It is clearly too early in the year for summaries of any kind, but considering the kind of month the markets have had in January, some reckoning appears to be in order. And it seems to me that the best among perennial investors are on the lookout for positives when the smelly stuff really hits the fan.
So, where are those positives? I’m sure PROFIT CONFIDENTIAL readers remember my lamenting about corporate Canada hollowing out. Well, for starters, it is obvious that all of those foreigners who came up here and snatched one after another of our corporate jewels have paid an arm and a leg for them. And they also saved us paying for a number of expensive writedowns in the process, too.
Also, our banks are still taking their sweet time expanding south of the border. Well, thank God for that. All have managed to survive the credit supply crisis in the U.S. relatively unscathed, except CIBC, I’m afraid.
Now, setting aside the cynicism about America’s indebtedness and the subprime lending mess, there are a few things that have remained true with our neighbors. The simple truth is that American capitalists are capable of dealing with their own mistakes. That may not be true of the government, but the capitalist system in the U.S. has an uncanny ability to figure out the problem, fix it, and move on.
This is why when investors search for pickings in today’s markets, they are likely to see the risk variable priced properly, dramatically lower price-to-earnings multiples and even some additional yield for buyers of certain corporate bonds.
There is one more thing to remember. When the market goes into a tailspin, everything goes into a tailspin, and not just the ticking bombs. Meaning, last month, plenty of good companies received their share of beatings, completely undeservedly, thus representing excellent investment opportunities now when the worst seems to be over. Actually, for the first time since August of last year, really, investors can identify a number of new stocks with excellent entry price points.
Even investors interested in trading foreign currencies have something to look forward to. Although the chance that our dollar will again enter the nosebleed territory of US$1.10 is not high at the moment, the Canadian dollar is still going strong. As a result, for those who want FX profits, there are a number of weak foreign currencies up for grabs these days.
Some investors say that money can be made in any market. Some are going as far as to say that today’s markets have given us a gift. I would agree with the first statement, but still go cautiously about the second one. The pickings might be slim, but there are pickings out there nonetheless.
We do know, however, that it’s time to get out from under the desk and start looking for the opportunities. We have come through a period when everything was hit indiscriminately. We are entering a phase when the winners and losers will be sorted out. It’s a period when alert investors can start to make money again, whether the markets trend up or down.