Showing posts with label Stock market. Show all posts
Showing posts with label Stock market. Show all posts
Tuesday, November 15, 2011
Stock market manipulation by hedge funds
Even though I'm not at all a fan of Jim Cramer I liked this video where he explains some tools available for hedge funds to manipulate stock markets. Efficient market hypothesis anyone?
Monday, September 12, 2011
Are German stocks getting cheap?
Frankfurt blue chip stock index DAX is one of the biggest fallers during the recent financial turmoil. Just look at the 5 year graph of the DAX index (click the chart to enlarge).
DAX has declined more than 25% already this year compared to S&P500 (9%) in the States or FTSE100 (13%) in UK. So the question is whether German stocks are getting cheap? On the following chart P/E ratios (stock price to earnings per share) of all the companies included in the DAX index are presented (click to enlarge).
While European banks are suffering a possible liquidity crisis (hence the low valuation) Commerzbank's stocks are good for gambling. The low valuation of most stocks seem to price in a double dip recession in Europe. We could see a nice rally with cheapest stocks from manufacturing industry once economic data gets more positive. Upside of 30% from current levels would not be anything extraordinary. One of my favourites from these stocks is BMW. Even though Europe and US might be slowing we have a major consumer boom in China and companies with big Chinese exposure might still do well this year and the following year. Hence my sympathy for BMW as well.
We'll see how much downside the DAX index still has and whether we're entering a double dip recession. Those who believe in a slow recovery rather than a recession might just start shopping, me included.
We'll see how much downside the DAX index still has and whether we're entering a double dip recession. Those who believe in a slow recovery rather than a recession might just start shopping, me included.
Monday, August 22, 2011
Panic or what?
In case you haven't seen the picture, here's an insight to stock market movements.
Now take a look at the S&P500 stock index for the last 5 years.
Are we still in denial? Have we gone through panic already? Are we ready to capitulate? The only way you would know is if you felt sick each morning and you are ready to sell with whatever losses. Stock markets usually rise much slower then they fall. If you are a long term investor (2 years or more) then you wouldn't need to worry too much since eventually the markets will bounce back and we can start waiting for euphoria.
The bottom of 2009 came after the financial world as we know it was about to end unless lots of tax payers money was used to bail out some of the biggest banks in the world. Our current fears are driven by uncertainty and possibility that we might be heading for a recession again. The fundamental situation is not as bad than it was two years ago which makes me think that we will see the hopeless despondency phase (the bottom) much higher than in 2009. We might already be in a depression phase.
It is dangerous to catch a falling knife though so I would wait until we have seen some stability and strength in the market before I would start shopping for bargains again. There is nothing rational about market bottoms. Volume levels are also important since that is an indicator of smart money entering (or leaving) the market.
On Friday Ben Bernanke from the Fed is about to deliver a speech on economic conditions. While we probably won't hear QE3 or something similar announced we will get a pretty good picture on how the Fed sees the situation in economy. I think we will see some speculation on the markets before that. If you see markets rising this week then make sure you won't fall to "sell-the-news" reaction. Whatever the news are, we will probably see some selling action assuming there will be a lot of green this week.
Keep your head cool, your emotions in tack and we will see some news pretty soon.
Now take a look at the S&P500 stock index for the last 5 years.
Are we still in denial? Have we gone through panic already? Are we ready to capitulate? The only way you would know is if you felt sick each morning and you are ready to sell with whatever losses. Stock markets usually rise much slower then they fall. If you are a long term investor (2 years or more) then you wouldn't need to worry too much since eventually the markets will bounce back and we can start waiting for euphoria.
The bottom of 2009 came after the financial world as we know it was about to end unless lots of tax payers money was used to bail out some of the biggest banks in the world. Our current fears are driven by uncertainty and possibility that we might be heading for a recession again. The fundamental situation is not as bad than it was two years ago which makes me think that we will see the hopeless despondency phase (the bottom) much higher than in 2009. We might already be in a depression phase.
It is dangerous to catch a falling knife though so I would wait until we have seen some stability and strength in the market before I would start shopping for bargains again. There is nothing rational about market bottoms. Volume levels are also important since that is an indicator of smart money entering (or leaving) the market.
On Friday Ben Bernanke from the Fed is about to deliver a speech on economic conditions. While we probably won't hear QE3 or something similar announced we will get a pretty good picture on how the Fed sees the situation in economy. I think we will see some speculation on the markets before that. If you see markets rising this week then make sure you won't fall to "sell-the-news" reaction. Whatever the news are, we will probably see some selling action assuming there will be a lot of green this week.
Keep your head cool, your emotions in tack and we will see some news pretty soon.
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