Commentary
It has been a while since I wrote something and calls have been coming in to get a better grip of the situation. The lack of commentary over the last 2 weeks has been due to a lack of direction in the market and a penny fever that has been relatively irrational.
The latest buzz today is the US budget woes. This seems like a rephrase of debt ceiling issues we have every year. The US government has not enough money to fund their continuing operations. Some programmes and some parts of government may have to shut down. A solution to this will bring us back to raising the debt ceiling again. And the saga continues. Like how it does every year since 2008.
So, what is in it for us?
First, remember market history, it tends to repeat itself. Tapering talks that have been stalled means that there is something right about US economic recovery. The debt issues are the opposite of this. There can be a day where debt woes make way for tapering talks again when market is on the upswing. So, buy on dips can be a strategy.
Next, I hate to admit it but penny fever may be over, due to the effects of macro-economic news. Penny fever arose when there was no clear direction. Now, with macro influences, market has clearer direction (negative in the short term) so penny fever may subside.
What can we look at if not for pennies?
Every time macro news hits, blue-chip (especially index stocks) tend to be affected to a greater extent. Therefore consider sticking to “high-beta”. These are cyclical stocks like property stocks and industrials stocks like shipping. Banks can offer a good rebound too.
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