February 24th, 2009
02:26 PM GMT
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The last few days have been turbulent on the market. Not surprisingly, ordinary investors are wondering what on earth is going on.

How can it be, after so much time and money has been spent on the economies of the world, that the market still won't show any signs of recovery?

The answer is because the crisis has moved into another phase. We have gone from a sub-prime collapse in the U.S. housing market, through to a general banking crises based on highly exotic financial instruments - and now into a deep industrial recession in the world's major economies. And it is this part that is now causing markets to fall.

On average, there was a 33 percent fall in Q4 earnings for the 394 companies in the S&P that reported since mid-January according to Bloomberg.com.

So it is clear that the market believes many stocks to be overpriced, based on the companies' existing and future earnings. With downgrades in economic growth for economies like the U.S., Germany and the UK, it's a wonder investors haven't sold even harder. Perhaps they now are catching up

For investors, these are simply horrible days. What to do? Sell into a falling market? Take a risk and buy cheap (I assure you this isn't a case of "Buy on the dips... you may be buying at the top of the next down section of the rollercoaster).

In short - no-one knows. And that's the problem.

Sorry. If you had hoped I would tell you whether to buy or sell, then you are fuming right now. "Not much good Quest," I hear you say.

So tell me then, what should we do?



soundoff (25 Responses)
  1. Frumos

    This is an issue of market sentiment. Massive efforts to lift investor (private and institutional) confidence have been proving futile. I think the best governments can do is to keep creating relief cushions, no matter how thin, for as many as is reasonable (the very poor mainly). Hence I think the proportion of TARP and other nation's packages allocated to this category of people aren’t sufficient.

    The pessimism, cynicism and negativity that have dominated people's minds have only been exacerbating the situation. I guess the rapid intensification of this crisis reflects the true personality of most of us (including those at the helm of affairs) as being cyclical, pretty much like the financial markets.

    Maybe we should simply allow the markets to continue on this downward spiral until all pessimism has been exhausted and people become desperate and subsequently more willing to work with governments on solutions. That way, a new breed of optimists will emerge, with negativists enjoying zero-tolerance, flushed out or pushed to the sidelines. Probably then we can begin to see the light at the end of the tunnel.

    Ah, and in relation to buying or selling, I sold (at a manageable loss). I'd rather hold cash than allow my investments vanish, thanks to the seemingly perpetual negative sentiment driving the markets.

    February 24, 2009 at 3:47 pm |
  2. Nina

    I agree with Frumos, let the markets work and some companies will fail. Governments should stop printing and spending money they do not have.

    February 24, 2009 at 7:56 pm |
  3. Ramsi Hashash

    The answer is simple,

    Buy if you have money you do not need in the next 2 years. Buy shares in companies who will be positively effect throught the injection of money through the goverment initiatives. For example anything in relation to infrastructure.

    Hiding is no solution, stand up and become involved, become creative. Let the goverment do what they have to do, but do not wait for them you got to help yourselve. Break with old believes shift your own paradigms and move on.

    February 24, 2009 at 7:56 pm |
  4. Ramsi Hashash

    We should all keep in mind that where there are losers, there are winners. This is the nature of the game. So hiding will make you a loser. Even if the market will drop another 5% to 10% invest now if you have money you do not need in the next 18 to 24 month.

    February 24, 2009 at 8:00 pm |
  5. Zula

    You americans will never get better economy again until investor's confidence comes back. For that, you have to make fundamental change in your stock market with more legislation and rules. You people are saying it is a free market. But I would say current stock market is a black market. In black market you can see speculators and cheaters, trade is based on cheating people rather than transparent market competition under protected environment for both sides. Government's bail-outs are short lived and only supporting the former cheaters (bank heads).
    To bring the economy back, Pr. Obama should hire people who don't have Wall Street mentality. Post-economists are hopeless. Bring fresh people from successful manufacturers' strategists.

    February 24, 2009 at 8:21 pm |
  6. louis

    Richard, Sit tight and hope for the best is all we can do – no quick fix and it seems clear that not even the financial gurus have a clue what to do – then again they got us here in the first place! The bigger the boom the bigger the bust.......genius ah...:) if you want a bit of a success story in a time of doom and gloom you may want to look up Gibraltar....a small sucess story but sucessful nonetheless and likely to be one of very few places on the globe to post growth. Sensible economy with vibrant finance centre. Cheers Louis. Oh get rid of the bell and replace it with a pistol – its cowboy land at the moment...:)

    February 24, 2009 at 8:26 pm |
  7. Uma in Liverpool, UK

    Roll with the punches, as most people in the world, who have nothing to do with stock markets, and live hand-to-mouth, have always done.

    That, or find an expert mathematician/physicist, who understands how to use Complexity Theory as a predictive tool, and book a great deal of time on a very expensive computer, to do the hellish computations, which will give you approximate parameters of the outcomes.

    There's always I-Ching. I never understood it, but it works for me Mum.

