Blogs & Comment

Press the "Don't Panic" button

Today the main Indian exchange, Sensex, has stopped trading after dropping more than 11%and thats after a big drop yesterday. In Hong Kong, the Hang Seng opened down 5.4%. Europe was a nightmare, too. In the States, Nasdaq opened down 5% after a holiday yesterday, and the Dow immediately shaved 300 points. Here in Canadawell, you can read all about it here.
Happy new year.
Its natural that theres a lot of alarmist rhetoric out there at a tough market time like this. But two things to remember: First, the markets will rise again.
When you read headlines like Almost no hope for a recovery in stocksas you will on the homepage of this website this morningmake sure you read the fine print. That no-hoper is from an economist who works for a Japanese research institute, and he is in all likelihood talking about the Japanese markets, which have also been plummeting in the past two days. But when it comes to Japanese stocks, having no hope is more or less a return to the normit does not speak to the worldwide situation, which I suspect is not as gloomy as many in the market seem to think.
Because the second thing to remember in times like these is that the markets are not the economy. There is a lot of froth on many global exchanges, and arguably Canada is no exception. Remember too that corporate earnings for 2008 might end up sharply down because of a U.S. downturn, but this is after several years of huge earnings growth. Something had to give sometime. The only question is, How much?
We are just putting to bed our annual Investing issue (subscribers will start getting their copies on Thursday), and inside youll find our take on 15 top-quality stocks from around the world, available at what we take to be reasonable prices. They are shares in companies that have solid earnings, strong cash flow, good management and reasonable debt levels. If this is the kind of company you want to own, then youll want to read our reportand you might look beyond the current market downturn for buying opportunities.
As I write in the upcoming issue, the important thing now is for investors to keep their wits while all around them are losing theirs. And to look past the headlines.