Thursday, June 08, 2006

Global Markets: Free Fallin'

From Tom Petty's Free Fallin'...

And Im free, free fallin
Yeah Im free, free fallin
Free fallin, now Im free fallin, now im
Free fallin, now Im free fallin, now im

From Bloomberg: "Stocks in Europe, Asia and emerging markets tumbled on concern higher interest rates worldwide will stifle spending and earnings growth.

Europe's Dow Jones Stoxx 600 Index slid 2.4 percent to 306.65 at 9:41 a.m. in London, with mining and oil stocks leading a drop in all of the measure's 18 industry groups. Shares of BHP Billiton, the world's biggest mining company, and BP Plc, Europe's biggest oil company, both retreated.

Asian shares were headed for the biggest loss in two years. The Morgan Stanley Capital International Asia Pacific Index dropped 3.3 percent to 119.59, the most since May 10, 2004.

U.S. stock-index futures also slumped, and an MSCI measure for global emerging markets fell for a fourth day, wiping out this year's gains."

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6 comments:

  1. Anonymous10:13 PM

    Dear Mr. Te,

    Is this downtrend for the long term? Should we, as Marc Faber said, take a holiday, and wait for Market Cycles to recover, or cut our losses and start over? Will the growing trade deficit in the US continue to create reactionary measures for interest rate increase? Technical wise, when do you go bargain hunting?

    And, as a native of Mindanao, i have been wanting to ask you: Does being on the trading floor give you unequal advantage over those trading from online brokerages and outlets? Not counting that others do insider trading, does news travel faster? Or are you dogged by misinformation campaigns left and right? probability-wise, are the odds of success the nearer you are to the center?

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  2. benson_te7:24 PM

    -Time reference is relative, it depends on one's definition. Long term for some is one year for others long term is equivalent to getting caught buying on the high side when the market goes down.
    -Cycles are distinct for each markets/assets. For instance, the US market cycles are different from Japan's or of Asias'.
    -There are opposing views on the trade deficit...I'm on those who says that it matters.
    -What particular information should one value from the trading floor?

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  3. Anonymous10:53 PM

    Dear Mr. Te,

    There is an old saying that I believe everyone adheres to; "buy on rumour, sell on fact". I noticed that my online brokerage usually is able to provide insight on company's finances at certain times far ahead of the news. Result: usually, those stocks go up, and then, a few days later, good news about that company is reported in the media, and the stock TUMBLES instead. I'm looking at the system's dynamics here. Is there a shorter time lag to company information on the trading floor than there is to their corresponding provincial outlets? Is there a time lag between Actual disclosures of financial results, actual reporting in the news, and actual publishing in the PSE website? Officially, that is, Not taking into account the insider trading going on.

    If there is such a time lag, and inefficient information is being received, would having 3 or more sources of information from brokerages provide more good insight, and thus reducing any possible biased information that might occur from any one brokerage? I'm working also on the premise that we are working on "bounded rationality" and each brokerage can only see the opportunities on their side of the fence, aside from possible distortions from biased information. So, how would you discern the probabilty of added success from getting more brokers, or like say, having a yahoogroups between other investors, who have different brokers? Is the combined total information bigger and better than the respective parts?

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  4. benson_te8:19 AM

    Warren Buffett's mentor Ben Graham once said "In the short run, the market is a voting machine. In the long run, it's a weighing machine." What you are referring to are mostly short term "noises" (not my cup of tea-I dont drink coffee). As an example you may read my last outlook about PERC.

    Brokers are wont to encourage you to trade frequently, hence deluge you with a surfeit of info-usually on the "micro" fundamental aspect. Since this is their source of revenue,then it is natural for them to do so. Yet, most investors fail to understand that broker interest is in HUGE conflict with the goals of an investor. An investor should be looking instead at absolute returns.

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  5. Anonymous1:59 PM

    Mr. Te,

    Thank you very much for those words of assurance. Its just so hard to stay as a value investor, especially during these trying times when even, as what I perceive are value stocks, going even lower. Which comes to my point; In your experience on the Philippine stock market, what constitutes a value stock now? At what P/E ratio benchmark, given good cash flow, should a investor count on (would 10 or below be a safe bet? Or is P/E ratio dependent on the industy its in?)? This is assuming you can wait 2 years for Market Cycles to recover and aim for an annual return of 30%. These are tips i got before, which may have been good advice for the past 9 years, but of which I am unsure will hold true in the future. I am not even sure why a low P/E ratio should make the stocks increase in value higher than the rate of inflation y-o-y( I think Paul Samuelson said that).

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  6. benson_te5:28 PM

    Value investors are unlikely to be swayed by ticker movements. Let me quote again Ben Graham, "Price fluctuations have only one significant meaning for the true
    investor. They provide him with an opportunity to buy wisely when
    prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market."
    and pays attention to ... the operating results of his companies.

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