    February 25, 2009 at 8:16 am |
  8. Amit Mahajan

    Actually Richard,

    You are far from the truth.
    The answer is very simple. T

    he market Economy is not a science but a big factor of the psychological sentiment. When CNN and other news sources bash the moods of consumers through dampening the spirits by showing negative news with personal views, the result is a shaping of the market mood.

    This mood is a major torque of the economic engine. This is a very opportune time for people to invest creatively and that is the key ALWAYS.

    Amit Mahajan
    Vienna, Austria

    February 25, 2009 at 8:20 am |
  9. Michael C. McHugh

    From what I know about history, there are always a few very smart capitalists in depressions like these who were clever enough to see it coming and are now taking advantage of it by buying up a lot of stuff as cheaply as they can.

    By these standards, the Chinese have turned out to be the smartest capitalists of all, and have earned the right to be a Great Power while the US has squandered it.

    There's a story that old Joe Kennedy was getting a shoe shine one day, and when he heard that the man shining his shoes also had money in the Stock Market decided that the time had come to get out of it. He later made a huge amount from short selling, but later said he started to feel very sick when he wondered whether the market had any bottom at all. In the 1930s, it was a bottom not far from zero.

    February 25, 2009 at 4:23 pm |
  10. Magdalena Cooper-de Neuze

    Here's an idea for rejuvenating the USA's current economic situation:
    - Establishing community bonds which are offered by local banks, financial and investment institutions.

    Every resident in a community will have the opportunity to purchase a bond from his own community first before being able to purchase a bond from another community. Bond prices can start at $100.00. After they are purchased they cannot be redeemed until after 2 years or upon death of the purchaser.

    The funds can be used for community business loans, education, healthcare and any other business needs of the community.

    This is a micro development idea which will grow the macro picture of the USA. Ride on USA.... I know you can and will do it to continue to build and maintain the American Dream.

    February 25, 2009 at 5:02 pm |
  11. David Mills

    Investments/buying a house,(ie young people) Crooks. My question is,
    for 20 or more years in Britain, the Halifax Building Society have always told the public through the media, how much the housing market has gone up. I could never understand this because THEY were the ones in the driving seat. If I, as a poor engineer could see this, why was it not pointed out in the Media. I have said for 30years that the housing market should be under government control, solicitors/estate agents because they are robbing the young newly weds all the time. In 12 years living in rural France we have now (Immobliers) in every street. God bless em.
    Bye a cheap house in France now, he he. Crooks.

    February 25, 2009 at 5:30 pm |
  12. Vince

    If you listened to the "experts" all the way through this crisis you would get the real message - nobody knows nuthin'! I have done a lot of dough listening to these people but I can thumb my nose at them now coz I went into hiding in Jan 08, for once I didn't listen and it saved me 30% of my life savings. BTW I intend to stay in hiding, nobody knows what is going to happen!

    February 25, 2009 at 9:06 pm |
  13. Gail Ellis Duncan

    When do you think the masses will begin to learn from all this? Don't you feel it is time that we look at community solutions and use some of the wisdom of our ancestors such as to barter, trade schools, community dinners/farming/health assistance? Things are changing therefore we must change and the sooner we except this we can move on. No more shop till you drop. Maybe this will bring us all closer and maybe we will be able to save this planet. Have more jobs created in fields of recycling, green movement, health care, teachers, farmers........survival work. Let's face it, fix and move on. Sooner or later we must.

    February 25, 2009 at 10:15 pm |
  14. David VanVoorhis

    I see a number of buy and hold opportunities that offer a certain amount of security in all sectors, even finance. For example:

    Deutsche Bank at 19 € an incredibly bargain when one considers:

    1) they have yet to take one Euro-cent from the German bail out fund
    2) The crisis will alter or kill the German State run banking system leaving the field open for strong banks in the future
    3) The government will NEVER let Deutsch Bank fail or be taken over

    Wells Fargo is also an exceptional deal considering they will be one of the strong banks to survive.

    In other areas, it is easy to pick stocks that will rise during Peak Oil 2. The low price of oil currently makes opening up new production areas unprofitable, so when the economy picks up oil will rise quickly again. Oil stocks as well as alternative like Vestas.

    February 26, 2009 at 6:06 am |
  15. Rajeev Bhalla

    Many stock analysts advise to stay calm and ride out the down turn. Few months ago even I was gawking at the systematic destruction of equity values. Part of my wealth portfolio went down and stayed down. Then it struck me I had no spare cash to invest, but at least I had "shares" in my account. Most shares are volatile in the range 4 to 10%. Select these stocks. Study them well, and play to your benefit, making profit by selling and buying the stock at it's highs and lows. Does not matter you have no cash! You have stock. According to your analysis if given stock price is high, sell it, wait for it to go to it's low cycle, buy it back. Buddy, you just made money! Even if it is small money, but many deals up & down, culminated, will start making some money, and you will start recovering some of the huge losses you made. Mind you this needs discipline, study, and commitment. Wish the worlds Equity investors, all the best!

