Now Is REALLY The Time To Panic

Terrapini is right. If, as my old guru Bob Beckman used to say, "a bear market climbs a wall of worry", there is plenty more worry to be scaled.

The Himalayan problems of hedge funds unloading good stuff to pay for bad, of Credit Default Swaps and more country collapses after Iceland, of insurers with toxic assets in their vaults, and of the barely-begun housing slump in Britain, overhang all these momentary "dying cat leap" rallies. Deleverage and disinflation will take years, not months, and be agony. This is not, repeat not, just another cyclical recession. We are heading into a once-in-a-century perfect storm.

There may be hope and relief rallies. They may be few, and feeble, or worth riding. But to roller-skate in a buffalo herd is no game for the typical Fool.

Why not ignore the whipsawing and go back to basics?

You're probably an older person with some cash to dispose of. You want a reliable income, not hot tips and quick gains you can boast about in the pub.

Inflation is set to drop fast again, so you don't need to bother too much about that stealthy eroder of your capital. But after-tax returns in the fixed-rate savings market-- whatever TMF says in its puffs-- are lousy, worse than negative for basic rate taxpayers.

Therefore, once you've parked enough for a rainy day in accessible places, look at the alternatives to the Nationwide for your nest egg. Gilts? Safe but even worse interest. Index-linked NS certs? Ditto.

Gold? No income stream, and not too bright considering this is supposed to be 1929 Mark II.

Corporate bonds? Some good yields, and should lead any sustainable rally on the markets, but too many have gone from investment grade to junk on the quiet-- prospects for their issuers are deteriorating so fast, and banking covenants may sink bonds if renegotiating loans remains so hard.

Which brings us back to... equities.

Value is out there. Big, dull, defensive companies furnishing the goods and services people can least go without, even if all luxury has to be forgone.

Some have sound balance sheets, no debt, even net cash. Some put shareholders over directors' self-aggrandisement and pay steadily rising dividends instead of borrowing and bidding. A very, very few, match these tests and yield more than the market average. And that means 4% after tax or more, when retail price deflation may be coming.

Hunt those ones down, hold them tight and take no notice of how the FTSE gyrates. You are not in this to "beat the market" but to create a well-insulated, sustainable income flow. It may even rise a little, but no need to demand that. This is about paying your way through the slump.

Do your own research. Buy online (never cheaper to deal than now) and shun "professional" managers with their sales gimmicks, personality cults and ludicrous fees.

Be wary of the tracker funds TMF keeps pushing. They will always slightly lag a market that is currently full of duds anyway, and they are often grossly overpriced for what they do-- 1.5% yearly, for example, on one friendly society's ten-year savings plan.

A tracker is a bet on the whole market recovering, which is far from obvious. Look at Japan since 1989; nowhere is it written in stone that a post-industrial society has to function on the basis of equity investment. The FTSE 100 may never see 7,000, or not soon enough for you, mate.

Just as people are learning that houses are homes, not gambling chips, so most investors should be seeking long-term value and ruthlessly discarding what does not make these desiderata.

That's what Warren Buffett started doing in the mid-1950s. You may not have as long as he did, but the attitude is the same. Buy right, sit tight, review your holdings regularly. If they are giving you the dividends you need to get on with your life, safely, leave them be.

Hoorah! The Global credit crisis is over!
Whoopee!
Maybe now we can stop all the depressing dwelling over things that are out of our control.

I agree with last chip. All assets are devaluing. Savings will also be davalued but by less. Simple message results. Spend your money now rather than wait. Exactly what the politicians want since in theory it would kickstart the economy. It didn't work in Japan in the 90s though and my bet is that it won't work here either.

After the 1929 crash it took until around 1954 for the DJ to get back to pre 1929 levels and that was a walk in the park compared to this one. Sheople holding stocks will get burnt. They say cash is king in a deflationery environment. I'd agree if it were n't for the £ droping off a cliff and a hyperinflationary holocaust approaching!

Interesting you slate hedge funds in one section and then talk about MAN as a general stock in the next section (whereas MAN is the largest hedge fund in the world and something for the UK to be proud of - well I hope). Is this just coincidental or poor journalism or are you trying to have a dig at MAN?

By the way, you should note that MAN's main fund has made a staggering 16% this month and about 26% over the last 12 months. Admittedly I have not tried to redeem anything from it but am very happy with my investments with the company.

Disclosure: also a very small share-holder in MAN - mainly because of the above. Shareholding is something around 5% of the fund investments.

Is it just me or has everyone missed the point of this article? That there is plenty more time to buy and plenty more bad news to come, so don't buy.

