Stock market shock: Bank shares go down as well as up

Ouch. Consumer confidence slid a whopping 7% in May, according to a survey conducted by the Melbourne Institute and Westpac.

This follows a slide of 5% the previous month… and 2% the month before that.

As The Australian Financial Review reports, the new numbers show “pessimists outnumbered optimists”.

In other words, many Australians are narrowly focused on the usual suspects… The budget…. The deficit… The politicians.

The RBA rate cut and the plunging Australian dollar haven’t made them feel any richer, just more uncertain. And Ford’s decision to cut 1200 jobs and to end local manufacturing by 2016 isn’t going to collectively make us feel any better…let alone the poor people soon to lose their jobs.

You already see the jitters showing up in some retailers’ results. On Monday, Myer (ASX: MYR) announced anaemic sales growth of just half of one percent in its most recent quarter.

Meanwhile Wesfarmers (ASX: WES) shares fell below $43 last week as the company issued a dire profit warning for its struggling Target chain.

But such is retail. And let’s not be short-sighted. It’s not as if the ASX is short of better opportunities just now…especially today.

Banking Shock: Blindly chasing yield ends in tears…again.

The S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) is having one of its periodic wobbles today.

Seems the rest of market has just cottoned on to the fact the mining boom is over, and that the Aussie banks are trading at unsustainably high valuations.

Banks dumped

Source: The Age, Thursday May 23, 2013

Welcome to the game. Here at The Motley Fool, we’ve been a little ahead of you, and the game. Yield is good. But blindly chasing yield can and will end in tears. It’s just a matter of when.

How quickly things can change.

Yesterday the Dow Jones and S&P 500 hit record highs, again.

Yesterday, Goldman Sachs said the U.S. stock-market rally may last at least another 2 1/2 years, sending the S&P 500 up a further 26%…

Today? A little fear has finally re-entered the market which, unless you were planning to sell everything up tomorrow, could give investors like you and me the opportunity to pick up some quality ASX stocks on the cheap…

The sad thing is, Australians are opting out

It’s truly unfortunate.

According to a new report just issued by the ASX, the Australian Share Ownership Study, two out of three adult Australians don’t participate in the share market — they don’t own shares directly or via their super funds.

Just 38% of Australian adults invest in stocks today versus 43% in 2010. Meaning that stock ownership is in decline. It’s another case of pessimists outweighing optimists.

As the Share Ownership Study found, this decline is in large part due to continued uncertainty following the GFC and the slowing of the mining boom. Investors absorbing so much fear they decide to sell their holdings and go sit on the sidelines…

In a way, I get it. There’s no doubt it’s hard to feel confident if all you’re paying attention to are scary headlines and the overall market gyrations.

Still, I can’t help but think it’s a dirty, rotten shame that so many Australians have stopped investing.

After all, for individual investors like you and me, the key to building last wealth is to take advantage of the market’s best opportunities in the form of individual stocks.

Make no mistake: There’s real money to be made.

Below, you’ll find a stunning illustration of how buying individual stocks can lead you to market-thumping returns… huge gains that leave the S&P/ASX 200 index in the dust!

10 times your money in 5 years? It’s not a pipe dream.

Five years ago, if you’d simply bought the market in the form of the ASX 200, you’d still be down over 10%… That’s despite the run-up so far this year.

But if you’d bought shares of TPG Telecom (ASX: TPM)M2 Telecommunications (ASX: MTU)BigAir Group Limited (ASX: BGL) or Credit Corp (ASX: CCP)

You’d have made nearly 10 times — or more — your initial investment!

That’s because the shares of each of these companies are up nearly 1,000% or more since 2008.

TPG is up 1,183%, M2 Telecommunications is up 1,005%, BigAir Group is up 975% and Credit Corp is up 1,060%.

It’s a startling reminder of how putting your money into the most promising individual companies can earn you truly life-changing returns, no matter what the overall market does.

Of course, past performance is no indication of future returns. To find tomorrow’s big winners… the stocks set to beat the market and earn shareholders outsize returns in the next five years… I look to my colleague, Motley Fool Share Advisor investment analyst Scott Phillips.

A mining stock free zone…but for how much longer?

As you might imagine, there’s not a mining stock to be found amongst our recommended stocks. But judged on my colleague Joe Magyer’s comments yesterday, that could soon change…

Joe and Scott are now starting to dig in seriously to find which mining stocks they’d like to own at the right price. It’s still early days into the mining bust, but if serious panic and fear hits the sector, I know they’ll be ready to pounce.

As you also might imagine, no banks have made it onto our buy list. Given the huge run the big four Aussie banks have been on over the past few months, you’d be forgiven for thinking missing out on those gains might have hindered our returns…

But no. Money can and is being made outside the banks and big supermarkets.

In the market for high yielding ASX shares? Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Bruce Jackson has an interest in Ford, Wesfarmers, CBA, Westpac and ANZ.


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