DJIA @ 10809.85, -634.76 (-5.55%)
NASDAQ @ 2060.29, -134.09 (-6.11%)
Absolute rout on Wall St. yesterday when I was hoping for some fightback.
Nothing much I can do but wait out the bad news and take a look at the world if and when things settle.
Standard and Poor's starred over the weekend and even prolonged the agony by releasing their verdict on America's credit rating when markets closed. They also seem to have courted controversy by downgrading the US, breaking ranks with their peers who managed to maintain their AAA rating on US debt.
All a bit tricky as you want them to have upped their game after having completely dropped the ball in the run-up to the credit crunch. As you would expect there are various accusations flying around about the use of flawed assumptions, and data errors.
At the end of the day the US House of Congress did leave itself wide open to this and the resulting criticism following their drawn out saga but I wouldn't necessarily use this in the negative context that S & P have done.
In fact, it should have been a positive to S & P that the US is seriously considering its position on its debt and that a near majority within Congress want to implement serious cuts to borrowings.
I can almost see Obama's view that the agency appears to shaping the outcome of events to fit their view rather than change or moderate their view to the actual outcomes.
Coming back across the pond the management of the EU's sovereign debt problems don't seem to be faring much better with Italy and Spain coming under the spotlight.
On a more personal view of events, a popular tenet of Warren Buffett's is to: "be greedy when others are fearful and, be fearful when others are greedy".
Basically this is an attempt to guide you against buying at the top of a market and selling at the bottom which is what can happen when fear and greed drive you with the herd.
None of us actually want to buy at the top and like some pyramid scheme be the last one holding the bubble before selling out when it implodes.
Fear and greed are basically the fuel that drives bubbles, booms and busts when all rational behaviour is elbowed aside.
I have managed to swallow my own fear (for the moment) and dip into the market making a further purchase in Aviva. Obviously haven't been lucky enough to find the bottom but should (hopefully), have found some value that will bear out in the future.
Still got a couple of dips left in me as well with Astrazeneca, Reckitt Benckiser, Admiral, General Electric, Standard Chartered and Vodaphone topping the list but I am also not averse to topping up any of the portfolio's existing holdings as I have already done so with Aviva.
Buying Astrazeneca will probably also lead me to cash in my Invesco Perpetual stake at some point in the future as my holdings start to overlap with the current strategy driving Invesco.
Can be quite exciting once you start buying but the only problem is that you can soon run out of money.
Trawling around I have also found some useful reading over on the Motley Fool site. Quite a few of their writers seem to have similar opinions to my own which includes trying to learn lessons from investors such as Benjamin Graham and Warren Buffett. These include Graham's tale of Mr Market (www.buffettsecrets.com: Mr Market ) which has a similar message to that of "being greedy" (which you would expect given that Buffett was a student of Graham's).
In this sage tale, Mr Market is a business partner who comes to the office each day offering to buy your share of the business or sell his share to you but being an extremely emotional or manic depressive figure he is subject to extreme swings between optimism and pessimism which dictates whether he is buying or selling.
It also determines the extreme price swings that he can quote to you as he seeks to gain your share or offload his own.
The key elements here are that he is, more often that not, driven by emotion rather than factual information. This, in itself presents you with an opportunity to try to recognise value by either buying or selling into an emotionally driven situation that could be more than a little irrational.
I have started to term them as lessons on thinking like a rich man!
On a more serious note, it looks like its going to be a long painful process of recovery and reality has certainly bitten hard.
Related articles:
- www.fool.co.uk: The time to buy shares is when everyone else is selling. What are you waiting for?
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