I'm not sure the irony comes across well.

Hi All,
The bear market is not over. But I agree with the article writer, it is time to buy for the long-term, also this bear market rally is long overdue which should last until say Dec/Jan, then it will be few more months of pains before bear market finally ends. Anyway these are my predictions only, and bear market could be over or last till 2015(those very pessimistic ones) but everyone can agree the bear market will one day and a bull market will start, hence I like to buy on dips during bear market, when fear is highest. Some of my recent addings in OCtober are already showing 20%+ gain, but again not short-term investing so obviously will keep them 2-3yrs min.

isn't the whole idea of fool to be lazy ie foolish rather than smart ('hunt those ones down,' etc etc) And doesn't your tracking ISA automatically update which the 100 stocks your tracker tracks are?

I quote word for word from the press earlier this week:

"In October 1982, Japan's main stock market index, the Nikkei 225, was trading at 7,160. Earlier this week, it dropped back to that level. Yes, after 26 years of extraordinary industrial and technological development, Japanese shares are no further forward than when the compact disc was introduced.
I mention this as an antidote to those who keep telling me that because share prices have dropped sharply in recent days they must be cheap. These are the same people who said that British equities represented "remarkable value" when the FTSE 100 fell back through 6,000, then 5,000 and finally 4,000.
Just before the Great Crash of 1929, London's All Share Index touched 39.80, having jumped by 73pc in eight years. After the bust, however, the All Share did not go above, and stay above, its 1929 peak until 1953. A full recovery took 24 years. And before you say, "that's because of World War Two," let me point out that the index crept above 39.80 in 1944, reaching 41.41, but slid to 35.15 during the coronation year of 1952"

I think Bruce Jackson was amongst those seeing "remarkable value" when the FTSE was at 6000, 5000 & now 4000. Will he still be saying the same if and when the market drops to 3000?

Whilst "past performance is not a guide to future performance and may not be repeated" we should take note of the above comments about Japan since 1982 and London's performance from 1929 to 1953.

My own opinion at present is to steer well clear of the stock market until we get a clearer picture.

"Caveat Emptor" has never been more applicable.

I remember a similar mail at the bottom of the dot com fall. I followed the advice and more by luck than
any thing else I sold when the market was around 6,500. I'm going to give it another shot this time around

Terrapini is right. If, as my old guru Bob Beckman used to say, "a bear market climbs a wall of worry", there is plenty more worry to be scaled.

The Himalayan problems of hedge funds unloading good stuff to pay for bad, of Credit Default Swaps and more country collapses after Iceland, of insurers with toxic assets in their vaults, and of the barely-begun housing slump in Britain, overhang all these momentary "dying cat leap" rallies. Deleverage and disinflation will take years, not months, and be agony. This is not, repeat not, just another cyclical recession. We are heading into a once-in-a-century perfect storm.

There may be hope and relief rallies. They may be few, and feeble, or worth riding. But to roller-skate in a buffalo herd is no game for the typical Fool.

Why not ignore the whipsawing and go back to basics?

You're probably an older person with some cash to dispose of. You want a reliable income, not hot tips and quick gains you can boast about in the pub.

Inflation is set to drop fast again, so you don't need to bother too much about that stealthy eroder of your capital. But after-tax returns in the fixed-rate savings market-- whatever TMF says in its puffs-- are lousy, worse than negative for basic rate taxpayers.

Therefore, once you've parked enough for a rainy day in accessible places, look at the alternatives to the Nationwide for your nest egg. Gilts? Safe but even worse interest. Index-linked NS certs? Ditto.

Gold? No income stream, and not too bright considering this is supposed to be 1929 Mark II.

Corporate bonds? Some good yields, and should lead any sustainable rally on the markets, but too many have gone from investment grade to junk on the quiet-- prospects for their issuers are deteriorating so fast, and banking covenants may sink bonds if renegotiating loans remains so hard.

Which brings us back to... equities.

Value is out there. Big, dull, defensive companies furnishing the goods and services people can least go without, even if all luxury has to be forgone.

Some have sound balance sheets, no debt, even net cash. Some put shareholders over directors' self-aggrandisement and pay steadily rising dividends instead of borrowing and bidding. A very, very few, match these tests and yield more than the market average. And that means 4% after tax or more, when retail price deflation may be coming.

Hunt those ones down, hold them tight and take no notice of how the FTSE gyrates. You are not in this to "beat the market" but to create a well-insulated, sustainable income flow. It may even rise a little, but no need to demand that. This is about paying your way through the slump.

