Tuesday, August 2, 2011
Today, the market was in a free fall, with the DJIA down over 265 points by the time the day ended. Some investors want to pull their hair out after such a day. I don't have any hair. Does that put me at an advantage? The debt deal got signed by Obama and the market absolutely tanked. What does all this mean?
I recently invested fresh capital twice, by adding to my position with Telefonica and initiating a new position with ConocoPhillps. If I knew the market was going to drop like this, would I have waited and deployed capital today? Absolutely. But I can't tell the future, and my crystal ball is always cloudy. So, I purchase equities when I feel there is value in the price. I felt there was value in both my purchases. But, with the DOW less than 12,000 and the S&P currently just above 1,250, there is an opportunity here.
There are quite a few blue chips on sale right now. Pepsi, Coca-Cola and Johnson & Johnson are just a few names that are trading at levels much less than just one month ago. Pepsi, for instance, is down almost 10% over the last 30 days. There is an opportunity here.
Are you taking advantage of this weakness? If I had more capital I would have invested today. But, I rarely dip into my emergency/checking account cash as I always like to have liquid cash on hand. I expect to receive my commission check this Thursday, and with that will probably be making an immediate purchase.
Are you waiting for a further drop? I'm actually surprised the market dropped as far as it did today. I was expecting a flat market or slight uptick after the debt deal passed. The debt ceiling impasse provided uncertainty, and the markets reacted negatively over the last week. With the passing of the debt deal, there are further uncertainties to keep things uneasy. The economy is still showing extreme weakness, and is stalling. The housing market is teetering. There appears to be very little growth in the job market, and because consumers are unsure about their jobs they are not spending money. It creates a very nasty cycle. One positive note is that the U.S. is going to keep its AAA credit rating for the time being. That's good news.
I expect to receive fresh capital later this week and I'll further assess the situation. I do think this is an opportunity for long-term value investors to shop their favorite names at a discount. If I had more money in my brokerage account I would be snapping up some blue chips while they are on sale.
Do you smell an opportunity?
Thanks for reading.