Posted by Frugal on 8th August 2011
It is amazing how fast the markets can change in less than a week!
While it is obvious that the markets are panicking, I think it is prudent to put cash on hold. I sold out my GOOG and AAPL right before the plunge, nibbled probably using 10% of my cash, and then stopped. Both GOOG and AAPL are still good companies, but markets do what they want to do.
It definitely feels like 2008/2009 again. After my positions took a big cut on Thursday, I realized one thing: I simply look too far into the future, while the market is extremely short-sighted. Of course, the economy is not so good, and the unemployment rates still suck. But markets “apparently” are quite oblivious to these facts.
Nevertheless, I still project the stock markets to rise into 2016 due to currency devaluation & inflation mainly, not due to a better economy. The fireworks in Web 2.0 may continue and grow into a bigger bubble. But that is 2016, not 2012. In this market, anything that is 1 minute later, is too far into the future.
Both GOOG and AAPL are dropping to previous support, and it should be a fairly good entry point. I’m preserving my cash pile of more than 20%, anticipating for the final short-term pop in physical precious metals. Buying on pullback on precious metals-related complex still works better than the general stock markets (in the short term as well as in the long term). However, the volatility in precious metals is 2X to 3X higher than the general stocks, and it truly takes nerves of steel to hold onto your positions.