Bottom Fishing, Gloomy Pictures and Lessons to be learned  

Posted by Book Eater

"If anything, the recent market turbulence serves as a timely wake-up call in our last stretch toward millionaire club that early retirement is only the means to an end, and risk management is more important than ever in our ride toward financial independence." - Michael Sivy, CNN Money

Breathe. Remember that knowledge is the key to overcoming fear.

A rough draft presentation I made: Just click the link below :)
Can't think of a catchy title kaya eto :
Gloomy pictures, Lessons to be learned

Basically, the topic is more of timing our entries on the "bottom".

Below is a summary of a few good things I picked up from the net, pasensya kind of busy lang doing other things. For technical charts - please see the ones that other Absolute traders are writing in their sites. This entry is more of strategies:

Michael Sivy's Tips:
1.) Spotting true bargains during this downturn is no layup. Price/earnings ratios based on anticipated results may be misleading, for instance, because growth may not come through as expected this year. So make sure that a stock also looks cheap compared with its peers based on P/Es using 2007 earnings.
2.) Ratios of price to cash flow (the cash per share a company actually generates each year). The reason: Cash figures tend to be less volatile than earnings.

Sivy’s Recommendations for US stocks:
Companies that derive a large percentage of their earnings from outside the U.S. at least 60% of their sales abroad
Almost two-thirds of sales come from overseas, where they are growing up to 20% a year in countries such as Brazil, China and India.
1.) Hewlett-Packard (
2.) 3M (

Recessions: Learn the facts
Today it's the subprime crisis. The 1990-91 recession lasted eight months, and unemployment eventually peaked at 7.8% - not a staggering number but still more than 50% higher than the current rate. Home prices in the top 10 metropolitan areas fell 8.3% during the downturn and its aftermath. Today they're off 5% from their 2006 peak. Recovery in the 1990s was slow: It took until 1996 for housing to start rising again.

The stock market moved faster. It dropped 21% but bottomed out in three months. If we did enter a recession this past December, as many economists think, a replay of 1990-91 would mean further market declines now followed by a rebound later in the year. Not a terrible scenario. Unfortunately, it's not the only possibility.

The 1973-75 recession lasted 16 months, about double the typical one. The Dow Jones industrial average fell 40% from its pre-recession high, or more than triple the decline we've seen since October's top. Unemployment peaked after the recession ended, at 9.1%.
Before you reach for the medicine cabinet, take comfort in some important then-vs.-now differences. The Fed, and the feds, today act earlier in a downturn. The Federal Reserve has cut interest rates 2.25 percentage points since August

Bottom line: A debilitating recession seems unlikely, but that doesn't mean you should do nothing. Instead, set yourself up for the opportunities that will come if the downturn is short - and keep yourself safe should the hard times stick around.


Pres. Arroyo and her economic team last Friday has the view that the downturn will be "short and sharp". If you read most strategies, that's also what they're saying, as well as most historical results saying the bottom could come this April/May and may rebound for the next quarter. All i say is be a picky buyer (if you're a passive investor). These markets create bargains. One thing we know is that the market is depressed right now. And whether it turns up soon or goes a little lower, if we begin dollar-cost averaging now, we'll be getting in on the ground floor prices (very near support levels).

Gloom in the markets means great opportunities, if you've got courage and patience.

The truth is that most of us are fair weather investors. Our tendency to be risk tolerant in good times, and risk averse in bad times. The result is getting into stocks when the market is up, and doing the traditional "panic and sell" when it turns downward.

Perhaps let's do some things different for now. Buy on pullbacks. Don't panic. Perhaps it's a bit counter-intuitive to technical signs. Is it really?

Meanwhile, there are lots of stocks that hit ground zero such as PAX that's surging up and up. When the stock is up 28% for two consecutive days now. Makes me wonder, hmm... is it time to sell? My TP resistance is at 5.40 but I might sell around 5? and play the volatility game (for the short term). Anyway, we're still far from the bottom. 6% downside at least for the PCOMP? hehe. - see my presentation on how i came up with that number.


manlibre mga PAX winners diyan haha.

- Nix

1 takes

hi nix, just found your blog lately and been doing a lot of quiet reading. i find a lot of truth in what you say. i'm no stock market wannabe, i just observe in the sidelines because i'm not allowed to invest directly because of my line of work. but i do write about the market from time to time. invest and not friend just told me that's easy to say when you're not the one losing money. hahaha. jolted me back to reality. oo nga naman. looking forward to reading more from this blog. regards

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