On 20 June 2012 we told you it was a great time to buy stocks.
We put our neck on the line by suggesting you look at five beaten-down Aussie blue-chips.
Not everyone appreciated our advice. Some said we were mad telling investors to look at those stocks when the financial world was falling apart.
Now, as those stocks have gained 43.7%, 63.9%, 78.2%, 50.4%, and 38.2% respectively, many folks have changed their mind. They now want to read more ideas on how to take advantage of this crazy market.
So we’ve knocked around a few possibilities with our publisher for the best way to get those ideas to you. We think you’ll like it. Stay tuned for more details in the coming days. Until then…
Here’s a novelty: bad news on the US jobs front last Friday saw the US stock market fall. That’s not how it has often worked in recent years.
Much of the time the market has seen bad news as good news. Why? Because investors have figured out that the worse the news, the more likely the US Federal Reserve will print money, which will be good news for stocks.
But the good news/bad news angle can only get you so far. Ask Japanese investors. They’ve seen more than 20 years of money printing and the market is no higher today than it was in 1986:
That said, the market has surged to trade at a level last seen in 2008. That makes the current level a five-year high. And what was the catalyst for the rally? That’s right, Bank of Japan money printing.
A Surprising Fact About Japanese Stocks
That’s the thing. It’s easy to point to Japan and say money printing doesn’t work. Look at the chart; that’s proof.
However, look at the chart again, especially the past six months. That shows you, regardless of the effectiveness of the policy on the broader economy, the fact is that it can have a positive impact on stock prices.
We’ve seen similar comments about the effectiveness of money printing on the US economy. The unemployment rate is still high, more people than ever are on food stamps, and US public sector debt is at record levels.
It’s all true. We can’t deny it. But the one statistic they forget to quote is the most important one for an investor — the US Dow Jones Industrial Average has gained 120% since the low point in 2009.
That’s almost twice as good as the performance of gold during the same time. The gold price is up 67% since March 2009. And it’s better than silver, which has only gained 102% since then:
Now, we’re sure that you could cherry-pick some other dates and produce a different result…but it would be just that, cherry picking. And if one thing’s for sure, cherry-picking results in hindsight won’t make you a darn dollar as an investor.
Instead, you need to focus on the future and make your best guess about where the stock market is heading next.
Look at the chart of Japan’s Nikkei 225 index again. Since 4 January 1990, there have been 5,718 trading days. How many of those days have been up days. 1,000? 1,500? Try this…
Of 5,718 trading days, 2,842 days have seen the Nikkei 225 close at a higher price compared to the previous day.
(Don’t take our word for it. Go to Yahoo! Finance and download the daily data for the Nikkei 225, calculate the gain or loss for each day, sort them in ascending order and then count the plus days and minus days. You’ll get the same answer that we did.)
In other words, 49.7% of all trading days on the Japanese market since 1990 (23 years) have resulted in stocks going up. That’s despite the overall market falling 66.9% during that time.
Do you see what we’re getting at?
Still the Best Bet for Long Term Wealth Creation
We’re not saying you should ignore high unemployment, record high food stamp usage, or multi-trillion-dollar debt levels. But we are saying that you shouldn’t allow it to interfere with your ultimate goal…
And that is to make money from what still remains the best short- and long-term way to build wealth — the stock market. You can read about some of those ideas here.
Stock market investing has always been an active investors game, and it still is. If you stay active, watch the market and place your bets at the right time, the stock market can reward you handsomely.
Don’t let the ‘down crowd’ scare you away from the potential riches of the stock market.
Cheers,
Kris
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From the Port Phillip Publishing Library
Special Report: TORRENT SIGNAL 3
Daily Reckoning: Can the Stock Market Crash Anymore?
Money Morning: Opportunities in the Australian Energy Landscape
Pursuit of Happiness: Why a PlayStation and Mining Technology Have More In Common Than You Think
Australian Small-Cap Investigator:
How to Make Money From Small-Cap Stocks