    February 27, 2009 at 6:03 am |
  16. steve paul from Owerri,Nigeria

    Global economic pinch or hard-bite as you call it has been an ill-wind that blows no one any good,world community must now understand that it influenza caught by the Bush Administration due careless and reckless spending,investing on ghost and perhaps hoaxed war,chasing the shadows in Iraq,poor countries around the world are in severe economic pains Iceland,Sweden,and Latvia for example.Do you know what third world are going through?their developments are now abruptly arrested.

    February 27, 2009 at 12:11 pm |
  17. Stephen Finlay

    Hi Richard,
    I know the media is not to blame for this but I think they have been very effective at spreading panic through their daily hyping of the problems which is hitting consumer spending and sentiment very badly. In relation to the core problem well I don´t know how to stop it. Its funny but everybody is blaming the banks where I actually blame accountants. A few years ago the IASC introduced the concept of "fair value accounting". It was this concept that companies used to revalue fixed assets such as property. These inflated balance sheets were then taken to the banks and used to borrow more money thus raising gearing and starting the whole Banking/credit snowball rolling. Auditors has very little exposure to risk in relation to audited accounts and its only when the get caught with their pants down like in the case of Arthur Anderson and Enron where they were actually caught shredding files.
    I just wish the media could start spreading some news for a change. I mean in relation to the loss at AIG this is a s a result of "Impairment reviews" again according to accounting concepts. They are also estimates and not concrete losses. Unless AIG actually disposes of the assets in questions the losses are for tax purposes not realised.

    March 2, 2009 at 7:38 pm |
  18. d. griffith

    Everyone has to go with what they know and understand. In my case I don't know or understand the stock market. So, I go with what I know and that is to buy basic needs from the supermarket, the farmers market and the hypermarket for my survival.

    March 2, 2009 at 11:28 pm |
  19. Annette Jones

    Maybe an alternative would be to bail out the taxpayers directly by giving each taxpayer a cheque for $100k. This would enable more deposits into the banks, stimulate the economy. The banks however would be taking in more deposits, they would also have to reconsider their mortgage lending by adjusting their interest rates. Employees could also "invest" in the companies they work in. This way transparency will be available as the "real" shareholders will be able to have a say.. not just the greed that has overtaken common sense at the expense of the normal man in the street. It is illogical that money is still being pumped into the same old system that is not working, How about turning the tide and adapting the change the government was voted into. Understanding democracy is for the people by the people but at this rate this is a one sided affair.

    March 3, 2009 at 7:34 pm |
  20. Suzan

    It is quite simple. Some people get really rich on speculation right now. It is the way the world works. They are taking a risk with a rollercoaster ride, but upto now if you buy and sell at the right moment, you're a winner.
    I think that most of the value of stock do not represent the value of the company, but the madness of the market.

    March 5, 2009 at 3:19 pm |
  21. Peter Dough

    Stress test systemically important financial institutions, close non-viable banks, recapitalise viable banks, neutralise all toxic assets on bank balance sheets, and price toxic assets using a transparent and simple formula. The problem is people don't like bailing out bankers, and bank shareholders and bondholders don't like seeing the value of their shares and bonds diluted or wiped out by government appropriation, which is really the only viable option. The time for hesitation is long past. G20, governments and banks must ensure these steps are taken swiftly and effectively. We need a decision, a process, and an implementation.

    March 5, 2009 at 8:22 pm |
  22. bl8ant

    OK here's how I see it. The market is toxic on so many levels and in fact , many of those elements are dying as we speak , as fraud gets revealed and as experiments fail, what was poisoned is dying.
    if shit is fertilizer than we have enough manure here to sow fields for America...lol

    what to do? STEM CELL RESEARCH is open for growth...and nano technology for super solar cell textiles and anything to do with Water Purification and sanitation...as one Market dies another is in the labour pains of birth, it is a cycle ,

    I think anyone with any money to invest , needs to appreciate the HUGE opportunity in building the foundation for a NEW Market driven by a Green Industry and operating in support of Human Rights, rather than the corruption and greed we have seen .

    INVEST IN A HEALTHY ENVIRONMENT!!!

    March 6, 2009 at 5:51 pm |
  23. fabri

    Do the wrong thing... I mean... the illogical thing.... the market is ahed at all the studies of analyst and professors ... the market has become a big cake where few people try to suck money at the people.... this is the aim of the market in the short time and also in the long time... exactly .. also in the long time.... this situation is the end of a big cake last 15 years. grandissimo mercato..... grand theft.

    March 12, 2009 at 8:54 am |
  24. slersArtileaF

    Everyone at Delicious Monster has been hard at work for the past several months on Delicious Library 1.5, a free upgrade that will be made available on April 29th
    delicious
    http://www.delicious-monster.com/blog/2005/04/announcing-delicious-library-15.html

    April 2, 2009 at 7:57 pm |
  25. slersArtileaF

    Hello !Oh hubba hubba! Forget the sportscar, been there, done that, got the T shirt, wore it out, gave it to goodwill.
    http://cstatman.blogspot.com/2004_07_01_archive.html

    April 3, 2009 at 3:55 pm |

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