I hate to sound pessimistic, but it looks as though the global banking system led by European banks is edging its way towards another big collapse.
That means in just a few short months, stocks could be back at their 2009 lows.
And if the last few weeks are any indication, the impact will also be felt in India…as it did after Lehman Brothers collapsed in September 2008.
But don’t expect things to capitulate so fast. At least not given that central bankers in the US and Europe will attempt one more Herculean effort to ‘save’ things.
Whether that intervention will take the form of another round of quantitative easing (QE) or another ‘stimulus’ plan is unclear.
But really, who are they kidding?
This crisis has nothing to do with liquidity (which is how the central bankers are trying to fight it) and everything to do with solvency (which is how they should be fighting it).
Not only are the risks of a global recession mounting by the minute, but I believe the concentration of risks is approaching critical mass.
Fear is fast building up among global investors and traders, and it won’t take much time for them to liquidate their holdings (including Indian stocks they hold) and move into cash while they can.
But regardless of what happens, this is what you should do.
Sell stocks with poor business fundamentals and shift that money into companies you really want to own – the ones with sound business models, ethical managements, and those that can survive a deep economic slowdown.
Most importantly, keep buying using the dollar cost averaging method – bits and pieces every month like you do via the SIP method in mutual funds.
See, there is no sense in making all-or-nothing decisions when that type of thinking doesn’t fit market conditions.
Remember, you miss 100% of the shots you don’t take, so getting to the sidelines is not a profitable plan.
Staying in the game always has been, and always will be, the way to profit.
But just watch out, and keep safe. It seems 2008 all over again, except this time it could be worse.
Anyways, here’re some interesting posts that we published on Safal Niveshak this week.
- Of Smart Central Bankers, Drunken Snakes, and Stock Prices
- Why I Don’t Watch CNBC, and Why Even You Shouldn’t
- The Stock Market Nonsense Called ‘Consensus’
- Steve Jobs Resigns from Apple: Lessons for Indian Investors
- Want to Become a Better Investor? First Get Your Brain Damaged
Have a nice and safe weekend!
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