By Shae Smith
Judging by the mainstream media, financial Armageddon was on your doorstep nearly two weeks ago:
‘$100 billion wiped off the market’
‘Another $50 billion lost in early morning trade’
‘Almost $165 billion gone in four days’
Those were the type of headlines you might have seen while eating your Weet-Bix.
You may have wondered if it was time to pack your bags, get the kids’ pop-up tent and teach your family how to live off the land.
I don’t blame you if you did.
When your portfolio has taken a hit, it’s hard to ignore it.
Greg Canavan, editor of Sound Money. Sound Investments said that’s part of the problem with ‘…day to day headlines. When stocks were crashing, you could be forgiven for thinking the global economy was unravelling.’
Then, yesterday morning greeted punters with more terrible headlines:
‘Wall Street plunge on recession fears’
‘Stocks in for bleak day’
‘World put on recession watch’
This is where headlines do investors no favours.
Investing after the credit bubble pops
You see, the global economy is changing. And the market is reflecting that.
Years of money printing have forced companies and governments to deleverage. No longer can they pump paper money into the system to improve the economy – even though they may still try. And companies can’t rely on debt to pump up their earnings.
Greg explained what’s happening in the market to his readers:
‘This is what investing is like in the aftermath of a credit-bubble bust. Economies experience very little growth, slip in and out of recession and then revert to low growth again.’
Mainstream papers bombard you with stomach-churning headlines. But according to Greg, the market is reacting the way it should after the past few years of money expansion.
‘The market is finally beginning to get it.’
As ‘Mr Market’ adjusts to this new normal, investors start to back away.
Traditionally, volume drops significantly during a bear market. Declining volume can lead to liquidity issues. And bear markets can wipe out over-confident investors.
Yet, there’s still money to be made in a bear market.
You just have to adapt your strategy.
Cash is your secret weapon in this market
Greg is aware of the effect money printing has on stocks. His strategy is about ‘focus[ing] on the business, not the price’.
‘In a bear market, cash is king’, says Greg.
Telling his readers ‘The industry has conditioned investors to think cash is useless and you’re doing yourself a disservice by holding it. Apparently your wealth is not working for you.’
Greg agrees that cash is not exactly a high returning asset, ‘…but neither are equities in an environment of falling earnings and expensive prices.’
‘Cash is valuable not for what it will earn you now, but for what it enables you to buy later…’
Holding cash is often seen as the last option when talking about your investments. But, if you’ve got cash on the sidelines, now could be the time to jump in – with caution.
Confident that you can take ‘action’ to prevent your wealth from being lost in this bear market, Greg shared this plan for investing with his readers.
‘My strategy here is to continue scaling into the market and buy during sharp falls or market panics. I’ll continue to identify quality stocks trading well below a conservative estimate of value so you can be ready to buy those companies at an opportune time.’
The financial world may look like it’s falling apart. But according to Greg it’s the chance to ‘…step back and take a look at the big picture.’
‘Only then can you see what is really going on in the world. And only then you can take action to protect your wealth.’
A bear market doesn’t mean buying shares is over. It’s all about waiting for the right opportunities. Click here to see what Greg believes are the best companies right now.
Regards,
Shae Smith.
Assistant Editor, Money Morning
Money Morning Article: Don’t Let Bad News Stop You Investing