I know, I know, my title just sounds like I’m a huge believer. That I’m one of the few people that only see the positive in the world and forget, read ignore, the bad things happening. But, truly, I don’t think that the picture is that dark right now. In fact, I think that we are right in the middle of the opportunity of a decade on the stock market. I’m definitely looking forward to 2012. We keep looking at worst case scenarios where the entire Eurozone collapses and provokes the biggest banking failure in history. This kind of scenario is very sensational and is sure sell a lot of newspapers. But what if we make another scenario? A brighter one? Let me do the exercise for you…
What if…
The Euro Zone comes to an agreement and is able to set a viable financial structure to resolve their problems? It is obvious that we won’t have to deal with only Greece, Italy and Spain. Soon, we will hear about Portugal, Ireland and maybe even the pillars of Europe; France and Germany that will have to borrow at higher interest rates. The problems are real, but at least now, people are taking them seriously. This is why I think they will come up with a solution. Will it involve other countries such as China which has a lot of liquidity to invest? Maybe. But I’m sure of one thing; the leaders of the Eurozone are now taking this debt problem very seriously and they will find a solution.
What if…
We get through the US election and concentrate on the real problems? Since the summer of 2011, we have been watching the election “pre-game show”. On one side, we have the republicans and on the other the democrats. One side wants to cut social programs, the other wants to raise the taxes. But all they do is play political games and are not interested in addressing the problems. Once we get past the 2012 election, I hope we get a more stable US political environment that can manage the US debt problems.
What if…
China controls its inflation and continues its crusade for more growth? What if Brazil does the same thing and continues to buy products. The BRIC is facing growth challenges but we all know that they are far from being done with their expansion. Rough economic times are usually a great moments for any growing countries as their companies have no other choice but to review their processes and become more efficient. This is how great economic expansion is created; through productivity!
Speaking of companies… haven’t you notice something very interesting?
Haven’t you noticed that the S&P 500 is trading at a P/E ratio of 12 while the historical average is 15-16?
Haven’t you noticed that the level of liquidity in US companies has never been so high?
Haven’t you notice that the profits are higher than pre-2008?
Haven’t you noticed that companies’ profitability hasn’t been that high for a while?
So let me ask you a question : Do you invest in countries or companies?
‘cause while the countries suck… the companies seem to be in a pretty good shape. This is why I’m so optimistic about the future. Because I am investing in companies that are making money right now and that are in a strong position to make even more money tomorrow.
As I get ready for 2012 and the new opportunities to come I will take advantage of the profits, low P/E, and free cash on hand of most US companies. These prices could get better though depending on the situation in Europe. I will probably sell my blue chips industrial stocks that go up on good days in Europe and start buying up solid companies that are dirt cheap with great growth, mostly those on the NASDAQ that no one is paying attention to.
Europe will be a risky and touchy subject for much of 2012. Regardless of whether or not a plan will come in place to take care of the debt. Even if a debt plan is agreed upon and acted on it will have dire consequences for Europe which I believe will lead to a total restructure of the Euro. Although I do not think it will fail in the typical sense. There will likely be plenty of bargains due to fear of failure. Nevertheless, these bargains fears are justified and it will be difficult for me to want any significant exposure to Europe.
What If? is such an important question every investor should be asking all the time. I may not agree with you that we are at the “opportunity of the decade” point (yet), but there are REAL values especially in quality divided stocks right now. Thanks for urging people to THINK!
Hey Ken,
It’s though to predict the market bottom, read impossible. But if you invest in the next months, I’m pretty sure you are making a good deal ;-). I hope people will remember that they invest in companies and not countries!
I am still investing in the market since I have retirement money going in all the time. Yes, the companies are in very good shape with lots of cash. As soon as they have some confidence in the leadership and direction that things will be going, they will be jumping in with both feet. Watch for M&A activity at that time.
I’m not very optimistic, but I’m sticking with my target allocation for now. I need to rebalance because foreign stocks all dropped quite a bit this year. We’ll also continue to add contribution toward 401k next year since it will be a while before we need to draw on it.
Unlike previous bubble-busts, the fundamentals are strong (remember WMT trading at 50 PE during the dotcom boom?). There are incredible values to be found. I think this is a good buying opportunity.
Buy low, sell high. I think we are at historical lows.
I’m as optimistic an investor as you’ll likely find. I’m young, frugal and I spend more money on stocks every month than most people spend on their McMansion mortgages. I think it’s important to put everything in context. You did so with your companies vs. countries comparison and I think time has to be put into context here too. Will Germany still be Germany 10 years from now? Italy? Greece? Are people still going to be waking up, going to work, eating, watching TV, buying products, driving cars, using phones, taking vacations, etc…10 years from now? The world isn’t ending, and the companies I’m investing in are still going to be making and selling products for many years to come.
I’m buying…but on the dips when the euro zone gives everyone a jolt!
I too am optimistic. I think behind all the bad news about countries are small but steady gains in the economy. Pair that with healthy companies, and I really believe that come the mid 2012 we will see more progress.
Historically at times when the economy is struggling our political system comes to a stand still, so hopefully with a return to a strong economy the political fighting will stop.
To me the only outlier that we still need to overcome is our new found sense of entitlement to government programs. We cannot continue to spend and not pay taxes if we want to remain solvent.
I personally am investing every month with my automatic programs, and picking up lower prices on the down days. @DividendMantra I am with you, better to look 10 years down the road then 10 days!