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NEWSLETTER – MARKET UPDATE
November 4th, 2008
“Be fearful when others are greedy, and be greedy when others are fearful. And most
certainly, fear is now widespread, gripping even seasoned investors… But fears regarding
the long-term prosperity of the nation’s many sound companies make no sense. These
businesses will suffer earnings hiccups, as they always have. But most major companies will
be setting new profit records 5, 10 and 20 years from now.” - Warren Buffett, NY Times Oct. 17/08
About Alex
Comment:
What a roller coaster year this has been so far! What started out as a slow down in the U.S. economy
with the U.S. sub prime mortgage meltdown and went from what most observers thought was a U.S.
credit crunch and a housing bubble burst, then spilled out of the U.S. and evolved into a global credit
crisis which is now resulting in what we all knew was coming - a global recession. For your
information, over the last few weeks I have attended many advisor investment forums put on by
many of the fund companies that we invest with to obtain their insights and perspective on where we
have been, where we are and where we are going. What I take away from their presentations, not
only as an advisor, but as an investor as well, is that we have to put our faith in the professionals, the
fund mangers and their analysts, who do the day to day stock picking and trading on our behalf.
Despite the massive downward trend in the market recently, the over-whelming theme that I took
away from all the presentations is that yes, these are uncertain times but with this also comes
unprecedented buying opportunities and these fund managers are taking full advantage of this. They
are seeing companies in their portfolios needlessly being oversold, and as a result the stock prices of
many of these companies are at bottom bargain prices as they don’t currently reflect the true intrinsic
value of these companies. As a result they are seeing tremendous buying opportunities because
when the market does rebound (and yes it will) the upswing is going to be very significant and by
holding on to our positions we will benefit greatly!
Nothing we have not experienced before:
We have either read or heard in the press that “this market sell-off is unprecedented.” I don’t
believe this to be entirely true because while the circumstances of each bear market may be different,
the behavior does not change. Rolling panics do eventually subside and, in time, recovery takes
hold.
Recessions are a normal part of the economy. We have gone through negative markets and
recessions in the past and the fact is we will go through them again in the future. However, markets
cannot go to higher highs without going through corrections like we have and are presently seeing.
Being growth to aggressive-growth investors invested primarily in equity funds the only thing I can
guarantee you based on history is that over a 10 year investment time horizon, we will see negative
performance at least once or twice over this period of time. Having gone through downward market
cycles before, stock markets typically peak before recession begins and bottom before it is over.
During and through the oil crisis from 1973 to 1974 when the markets hit bottom at that time, they
saw a 70% gain afterwards, ¾’s of which happened while the economy was still in a recession. –
(source CI Investments)
Contact Alex:
Bus: (416) 977.4804 ext. 112
Fax: (416) 977.0282
[email protected]
www.hardyfinancialinc.com
Looking forward:
In today’s global markets the bad news for the most part is already being priced into the markets and
as a result stocks are way undervalued (herein lies the opportunity) but this bear market is worse than
the economic conditions would have predicted from earlier this year.
That said, stock markets tend to look through recessions and bottom relatively early during a
recession. As such, another very important point I took away from these presentations was that
investors should NOT be moving out of their equity positions and moving to the sidelines – we have
to stay invested and ride this out. As we are seeing massive swings, both negative and positive, day
to day in the markets it is just too difficult to try and exactly time the market as to when we should
be bailing out and then jumping back in.
cont’d 2
NEWSLETTER – MARKET UPDATE
November 4th 2008
cont’d from page 1
I believe Mark Twain said it best: “October – this is one of the peculiarly dangerous months to speculate in stocks. The others are July,
January, September, April, November, May, March, June, December, August, and February." Trying to time markets is a fool’s game.
The best strategy for long-term investors is to stay invested so that they don’t miss the up tick that has always followed market corrections
in the past. No one can look into the future, but everyone can learn from history.
Don’t Miss the Opportunity:
Investors who have been sitting on the sidelines should not wait for an official announcement that we are in a recession as this announcement normally arrives after the recession has ended. More importantly, if one is waiting for a confirmation that the recession is over
before acting, the investment opportunity tends to be missed as well.
No one can accurately time the market and predict when a market has hit bottom. It can be argued that given the current conditions due to
forced and panicked selling, the market does present a great long term investment opportunity. Investing new money into equities can be
most beneficial in today’s conditions. Let’s not forget the long valued rule of investing – BUY LOW & SELL HIGH! For those currently
invested, this rule is particularly important as we don’t want to sell our positions at a low either. There is no doubt that the current low
markets and valuations of companies that trade on these markets are looking most attractive and investors should not only be holding on to
their equity positions but attempting to take advantage of this new buying opportunity now before it disappears.
Learn how you can achieve greater wealth in the long term by not using your own money and investing it today to
take advantage of the current lower market conditions and the low interest rate environment while at the same time
benefiting from tax deductions outside the RRSP!
Call to arrange your private consultation.
Coming Soon:
Be prepared to take the L.E.A.P.!