ASX: Still a Speculator’s Delight
‘If the market gives you time to panic, it’s all over.’
So I was told once.
Mr Market settled down in the Tuesday US session. The Dow actually finished up for the day.
The overnight SPI futures contract for the ASX was up too.
Odds on things settling down from here…for a time!
Take that with a grain of salt. I’m not so vain to think I can call the bottom on any market.
But we’re not panicking here at The Daily Reckoning Australia headquarters, either.
Stocks dip. They rally. That’s just what they do.
The front page of today’s Australian has a headline that blasts across the page…
OUR DAY OF RECKONING
Hey, every day is a day of Reckoning for your editor! I get up and try and make sense of the world. That’s all any of us can ever do.
No events from the last week will change that.
Most likely, these rough few sessions will be forgotten in a week or two.
Do you remember the market panics in August 2015 and January 2016?
Of course not! I barely do, and I wrote about them at the time. Stocks have since coasted much higher.
The world keeps spinning.
Today’s paper has lots of red, downward arrows and evocative pictures.
I like to set these kinds of headlines aside and look back after a time.
So often, these emotive pages mark that the down move is just about over.
Point being: When you see headlines like this, your instinct is to go the other way.
I say instinct…that doesn’t necessarily mean acting on anything.
Another way to gauge this is the VIX index…
On Monday, this index saw a massive spike in the US. Check it out!
That was its highest closing point for two and a half years.
A lot of traders were ‘short’ here. Ouch!
The Wall Street Journ al reports that some of the notorious products traders used to go short (‘inverse’) will be liquidated. The massive spike triggers clauses in the fine print.
Investors in one of these short VIX funds will roughly get back US$10 per share. They were worth US$266 last week.
Like I said…ouch.
But hey, that’s their problem. Don’t go in the kitchen if you can’t stand the heat.
The VIX has cooled a little since Monday.
I said then that the action around the VIX probably has more to do with the market selloff than the narrative about rising interest rates.
I could be wrong, of course.
But consider the fact that 10-year US government bond yield bottomed well under 2% in 2016.
It’s been trending higher ever since. Stocks have gone up ever alongside it!
I know…I know…the yield is now approaching 3%.
The mainstream media leaves you with the impression that there’s something magical about the yield going over this figure.
I disagree. As I tried to show you last week, I’ll start to worry if it goes over 5%.
We are a long way from that.
US stocks are showing strong earnings…and have lots of potential upside.
All the value investors will be drooling over this selloff. Finally, they can grab a stock or two at a discount.
There’s been precious chance of that in the last 18 months.
I’ve seen it already with some of the US stocks I keep an eye on.
Part of me actually doesn’t even care about the gyrations in the big indexes.
My main hunting game is finding great little stocks that are ready to shoot higher.
These ones survive or die on their own efforts, mostly.
The market might make them wobble for a time but, like all companies, they are ultimately responsible for their own success.
There’ll still be dozens of opportunities to make money from these types of stocks all year.
I’ve been doing the same thing for years now.
Who cares about these people?
I actually couldn’t care less about the Fed or Janet Yellen’s legacy or what Australian Treasurer Scott Morrison says.
These things are largely irrelevant. Either a company has a growing business with great growth prospects…or it doesn’t.
Opportunities to make money are around all the time. And if the market stays down or weak, learn how to go short!
See this? The Daily Reckoning Australia is raising its tattered flag to regroup its band of speculators in the blast zone of the market dip.
We make money from finding great opportunities, regardless of what the wider market is doing 95% of the time.
Don’t forget it!
Editor, The Daily Reckoning Australia