Market Turmoil

Unfortunately, anyone who owns equities right now is affected by the current market turmoil.  I am no exception and I expect that my net worth statement this month will take a big hit. 

Why is the market tanking?

To put it simply, it's because of uncertainty.  With sub prime mortgage defaults on the rise, those financial institutions exposed to that particular lender market will take a big financial hit.  People are uncertain how far into the economy this will reach.  Uncertainty = panic selling.  For a more detailed explanation, Globe Investor has a great primer on the credit crunch

So what do you do in times like this?

Long term investors should expect volatility like this in the market from time to time.  Actually, long term investors should get excited when markets dip because of the potential buying opportunities.  Good companies are currently being sold off due to panic selling.  Financial stocks are getting pummeled because of sub prime exposure.  But if you're looking 10 to 20 years down the road, this whole sell off will be a little blip on the map.  Stay the course.

Although I am invested deeply into the market, I do have a bit of cash on the sidelines waiting to be deployed.  I'm not the type to try to pick the bottom, but I aim to buy when the market starts to turn around.

Which stocks are attractive?

Personally, I think that the Canadian big 5 banks are over sold.  Yes, they may go down further because of their sub prime exposure, but in my opinion, I expect that they will bounce back to form in no time.  Banks that I'm watching, RY-t, BNS-t, TD-t, CM-t, BMO-t, NA-t along with MFC-t (insurance).

Below is a 2 year chart of the Canadian financials ETF: XFN-t – just another dip?

 What are your thoughts on the market correction?

Disclosure:  I own some of the stocks mentioned in this post. 

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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stock investing blogger
13 years ago

As per me, the market turmoil is here to stay for some more days. At such situation from stock investing point of view it is really a great buy opportunity looking from at least 4 to 5 years perceptive, but from stock trading point of view, i will use every rise in my selected stock pick to sell.

August 2007 Net Worth Update (+0.11%) | Million Dollar Journey
13 years ago

[…] going as smoothly as planned.  First I've had a ton of unexpected expenses followed by a market correction which started in late July.  The market correction has affected my August 2007 net worth […]

13 years ago

I describe the process that I use to value stocks in a couple posts on my blog (sorry for the plug)

RY looks like good value below $52.

13 years ago

moneygardner, what price do you think is good buy price for RY?

13 years ago

In my value analysis of the banks I follow BNS is the cheapest by far. My order goes BNS, RY, BMO, then TD.

So far during this downturn I have initiated a position in BNS, and today I doubled my stake in Yellow Pages.
13 years ago

I think trying to time the exact bottom is a nerve-racking experience. I heard a lot of “don’t try to catch a falling knife” comments from other brokers in my office. It was something else today, as the TSX was off almost 600 points by lunchtime but clawed back 410 of those point over the afternoon. So if it’s all uphill from here (who knows) then the exact bottom was right when I was ordering lunch today… :)

I can tell you the analyst calls from the streets and overseas are predicting more fear based selling, coupled with programmed-trading triggers – although fundamentals are still firm. Personally, I’m waiting until we lose the volatility before buying – I don’t mind missing 2% to 3% of the first part of the next uptrend – long run it doesn’t make much difference. I think it is quite possible for more losses next week – so, to re-iterate, I’m having all my clients hold off until we have some stability and a clear signal we are through the madness.

I would point out that the yield on Yellow Pages is over 8.5%… do your own due diligence however. But personally, that’s tops on my list.

13 years ago

Certainly capitulation today. This is when you buy. I sold some stocks that were only down a bit to put the money in stocks that were down a lot (for no reason). I invest primarily in the precious metals stocks, so amplify the general market volatility by a factor of 2 at least.
I’m not really concerned though.

Q Cash
13 years ago

Time to buy.

I have been sitting on a little cash that I wanted to purchase some more dividend producing and income generating stocks and funds.

Today is the day. My intention is to spread it around the banks and a few income trusts.

We will see how it pans out.


Average Joe
13 years ago

I basically use 3 methods to determine a model price: average high dividend yield, Graham number, and a discounted present value calculation.

I had BMO, RY and NA selling at a discount. I had BNS and TD still too expensive. However, with today’s current drop, BNS is just now coming into buy range as well.

Feel free to drop by to see my methodology and my model prices. (Sorry for the plug)