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Market Turmoil

TSX 12,464Commercial backed paperSub-prime mortgage defaultsInjected liquidityCredit crunch

How was my holiday?… Not bad if someone had asked.

After promising my family I would turn off my Pearl, throw my laptop in the trunk & swear off all electronic devices until early yesterday morning…I knew something was up when I turned my phone back on during the drive home and witnessed 319 unread emails and more voicemails then my answering service could ever tolerate. To say that some friends & colleagues were concerned would be an understatement.

I’ve never been a “Bull” or “Bear” with respect to the market, but I have some confidence in being able to understand the nature of the market, its ebbs, flows & personality. In a situation where money’s at stake fear and emotion will always be the two most influential forces. They tend to push and pull the market in directions wildly without much compassion and those not properly diversified against the amount of risk they can handle will most likely experience the real pain. People fear what they don’t understand and once you’re accustomed to certain returns on paper over a period of time, reality at times can be a sharp contrast to the situation you found yourself in only weeks prior. That’s the one symptom of F&E that shows up most often in the market: a short memory.

The common theme in all the urgency was that everyone wanted advice. Buy…sell…hold, didn’t really matter. Although investing is completely dependant on everyone’s personal situation, needs & tolerance for risk – that didn’t stop fear & emotion from reeking havoc in the financial markets and with people’s portfolios. Reminders of 9/11, 1987…people quoting commentaries from media sources, online blogs and even their advisors all contributed to the escalating worry.

I replied to some emails, returned calls to friends, checked my accounts, noted what limit orders had gone through (setup prior to vacation) and then spent about an hour doing screens, checking my watchlists & reading over the comments of varying “professionals” from the past week.

After holding onto a return of 26% YTD and sitting at just over 20% cash…I haven’t done a single thing since. Except for a few rare opportunities that I took advantage of, the environment today hasn’t changed much since the 500+ drop in the TSX last week. It is my opinion that there’s nothing present today that will suspend the volatility of the market. No quick fix interest rate cut that can curb anxieties and it’s certainly not the end to this appreciating market. The fundamentals in our country at the moment remain favourable and the economy as a whole has little disparity between a wide range of important economic factors. My own simple realization and continued opinion is that valuations of securities were not in sync with the amount of risk present in the market. Bottom line: people got greedy. Just as with the Tech Bubble and all other major corrections prior, the market woke up and realized that the risk/return balance was wildly skewed to one side and it reacted accordingly.

Is there value?Yes
Is the volatility over?Not even close
Have we hit an intermediate bottom?I honestly have no idea

At times like this I focus entirely on quality, forward vision and sticking to what I do best. I recognize favourable opportunities, take important note of fundamentals and if valuations are attractive…I consider my next move. I consult my Value Rules, look over my S.A.’s of stocks on my watchlist and ensure my MoS is adequate for the security I’m considering to purchase.

I’ll continue to wait, watch and make specific entries into positions I feel hold value over the next while. But I certainly feel that we haven’t seen the worst of it. But, if there is exposure to significant risk that the market has yet to realize, the situation may be very different from even what we’ve experienced so far.

Advice to readers: Stick to your style, plan and objectives and invest appropriately. For my own personal situation, some stocks may be at levels that offer incentives greater than those to other investors. Sometimes with so much confusion, focusing on your own situation is a much easier way to deal with a volatile market than to constantly worry about all the additional factors that influence the market.

*For the Boyz…what DID I buy with those limit orders?…SECRET, but some pretty sweet stocks for that early retirement party*

**And if anyone cares….7lb Largemouth & 45″ Lunge were the biggest fish caught by yours truly**

{ 2 comments… add one }
  • moneygardener August 22, 2007, 6:12 pm

    How anti-climactic…

    I don’t care about the damn fish..what stocks did you buy?

    I bought BNS at $47.50 and more YLO.UN at 12.63.

  • Nurse B, 911 August 23, 2007, 7:53 am

    Figured you’d be one of the ones wondering what I was busy doing through all of this…

    I’ll assume you’re interest was strictly the DivG type stocks

    Limit Order’s got me:
    TD($65), CNR($50), MFC($36.50), RY($51), SLF($48) & BNS($48)

    TD & CNR are new additions…the others I already held so I only lowered/adjusted my cost.

    I missed BMO by around $1…not a big deal though.

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