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Sharemarket Boom Times Are Back...
Saturday 17th March 2012
Dear Fellow Share Market Investor,
The ASX may be stuttering, but we Fools are not deterred. Stay firm. Take control. Make money for you, not them. Don't you be the muppet.
U.S. markets continue to rally, the S&P 500 closing Thursday above 1,400 for the first time in almost 4 four years.
According to Bloomberg, the benchmark gauge is on pace for the best first quarter since 1998. The boom is back...in America at least.
Here in Australia, Chris Mayne of Credit Suisse said in the Australian Financial Review, the ASX is the fourth worst performing market.
Seems we’ll have to step up our War on Pessimism. On the bright side, the only way from here for Australian investors should be up...
Who's the muppet?
“Today is my last day at Goldman Sachs. After almost 12 years at the firm – first as a summer intern while at Stanford, then in New York for 10 years, and now in London – I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say the environment now is as toxic and destructive as I have ever seen it.”
The above quote comes from ex-senior Goldman Sachs executive Greg Smith, who decided to share something of an exit interview with the rest of the world, via a New York Times opinion article.
Customers are “muppets” (with apologies to Kermit and crew) and Goldman Sachs apparently only wants to make money…
We’re mostly bemused by why this is a surprise to anyone. These guys are investment bankers. They are born to make money…for themselves.
The movie “Wall Street” and the stereotypical trader, Gordon Gekko, were conceived in the mid-1980s, and hit our screens just after the 1987 stockmarket crash.
If we can paraphrase Mr Gecko: “Greed, for want of another word is what these guys do”.
It shouldn’t be the case. It’s why we’re passionate about the Australian Investor Revolution. No-one cares more about your financial future than you do. There’s never been a better time to take control of your financial future.
And by that, we’re talking about making your own investing decisions, not letting some highly conflicted financial salesperson shoehorn you into some high-charging, index-hugging, under-performing fund. Like investment bankers, many financial salespeople are born to make money…for themselves.
Don’t be fooled, dear Fools. Don't be the muppet.
We come from the world of DIY Sharemarket Investing. A world where we control our money. Try it one day. It’s liberating.
Speaking of DIY Investing, we’re hard at work putting the finishing touches to our April issue of Motley Fool Share Advisor. Once again, Investment Analyst Dean Morel has surprised even us with his top ASX pick for new money. All will be revealed this coming Thursday.
One thing you won’t find Dean or any of us recommending is gold.
We’ve had some spirited correspondence in defence of gold, given our recent comments about the yellow, shiny stuff. We love opinions and we love diversity. The Motley Fool encourages different thinking.
We just can’t come around to the way of thinking of the gold bulls. Yes, gold has risen sharply over the last decade, and we didn’t see it coming. Guilty as charged. But more importantly, gold is high at the moment because fear and uncertainty are high.
And that is exactly the time to be looking for bargains in the market!
You might have heard of an older gentleman who lives in Nebraska in the mid-western US and who has made a couple of dollars by buying undervalued shares (and whole companies). His name – none other than the world’s third richest person, Warren Buffett.
Buffett doesn’t worry about the quasi-fear index that is gold. In fact, he’s railed against those who would buy it.
Buffett’s alternative: “be fearful when others are greedy and be greedy when others are fearful”.
Arguing about whether gold might go up or down another $100 is an investing sideshow. For the rest of us, life goes on...
The US markets have already recovered. The Dow Jones Industrial Average is now very close to all-time highs on price alone, and has surpassed that level when dividends are included – underscoring the amazing power of dividends.
Our market is still well off its highs which, despite the headlines, is wonderful news if you’re still in the market for shares – we all have an opportunity to go bargain hunting.
Not in Myer portfolio…
One place where bargains have been easier to find lately is at your local Myer (ASX: MYR) store, as the company tries desperately to grow sales. The newly re-listed retailer, which was eased back onto the market in 2009 loaded up with $1 billion in debt, has struggled ever since, and the latest results were no different.
As Fool contributor Mike King noted this week, the company finds itself in something of a no-mans-land, neither the cheapest nor replete with exclusive, aspirational brands. The result, which should have surprised no-one, was a first half profit decline of over 17%.
There’s a reason ‘mystore’ won’t be in ‘myportfolio’ any time soon.
Lest we end on a negative note, we think Myer’s problems are company - and perhaps industry-specific.
Grow, grow grow your portfolio, gently down the years...
Many Australian listed companies have either continued growing profits throughout the downturn, or have been in cyclical profit declines that have either ended or are coming to a close.
Warren Buffett is fond of reminding us that the Dow Jones was 240 points when he was born and 40 points some three years later. When it closed on Thursday night after decades including wars, recessions, high inflation and huge interest rates, the Dow was at 13,252 – not including the avalanche of cash that had wound its way to shareholders in 80 years in between.
We don’t know what will happen in the short-term (and make no mistake, neither does anyone else!), but we have a pretty fair idea what the long term looks like.
Mark Twain was quoted as saying ‘history does not repeat itself, but it does rhyme’ – it’s hard to disagree.
Ignore the doomsayers, Fools – the future belongs to the optimists!
Until next time, we wish you happy and profitable investing.
Scott Phillips
Motley Fool Australia
The Motley Fool's Top ASX Pick For New Money
On Thursday, Dean Morel will exclusively reveal his latest top ASX recommendation for new money to Motley Fool Share Advisor members. If you’d like to try Share Advisor, The Motley Fool's premium subscription-only stock picking service, click here now.
Plus, just published, get Shares 2012, 10 more stock picks, absolutely free, but only when you subscribe to Share Advisor.
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Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. All figures are accurate as of 16 March 2012.
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