Morning Report Friday 9 January 2015
The Dow rallies 500 points in 2 days, are we wrong?
This morning, the Bloomberg headlines are all positive and it feels like equities are back in a rampant bull market. It’s important at times like this, when human emotions can work very much against investors, to stand back and consider if the bigger picture has changed. I like to revert back to a famous comment by Warren Buffett when positions feel a little uncomfortable:
• “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” – Warren Buffett.
My view remains that the US Indices are in the process of “topping out” and will correct 10-15% in coming months (see chart 1 & 2), not a reason to sell the house and go short, BUT a good reason to have decent cash holdings with the goal of buying quality stocks at lower prices. Next week, when we are all back 100% in the swing of things, and Market Matters have moved into their new offices in the MLC Centre (Sydney), I will return to looking at specific stocks / sectors I am looking to buy and at what levels. In stock picking for 2015, two unfolding factors that will receive close scrutiny are, do consumers spend some of the money from lower fuel costs, or continue to pay down debt, and how will investors react to rising interest rates in the US?
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