iBooyah.com Investment Matters

 
1.  Look at the percentage of decline rather than actual number. A 400 point drop in the DOW is only 3 percent.  A 96 point decline in the NASDAQ is only 4 percent.  To help put things into perspective, when the market crashed in 1987, the DOW plunged 22.5 percent.  In comparison to today’s decline, we would classify the sell-off as a small correction.

2.  Keep in mind this is the first major sell-off since last May.  This market has been setting new all time highs on a weekly basis since September of 2006. The market would have eventually corrected itself; it was just a matter of time.  The sell-off in the Chinese market was just a catalyst.

3.  Corporate profit is healthy and doing well. We heard Mr. Bernake himself testifying before Congress last week stating the economy was in a good shape. The unemployment rate is low and interest rate is still affordable.  If you look closely at the macroeconomic situation, the fundamentals are still sound. For these reasons, we believed the market should recover from this sell-off in short time.  Allan Greenspan’s comment about the possibility of a world wide recession is simply that, a possibility.  There is always that possibility.  By the way, he is only human and has been known to be wrong.

4.  The Chinese market has been on fire for awhile now.  Remember how the U.S. market was in the late 1990s where people were taking out credit card loans to buy stocks? That was the situation in China.  People were afraid of being left behind so they followed the herd.  The Shanghai Stock Exchange was up something like 50 percent in the last couple of months.  Personally, we are not surprise; the bubble was due to burst.  No market can sustain that level of appreciation without correcting itself. 

 
Instead of hiding out until the market is green again, we are taking this opportunity to shop for stocks that is now on clearance.  For instance, we been eyeing Apple (AAPL) for a long time, but always felt the stock was too high to enter.  Perhaps we will finally get to buy it in the low 80s.  Starbucks (SBUX) is now in the low 30s, we are waiting for it to fall below 30s to buy more.  Coca-Cola (KO) is down 3 percent at $46 per share, this would be a great stock to buy; especially if you believed the economy will slow.