Sunday, March 9, 2008

More and More Worries

On Thursday, stocks in the United States tumbled after more shits were discovered from the credit markets pot hole. Coupled with the lackluster retail sales, everyone now is really worried that the economy is nearing recession.

One of the main culprit from the series of fresh jolts to the market is that there was news that this "jumbo" mortgage lender in US called the Thornburg Morgage Inc, was in default after failing to meet its creditor demands for upfront cash. Needless to say, the share price of Thornburg plunged 51.5%!

Second news was that there is a report that showed the number of foreclosures of US mortgage hit a record high in late 2007. That slapped the S&P financial index (equivalent to KLCI in Malaysia) down 3.7% in its sixth straight daily decline.

It is interesting to note the following statement from Frederic Dickson, senior vice president and market strategist at DA Davidson &Co in Lake Oswego, Oregon (not too sure whether actually) - "We are dealing with a market that at this point is still very, very jittery, wondering what's going to come out of the closet next". What does that tell us as a layman investor? The so-called experts can't even determine what is coming next. So, how can we? Every few days you will hear some good news and share prices rebound (go up) but in the next few days, some bad news slapped share prices down again.

Can the market be timed? I would prefer to take a No as the answer. Best strategy is to invest a portion in the market and half as cash. Let me talk more about the strategy in asset allocation for the Hengdai Equity Fund IV ("HDFIV") in the next post.

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