Do your own research. Buy online (never cheaper to deal than now) and shun "professional" managers with their sales gimmicks, personality cults and ludicrous fees.

Be wary of the tracker funds TMF keeps pushing. They will always slightly lag a market that is currently full of duds anyway, and they are often grossly overpriced for what they do-- 1.5% yearly, for example, on one friendly society's ten-year savings plan.

A tracker is a bet on the whole market recovering, which is far from obvious. Look at Japan since 1989; nowhere is it written in stone that a post-industrial society has to function on the basis of equity investment. The FTSE 100 may never see 7,000, or not soon enough for you, mate.

Just as people are learning that houses are homes, not gambling chips, so most investors should be seeking long-term value and ruthlessly discarding what does not make these desiderata.

That's what Warren Buffett started doing in the mid-1950s. You may not have as long as he did, but the attitude is the same. Buy right, sit tight, review your holdings regularly. If they are giving you the dividends you need to get on with your life, safely, leave them be.

Hoorah! The Global credit crisis is over!
Whoopee!
Maybe now we can stop all the depressing dwelling over things that are out of our control.

I agree with last chip. All assets are devaluing. Savings will also be davalued but by less. Simple message results. Spend your money now rather than wait. Exactly what the politicians want since in theory it would kickstart the economy. It didn't work in Japan in the 90s though and my bet is that it won't work here either.

After the 1929 crash it took until around 1954 for the DJ to get back to pre 1929 levels and that was a walk in the park compared to this one. Sheople holding stocks will get burnt. They say cash is king in a deflationery environment. I'd agree if it were n't for the £ droping off a cliff and a hyperinflationary holocaust approaching!

Interesting you slate hedge funds in one section and then talk about MAN as a general stock in the next section (whereas MAN is the largest hedge fund in the world and something for the UK to be proud of - well I hope). Is this just coincidental or poor journalism or are you trying to have a dig at MAN?

By the way, you should note that MAN's main fund has made a staggering 16% this month and about 26% over the last 12 months. Admittedly I have not tried to redeem anything from it but am very happy with my investments with the company.

Disclosure: also a very small share-holder in MAN - mainly because of the above. Shareholding is something around 5% of the fund investments.

Is it just me or has everyone missed the point of this article? That there is plenty more time to buy and plenty more bad news to come, so don't buy.

I'm not sure the irony comes across well.

Hi All,
The bear market is not over. But I agree with the article writer, it is time to buy for the long-term, also this bear market rally is long overdue which should last until say Dec/Jan, then it will be few more months of pains before bear market finally ends. Anyway these are my predictions only, and bear market could be over or last till 2015(those very pessimistic ones) but everyone can agree the bear market will one day and a bull market will start, hence I like to buy on dips during bear market, when fear is highest. Some of my recent addings in OCtober are already showing 20%+ gain, but again not short-term investing so obviously will keep them 2-3yrs min.

isn't the whole idea of fool to be lazy ie foolish rather than smart ('hunt those ones down,' etc etc) And doesn't your tracking ISA automatically update which the 100 stocks your tracker tracks are?

I quote word for word from the press earlier this week:

"In October 1982, Japan's main stock market index, the Nikkei 225, was trading at 7,160. Earlier this week, it dropped back to that level. Yes, after 26 years of extraordinary industrial and technological development, Japanese shares are no further forward than when the compact disc was introduced.
I mention this as an antidote to those who keep telling me that because share prices have dropped sharply in recent days they must be cheap. These are the same people who said that British equities represented "remarkable value" when the FTSE 100 fell back through 6,000, then 5,000 and finally 4,000.
Just before the Great Crash of 1929, London's All Share Index touched 39.80, having jumped by 73pc in eight years. After the bust, however, the All Share did not go above, and stay above, its 1929 peak until 1953. A full recovery took 24 years. And before you say, "that's because of World War Two," let me point out that the index crept above 39.80 in 1944, reaching 41.41, but slid to 35.15 during the coronation year of 1952"

I think Bruce Jackson was amongst those seeing "remarkable value" when the FTSE was at 6000, 5000 & now 4000. Will he still be saying the same if and when the market drops to 3000?

Whilst "past performance is not a guide to future performance and may not be repeated" we should take note of the above comments about Japan since 1982 and London's performance from 1929 to 1953.

My own opinion at present is to steer well clear of the stock market until we get a clearer picture.

"Caveat Emptor" has never been more applicable.

I remember a similar mail at the bottom of the dot com fall. I followed the advice and more by luck than
any thing else I sold when the market was around 6,500. I'm going to give it another shot this time around