"Gather Ye Rosebuds While Ye May" is a poem by Robert Herrick. This poem portrays our existence on earth, and that people age as life goes on, and everything becomes boundless. Herrick here urges people to take advantage of youth and energy while they may! The poem is in the genre of carpe diem, to seize the day.

Tuesday, January 22, 2008

Stock Market Freefall... Where is the Bottom?

So how does this really work? Is it a global meltdown? When the US stock exchange/markets catch a flu... the rest of the world starts coughing and sniffling?

So how about Contrarian Theory? I really am not an expert hehehe but how about that? Invest NOW!!!


Example: Dogs of the Dow is arguably an example of a simple contrarian strategy. When purchasing the stocks in the Dow Jones Industrial Average that have the highest relative dividend yield, an investor is often buying many of the "distressed" companies among those 30 stocks. These "Dogs" have high yields not because dividends were raised, but rather because their share prices fell. The company is experiencing difficulties, or simply is at a low point in their business cycle. By repeatedly buying such stocks, and selling them when they no longer meet the criteria, the "Dogs" investor is systematically buying the least-loved of the Dow 30, and selling them when they become loved again.

During the Dot com bubble an investor would have profited by avoiding the technology stocks that were the subject of most investors' attention. Asset classes such as value stocks and real estate investment trusts were largely ignored by the financial press at the time, despite their historically low valuations, and many mutual funds in those categories lost assets. These investments experienced strong gains amidst the large drops in the overall US stock market when the bubble unwound.

Check this video on youtube.. Embedding it was disabled.

And history repeats itself?

8 comments:

..::Amu::.. said...

this is the second time I am typing it!!! :@ well I hate stock market and thank GOD I took out all my money from it last year with a few thousand KD loss...

Do you have any shares there?

skunk said...

youre on the right track thats for sure.

the problem with the dogs of the dow theorey is that the companies that truelly are at the bottom are there for a reason. and unless you've been watching them it can be a mistake to pick them up just cos their yield is high and they classify as a dog. i recall reading somewhere about how in the long run this doesnt actually work as a sustainable philosophy.

for example, you can get a nice 15-18% on icelandic bonds but you risk losing on the currency. so you have to balance the yield with the other risks involved. so company z might yield 15% but if its a core busniess economics or management suck then youre in for a wild ride.

but,... if you modify it to watch the big blue chips that fall out of favour for a reason that you think is only temporary then yes contrarian investing works very well then. which is why prince waleed bought more citigroup even tho theyre writing off billions. he's guessing that when the dust settles, the schizophrenic smaller investors will pile back into citi.

the same can be said for coke, american express and macdonalds at one time in their history.

read about buffett, if youre going to learn about something then learn from the best, and no one can match his 40 year record.

'Grey' said...

Share market is not my thing ! i think my Brother in law lost a great fortune yesterday ... I dont see difference between gambling and stock market ..

Ansam said...

Amu-
Stock market hates you too :-P LOL no I am just kidding... hehehehe I think you had a bad experience... I am still new to this, but I work in investments so I am exposed to such environment every day

Skunk-
Wow! You always amaze me with your knowledge about the market and all.. I wish I can learn from you more than I already did. Thanks

Grey-
A lot of people think this way too :-)

..::Amu::.. said...

A friend advised me to get into islamic funds, do u think that is a good idea?

Ansam said...

Islamic funds does get interest-paying instruments... instead you see them holding cash on a temporary basis.

Some Islamic funds do invests in foreign securities. That means risk is there! This is when we talk about political, social and economic developments abroad, and also the currency risk.... add to all that the difference in accounting methods used

All the Sharia restrictions could give lower performance than the conventional funds...

I know I didnt answer the question well but I am not that knowledgable in Islamic Funds!

Ansam said...

I mean doesnt in the first paragraph! NO interest

..::Amu::.. said...

mmm I think its better to just have it in KFH as deposits they have for 1 year..its less but i guess its better..I am always confused with funds management!!

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