Thursday 8 November 2012

Should u panic after a 300 points drop in US post election?

Dear Friends,

Ouch! a 300 point drop? That is one big drop after the election. Guess Wall Street certainly hates Obama, ha. But one thing for sure, the people still likes him. Of course, the major reason that CNBC gives is FISCAL CLIFF. Well, I guess 2moro papers and media will start to discuss this topic again and again just like the Euro crisis episode. This is the new IN-THING of Wallstreet.

The thing is I know some friends might panic amid the drop in Wallstreet. If you have stocks now, that is the last thing you want to do - Sell into a panic.

In fact mid term wise, I think this is a good chance to start locating some value stocks that did well for their earnings.

Why do I think so? Because Fiscal Cliff has no direct & immediate impact on the earnings of companies. Some of you may argue about decrease consumer spending which will lead to lower bottomline for earnings. Yes, but in the event it happens, companies will also lower their forecast or guidance for them to hit their sales targets.

And this isn't the first time that a country raise taxes. Not in America. Bill Clinton raise taxes too in his campaign. Did it cause a sudden collapse in Great America? No, he carry on to lead one of the best thriving economy in American history. One that has no deficit.

What really drives a stock price is earnings, the core fundamental of capitalism. Fiscal cliff is a drama played out by two political parties. I seriously do not think they will jeopadise US economy by not compromising. Maybe disagreement, but in the end, everyone compromise for the better America, wouldn't they?

A good chance to accumulate good earnings stocks 2-3 months down the road? That is still what I think... by the way, accumulation means buying a little gradually up to elaborate. Bank of America has dropped to $9.38 now since I said it reach a double top a couple of days back! Isn't it a better time to buy if it drops to $9?

Mr Warren Buffett thinks financial sector will be on the way up for years to come when economy becomes better, shouldn't we celebrate this drop and get on the boat like him?


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