This feels like deja vu.
Markets fluctuating wildly due to rumors of another global recession, stock prices freefalling in unprecedented levels, wary investors holding on to paper losses while hoping everything will be all right — this looks like 2007-2008 all over again.
We know what it was like before. Prior to 2007, almost everyone was happy with the stock market. In 2006, the benchmark Philippine Stock Exchange index (PSEi) grew by an amazing 42.3%. When 2007 started, optimism reached new levels with most people joining the stock market bandwagon. Unfortunately by then the subprime mortgage crisis has already started which caused 2007 to end with tempered gains of 21.4%. (See 2007 PSE stock market performance)
Little did everyone know it was going to be downhill from there.
The same problems in 2008?
By 2008, the optimism seen during preceding years was replaced by gloom and uncertainty. In the PMT Forum, members started asking: Who is hurting during this downturn?
They compared notes about their losses: How much have you lost so far in this bear market?
Member mlangseth, for example, shared on October 2008: “I have lost 28-33% of my investments, paper loss only as I do not want to move any of my investments.”
And member poorguy too, that same month: “I think I lost 20-25% or more pa ata, paper loss lang naman. But from other investments I lost php 100k na…”
Stock market woes forced scout to change investing strategy: “I managed to pull out around 30% of my stocks investment, the other 70% was just too deep to cut losses. My original plan is for short term investment, say 6 months to a year. Unfortunately I am forced to go long term now.”
History repeating itself in 2011?
The eerie reality is that the same events are currently happening and investors are asking the same questions people were asking back in 2008.
Look at one discussion recently posted in the PMT Forum: How much did you lose last week?
Says adomicbomb on September 2011: “I don’t know if you check your portfolios everyday, but chances are you’re also deeply in red. Last week was terrible virtually all funds lost 10-15% of their value in a couple of days.”
And another one that seems to echo what investors were thinking in 2008: PSE: Is it time to liquidate?
Looking at these current thoughts and posts, we wonder: is history repeating itself?
What’s going to happen next?
The PMT Forum again saw a surge in active members dissecting the current issues plaguing global markets.
Shares dinaren: “I’ve also read that some European banks are in trouble, Italy is showing signs of crisis and could possibly go into default. Italy is just too big to fail they say. Expect a mad rush to the exits when this happens. Nothing we can do about it. Even the fundamentally superior companies will succumb to market sentiment.”
Greedisbad opines: “The whole debt crisis reminds me of the bank bailouts done by the US a few years ago. It’s basically a lose-lose situation. If they let Greece default, the European Union’s Greek T-bills will be severely marked down and recession is a guarantee. If they bail Greece out, then at the very least they could try to sort Greece back to being economically viable again.”
For allanmm13: “The imminent fall of US/Europe may signal the rise of Emerging Asia (including sana ang Pilipinas). There will be a period of adjustment like tightening of policy, reforms from countries about their banking,etc. It will be probably the shifting of economic power from West going to East.”
What to do next?
Without a doubt, we are faced with tough and uncertain times. The market could suffer a deja vu and crawl back into recession just like what happened during 2007-2008. Or it could be resilient enough to emerge less scathed. The sad fact, though, is that no one knows what’s going to happen next.
The best weapon to use to protect oneself, therefore, is knowledge and understanding of the market. We encourage everyone to read, conduct research, and join discussions before making a decision. Do not rely on one person’s opinion alone. Read and learn while taking everyone’s suggestions with a grain of salt. At the end of the day, you can only depend on yourself. And for whatever’s gonna happen to you or your investment portfolio, you only have yourself to blame.
Here’s to hoping we all emerge triumphant when these dark, trying times end.
Deja vu, indeed. And that gives you the clue that if you’re long, then now would be an opportunity to buy. Basic fundamental question is: what company at what price?
With what’s going on right now… if you’re still out, don’t get in (yet). Too much heat and uncertainties are still going on. If you’re caught inside already… take the beating (if you can) or scram whatever is left in your purse. It’s the question of how deep is your pocket. The moral of the story is… nothing stays on top. Market goes down and will later survive. The question is when?, or if it does recover, are we still financially breathing…
I think it’s more of a question of how concerned you are with liquidity–that is, if you’re overly bias with having cash now because you’ll be needing it to pay for something, then you want to be liquid. If you are inclined to that and you need the money, then better stay out. But if liquidity’s not your concern and you’ve got excess, deployable cash you won’t be needing in a very long time, then go forth and exploit.
On the question of when to get in, I personally believe this should be asked after identifying which stock is worth prospecting. Because in the end of the day, if your mindset is that of a long-term, businessman investor, your ultimate concern is not whether the market as a whole is overpriced or underpriced–you’ve got to specific about that. Ask which specific stocks are fundamentally sound, then from there, determine at what price they are worth purchasing.
With that in mind, the question of when the market will recover becomes irrelevant. Because what you are now mindful of is the performance of the underlying business. Rather than concerning or worrying yourself with grand economic views of boom and gloom, attempting to gauge market sentiment, and timing whether now is the right time to buy or sell, you’d be simply more focused on acquiring shares of the best businesses at the best prices. Once you get in, you hold on to them indefinitely as you ride that innate compounding characteristic of excellent businesses.
Deja vu. Although, I’ve been long-term on the market since start of the year since I’m more concerned with my real estate business. I wonder if this will cause a blip in the real estate market as well.
The stock market is for people who invest for the long haul. Otherwise, you’ll worry to death about the value of your investment every time there are market fluctuations. People who need their cash in the near future has no reason whatsoever to go to stock market investments. It would be nonsense to do such a thing!
PMT user TSO here.
The entire post reeks of a cautionary sentiment towards the market environment today, and that’s hardly surprising, what with the US economy struggling to regain its footing after buying itself some precious time (with politicians kicking the can of responsibility further down the road), and Greece’s high probability of default, or otherwise becoming a disappointing blemish for the EU.
One look at the Dow, or the PSE for that matter, and anyone can tell the fear itself has already been priced in. From a long perspective, companies are already being traded at cheap valuations, with the prospect of becoming even cheaper (should the world markets hit an “epic fail” moment) or bouncing upwards (should optimism win out and an economic miracle occurs).
In contrast to drparma’s suggestion, I’d say you get in while it’s cheap, but keep a sizable sum of your portfolio (20%? 30%?) in cash, because if things hit rock-bottom by a sudden screech of terror in the market, you don’t want to be in a position where the market has become a department store of deeply discounted items and you’re illiquid!
Really good, excellent travel network can finally find a solution.
A falling price is buying opportunity for an investor as it gives him the chance to buy more shares at a lower price. All Investors should be happy if stock prices are coming down !, If SM announces 30 to 50% SALE in their malls, we can be sure people will come in droves. The goal of the investor is to know the value of the businesses in the stock market and buy if it offers a price that suits his book. No fancy degree required. if you know your addition subtraction,multiplication and division this is enough to understand company reports. so start reading .
My dream retirement would involve a pleasant log cabin in the mountains. Who needs a beach?