelve hours a day, seven days a week with no luck.
So, what will happen?
Both, the actual and the media crisis are what have reached the Stock Market. And they will pass. And then, the stocks will go back up where they belong. And our money will increase. That is, if we got the money and the time to buy now, in this estranged market.
After all, the coin has two sides. And while we all believe the phrase “all that goes up must go down” is true, the counterparty to that is that all that goes down will eventually go back up. Wouldn’t you agree?