Financial markets – Do you have any balls?

The Dow is currently down 145 points on inflation data. The financial sector is still as strong as a house of cards, and retailers are reporting mixed-to-disappointing results even with stimulus checks boosting last quarter’s consumer spending. This environment creates three mentalities (if you have a different one, GET OUT OF THE MARKET):

  1. Huge buying opportunity. It’s time to make your judgment call: have we reached bottom? If so, in which sectors? And which of these sectors has the greatest potential for growth, the most resiliency on down market days, and the most positive investor sentiment? Markets are cyclical, and while it may seem like everything is a falling knife, the old adage “buy low, sell high” firmly applies. There are relative* bargains abound, with some shining growth stocks available at attractive prices due to overall market concern. However, be extremely cautious as I’m positive we’re no where near the low point as the full realization of the credit crunch comes to light over the next year. The current environment is an opportune time to dollar/cost down on any equities you feel strongly about holding for a mid-range time period (greater than three years). That being said, prepare to see things keep going down as you buy. You MUST stay true to your price targets and invest without emotion. If you don’t, you will fail (if you are not an idiot). It’s called discipline, and it’s a hell of a lot easier said than done.
  2. Too risky for my blood.. and hard earned equity. I can’t stand watching my money evaporate (though unrealized) before my eyes. All i hear is how the economy is suffering, we’re in a recession, and that people are losing their homes. Yes, economic times have been rosier. This is not exactly the market you want to try to time. However, especially in some sectors and with high profile stocks, such as financials or say, GOOG, you can employ certain hedges to buoy or even increase performance during rough times. Shorting selective securities with massively negative sentiment, straddle option strategies, investing abroad, and buying non-perishables are all ways (though some easier than others) to put yourself in position to better handle rising costs and volatile markets.
  3. Neutral… I don’t know what to do. See 1 or 2, and make your choice. If you still don’t know, GET OUT OF THE MARKET.  Pay off your debt and buy non-perishable consumer staples.  Holler.

My portfolio is up 2.48% as a whole today.

Currently listening to: Coconut Records – West Coast

*relative = compared to prices October 07, May 08, or the time when your Uncle Herb decided to sell his trailer for a milli.

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