Phew. Finally some respite for my poor battered and bruised portfolio — overnight the Dow jumped 146 points and today the S&P/ASX 200 is trading right back at around 5,400. Was it only 5 days ago the ASX hit 5,500 and Australia and New Zealand Banking Group (ASX: ANZ) rose for 11 consecutive trading sessions? Time flies when you're having fun, huh?
The Wall Street Journal reports the Dow's surge as being… "… a reprieve for investors rattled by the downturn in stocks in the last month." Yes, Foolish readers — tech stocks, including biotech stocks, have been on the nose these past few weeks, and my portfolio has not been immune, given I own Facebook (Nasdaq: FB) and Google (Nasdaq: GOOG), down 13% and 9% respectively over the last month. My idea of fun it was NOT… which is NOT surprising. You see, studies have shown the pain people feel from a loss is about twice as strong as the pleasure felt from an equivalent experience of gain — referred to as loss aversion.
The mother of all tech crashes… or a load of hot air?
So, rather than celebrate Facebook's 115% gain over the past 12 months, investors focus on the recent past, extrapolate those share price falls to the future, and fret about what might be the mother of all tech stock crashes, coming soon, according to Marc Faber. A little more about our friend Mr Faber and his market crash prediction a little further on…
My investing colleagues and I, including Scott Phillips and Andrew Page, recently held a Motley Fool Share Advisor member-only Q&A event in Melbourne. The response was overwhelming — standing room only — with over 200 eager Fools attending.
This ASX dog keeps on barking
The first question was about the prospects for rare earths producer Lynas Corp (ASX: LYC), the dog of my portfolio. Yes I still own it, no I am not buying more, due to my original position sizing and the stock's capital depreciation, Lynas thankfully now makes up only a tiny percentage of my portfolio, it's a highly speculative stock with an uncertain future, and one I'd be avoiding with a barge pole. Next question please…
It was a great evening, if I do say so myself. There's nothing better for us than to meet our members, talk stocks, and share tales of investing winners and losers over a wine and beer or two.
Turning the strong Aussie dollar into an investing winner
One of the big takeaways for me was that more members than I ever imagined were investing in US-quoted stocks, specifically some of the companies on the US side of our Motley Fool Share Advisor scorecard. My portfolio has a healthy mix of ASX and US-quoted stocks. I like the fully franked dividends of home, and the monopoly-like qualities of US stocks, including the aforementioned Facebook and Google.
I also LOVE the strong Aussie dollar — trading today at above US94 cents — when buying US stocks. Not only do you get more Yankee dollars for your buck today, but when inevitably the Aussie dollar falls back below US90 cents, and perhaps even as low as US80 cents, you make hay on the exchange rate too.
Forget Commsec when trading US-quoted shares. I have accounts with both optionsXpress and Interactive Brokers (no affiliation). The commissions are dirt cheap when compared to the Aussie execution-only brokers. Give them a try.
Back to Marc Faber…
As Scott Phillips mentioned last Friday, the author of the The Gloom, Boom and Doom Report recently predicted… "I think it's very likely that we're seeing, in the next 12 months, an '87-type of crash… And I suspect it will be even worse." It seems Mr Faber's report is more Gloom and Doom than Boom… but each to their own.
In my long investing and stock market commentary career, I'm yet to make the lead story of The Sydney Morning Herald making outrageous predictions like… "Stocks to rise around 10 per cent per annum, including dividends, over the long-term." Oh well… I'll just keep grinding away, hoping one day for my lucky break!
This is one big bet I'm willing to make…
As for Mr Faber's prediction of the mother of all stock market crashes, I'll happily take the other side of that bet. What do you say Mr Faber? If stocks don't crash 22% in a single day between now and April 14th 2015, I'm the winner. Good luck — you'll need it.
Any sane, rational person will quickly conclude the odds are hugely in my favour. 1987-style market crashes — where the market falls massively in one trading day — happen once in a blue moon. Seems I'm not the only one thinking the same.
ASX shares set to move higher…
Only yesterday, despite the ASX suffering its biggest daily drop in a month, AMP Capital head of dynamic asset allocation Nader Naemi said in the AFR… "It was another ugly day in the market, but I doubt this is the start of a much bigger decline and still predict local shares will move higher in 2014."
And in The Wall Street Journal, Joe Heider at Rehmann Financial said… "We're really telling our investors not to overreact on a day-to-day basis, to hang in there because we think better days are ahead."
I couldn't have put it better, more Foolishly (note the capital F) myself. I'm happy to leave it to the high frequency traders to fight over the scraps of the day-to-day ups and downs in the stock market. I've got better things to do… like plonking my cash down on high quality companies trading at good prices.
Value investing… gone but not forgotten
On that point, it was great to see good old value investing recently getting a plug again, with Chad Morganlander of Stifel Nicolaus telling Bloomberg… "You have concerns about high valuations and flat revenue growth, which is a perfect cocktail for a sector rotation out of growth and into value." I'm not a cocktail drinker, but the idea of a perfect investing cocktail is right up my alley… ideally with a twist of fully franked dividend.
Value wins
Value investing never goes out of fashion. Just ask Warren Buffett. Slow and steady wins the race. That's not to say growth stocks like Google can't be value stocks — count me for one who thinks Google is decent value even at today's prices — but value always wins out, in the long run.
