In October 2008, Lehman Brothers declared bankruptcy. World stock markets collapsed.
Warren Buffet on 17 October 2008 wrote an article in the New York Times and headlined the article BUY ! He bought over USD 10 Billion. in stocks while the S & P was at 900 In 8 years his investments have tripled as the S & P is now over 2850.
Since 1987 there have been 10 major corrections in the US markets. Each time those who had the courage like Warren Buffet to buy made money.
Will this time be different ?
I do not think so.
If history is a precedent, my bet is not to panic and buy at these lows if you have the cash. Risk is relatively low .
Earnings yields spreads are positive. What that means is that the risk free return of the US T Bond of 2.85 % is less than the trailing earnings yield of the S & P 500 of 4.1 %.
Notice the blue line. The spread of 1.3 % is positive. If history is a precedent, as long as it remains positive there will not be a recession and market collapse as in 2008.
Under pining the earnings yield spread is the recent massive Trump tax cut which has reduced taxes across the board including the drop in US corporate taxes from 35 % to 21 %.
This will and is boosting earnings to compensate for gradual rises in US interest rates. Couple this with the Trump wholesale elimination of the business killing Obama regulations, the background for world equities is positive.
Expect the recent weakness in world markets to subside and be patient. It could take 2 to 3 months.
We are positioned in solid blue chip companies with low or no debt and with our cash are picking up quality shares to take advantage of the panic. We collect our dividends while we wait.
Invest well and grow your wealth.
Next Friday will be spending the Chinese New Year in Adelaide and back the following week. If you need any assistance please call our customer service desk at 03 2783 0300. You may also email me.
Bill
This is a snowy owl from Northern Canada. They are arctic birds and like the cold.
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