Overnight, for the second day in a row, the Dow slumped another 100-odd points. It was the market's biggest fall in three weeks.
Naturally, the ASX has followed Wall Street lower, slumping 40 points in early morning trade. Year to date, the S&P/ASX 200 is now up just 0.8%.
Thanks for nothing!
Tough crowd, aren't we? The same index is up 15% over the past 12 months.
It's just that on days like these, we focus on the here and now, forgetting that a 15% annualised return means you'll roughly double your money every 5 years.
No wonder Australia has a whole heap of newly minted millionares…
Sending markets lower, as reported in Bloomberg, was "a surge in violence across Iraq, three years after U.S. troops withdrew, raised the prospect of a return to sectarian civil war in OPEC's second-biggest oil producer."
Markets hate war. As an investor, you should embrace the uncertainty, and the lower stock prices it brings.
Notwithstanding the human tragedy, Baron de Rothschild's stock market quote comes to mind…
"Buy to the sound of cannons, sell to the sound of trumpets."
Warren Buffett has a different quote, but the premise is the same…
"Be fearful when others are greedy and greedy when others are fearful."
As a net buyer of shares — putting cash to work or reinvesting dividends — you should welcome cheaper share prices.
As Buffett says…
"Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."
As I look at my portfolio today, I see a sea of red.
It's not pretty. But it could be a hell of a lot worse…
The iron ore price slumped another 2% overnight to $US91.50 per tonne, a 21-month low. The red dirt is now down 32% this year.
No wonder then that BHP Billiton (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group (ASX: FMG) shares are all down again today, now sporting losses of 7%, 16% and 29% respectively so far in 2014.
You won't find me wading into the iron ore sector quite yet, if ever. I'd want to be seeing some serious signs of distress, including curtailing of production and debt pressures.
To emphasise the point, today Fortescue shares trade at around $4.15. This time last year they hit a low of around $3. There could be more pain ahead.
There are plenty more ways to skin a cat, and to pick stock market winners than playing in the capital intensive world of iron ore miners.
One stock I've had a passing interest in is Oil Search (ASX: OSH) — and not just because the oil price jumped overnight on the renewed tensions in Iraq.
Earlier this month Oil Search upgraded its 2014 production guidance and, at the same time, lowered its forecast per barrel cash operating costs.
It rarely gets better than that — higher revenue and lower costs.
No wonder Oil Search shares are up 21% so far in 2014, trading at $9.80, near an all-time high. But there may be more gains ahead…
The AFR recently reported that RBC Capital Markets raised its Oil Search price target to $11 a share from $10 a share.
In its most recent commentary, fund manager Perennial Investment Partners said…
"Oil Search has one of the strongest cash flow and return on invested capital (ROIC) growth profiles within our universe, supported by valuation upside to the current share price."
High praise indeed. For one, I'll be taking a closer look.
Unlike iron ore, I have a soft spot for oil. They don't call it black gold for nothing.
Regular readers of Motley Fool Take Stock will know I'm on the record as saying our record low interest rates are likely here for an extended period of time.
Still, that hasn't stopped the unstoppable Aussie dollar from rising again, jumping above US94 cents.
While the high dollar is a drag on our economy, on the bright side, it makes overseas travel even cheaper.
One company benefiting from that tailwind is Corporate Travel Group (ASX: CTD), one of the top performers for subscribers of Motley Fool Share Advisor, our subscription-only stock picking newsletter.
Including dividends, Corporate Travel Group is up 164% since Scott Phillips tapped it for members. I own the stock too, having bought a couple of months after Scott tipped the stock. I paid a little more, up 'only' around 85%.
Tough gig, hey?
Yesterday Corporate Travel Group further expanded into the US market, snapping up USTravel for just over US$5m.
Not only does Corporate Travel Group benefit from the cheapness of overseas travel for Aussies, but it's also using the opportunity to snap up US companies with our strong Aussie dollar.
That's smart.
I may not be as smart as the folks running Corporate Travel, but I'm also snapping up US companies — buying US shares.
The stronger our dollar, the more US shares I can buy.
Little wonder then the AFR reported this week that…
"Australians are sending bigger chunks of their wealth offshore as they hunt for exposure to companies such as Google and Apple to boost their investment returns."
If you haven't tried it yet, investing in US shares is easier than you think. You can do it directly through Commsec and the other big online brokers. Give it a try.
I happen to already own shares in both Google and Apple.
Billionaire Charlie Munger, Warren Buffett's investing side-kick, once described Google's competitive advantage as such…
"Google has a huge new moat. In fact I've probably never seen such a wide moat."
Such a company is your perfect "sleep well at night" stock, regardless of the oil price, war, interest rates, China or even the GFC.
I'd welcome, with open arms, the opportunity to add to my already sizable Google holding… especially with this strong Aussie dollar.
Myself and the team at Motley Fool Share Advisor have already tipped Google for the US side of our scorecard.
Did I say you should give investing in US shares a try?
We're not promising another 729% winner, but you do have to be in it to win it.
Speaking of winning…
Have a great weekend and go Socceroos. I've got my $5 @ 10/1 on an upset win for the underdogs.
