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Welcome to Profit Confidential • Tuesday, May 22, 2012

Time to Wait Out the Storm

Wednesday, August 29th, 2007
By Mitchell Clark, B.Comm. for Profit Confidential

I don’t have any sense as to where the stock market is going to go over the next month or so and neither do many on Wall Street. The fact of the matter is that anything could happen to the stock market over the near term.

Stock prices could recover; they could go much lower; or they could stay flat. Regardless, I do believe it will continue to be a difficult time for equity investors over the coming weeks.

The economy and the financial markets always want to return to normalcy after periods of excess. I remember seeing online advertising saying that I could easily borrow $500,000 for only $1,500 a month. Of course, the credit excess really hurts those people without any equity in their homes. They are the ones being hit hard right now. Still, this situation is going to right itself.

Even in the real estate market where the average housing price is falling, the market for homes has been hot for quite a long time. A little breather is healthy, even though it hurts.

There are a lot of good investment opportunities in this equity market, but I’m still very cautious about taking on new positions. Long-time readers know of my affinity for Chinese stocks, which to some degree, trade on their own merits and are less affected by domestic stock market sentiment.

My hope is that we’ll get a turnaround in stock prices sometime in the fourth quarter. My feeling is that the probability of an interest- rate reduction by the Federal Reserve is increasing, and this could be the catalyst that turns things around. Until then, there isn’t much to be done but ride out the storm.

I imagine big investors like Warren Buffett are salivating at the opportunity to buy entire companies outright at cheaper prices. I’m sitting on the sidelines thinking it’s too early to pull the trigger.

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Profit Confidential AuthorMitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.

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