The only thing worse than losing money in the investing game is thinking about profitable opportunities you missed out on. (Yes, investing is pretty much a recipe for misery. Seriously, go invest in a tracker instead).
Anyone brave enough to buy certain UK bank shares a few weeks ago would by now have made a small fortune.
Barclays shares, for example, have more than tripled since early March.
It’s been a similar story in the U.S. as in the U.K., as the graph shown above from The Economist indicates. US banks as a group are up over 50% in the month.
Indeed, the U.S. banks are largely behind the global rally.
News of record profits at the giant Wells Fargo bank a week ago fueled the latest leg up of the banking stocks recovery. Goldman Sachs followed up on April 13th, reporting expectation busting profits of $1.8 billion, and JP Morgan kept the party moving with better than expected results on the 16th. And today Citigroup posted profits for the first time since 2007.
But what do these results really tell us about bank earnings, and about the sustainability of the recent rally?
I was talking to a friend last night about what I’m currently doing with my life, and discussing whether either of us fancied starting a new business in the teeth of the recession.
He told me – not for the first time – that he was getting itchy feet, and that he felt in a secure enough position to think about starting a business of his own.
I told him I’d love to talk through his plans and help out in any way I could.
But I also suggested, as tactfully as I could, that I thought he was far less likely to start his own company now than when we’d had such discussions in our late 20s.
What’s more, I think there’s no shame in that.
(Source: Google Finance)
When I wrote about currency risks and opportunities for investors in January, I mentioned I was going to leave my holdings in Japan untouched, rather than cashing in on the Japanese yen’s strength by converting my Nikkei tracker funds back into UK pounds.
At the end of March, however, I changed my tune and swapped half of those holdings into a UK FTSE 100 tracker.
Why? Well, it’s not because I think private investors can predict short-term currency movements with any great confidence. I know I can’t predict short-term currency shifts. Indeed I swapped a little late, looking at the graph.
What I do believe in, however, is reversion to the mean.
Every week I read a large number of personal finance and investing articles. Here’s my latest weekly shortcut to the best.
This is the final part in a series of three posts on riding out a bear market. To be sociable and mix things up a bit, the first two posts are on two other splendid financial blogs:
- MoneyNing (Part 1: Beat market volatility by being boring)
- Investing School (Part 2: Ignore your portfolio for months at a time)
Read those parts first, then come back to read the final post below.
If you’ve already read those and you’re new to Monevator, welcome aboard! If you like what you’ve read, please do consider subscribing via RSS or email.
Strategy 3: Try to invest when the market is down
The best antidote I know for beating bear market blues is to buy when the market is down.
Averaging down can be a dirty word among traders, but value-orientated equity investors should welcome the chance to buy companies they believe in at a cheaper price.
And buying when the whole market is cheaper, that’s another matter altogether.
