Is the worst over or is it still to come

[Phaedrus]

Is the worst over or is it still to come? Is this really the beginning of a long slow recovery?

Everyone has their own theory, but the reality is that no-one knows. No-one

I started buying shares based on broker recommendations around the market peak.

You are learning the hard way - just as most of us here did. Forget brokers - you are on your own in this and the sooner you realise that the better.

I have trouble selling my losses as I will crystalise them when I sell the shares

A loss is a loss - whether it is crystalised or not. We all make mistakes. The trick is to recognise them as soon as possible and quit them. If you don't take small losses, you WILL take big ones. Let your winners run and cut your losers.

I can't help thinking that there is worse to come.

You would not be alone in this, but look at what is happening right now. Markets are rising. This is a time to be in, not sitting on the sidelines waiting for a bottom that may not eventuate. There are people right here on ST that have missed out on this magnificent rally because they (not unreasonably) think there may be worse to come.

Should I cut my losses and wait for the next bottom on the share market?

Are any of the stocks you are holding not rising with the general market? Sell them and buy something that is.

I understand market timing is difficult at best but it could also be profitable if you get it right.

Aaron, you can't get it "right". Fortunately, you don't have to. All you have to do is be on the right side of major moves. Make sure you are in on the big moves up, and out of the big moves down. This is not complex or difficult to achieve and there are many ST threads devoted to this subject.

[Aaron]

Which are the threads that discuss whether the next major moves are up or down.
I guess I am tending to believe the next swing is down due to private sector debt problems in the US & UK (western world) causing the last big drop and the solution to this problem being governments taking over this debt and creating more debt and running deficits and printing money to prop things up. It doesn't sound like a long term solution to over consumption based on an increasing spiral of asset price inflation pushed up by increasing debt resulting in increasing asset prices etc.
I would have thought asset deflation and debt reduction would be the answer but I guess the US needs inflation to make their debts relatively smaller over time.
I have to admit I have no clue as to how the global economy and money supply work but I will stick to reading a lot of different opinions and try and make up my own mind.

[Phaedrus]

Which are the threads that discuss whether the next major moves are up or down?

Wrong question. Any such threads must of course be no more than pure speculation. What you need is threads that discuss what the market is doing right now. Apart from the fact that it is impossible to predict the future, there is no need to even attempt it. All you have to do is make sure that you are positioned appropriately within the current market.

[Aaron]

How can you position yourself within the current market if you aren't looking to the future. No-one can see the future but you can form an opinion based on what you read and hear. Wouldn't I be appropriately placed sitting on the fence waiting for the next possible/likely fall within the next 12 months. I am guessing you trade and follow shares regularly so would be in or out quickly if there are any big swings up or down. I don't follow the markets daily and am hoping to be a long term investor buying good companies at the right price. Although the stockbrokers providing me that advice would appear to have been a little too optimistic two years ago. If I thought some sort of crisis might trigger an overall market fall like we have seen i could be buying in 10-50% cheaper in twelve months than now. I could be wrong and the recovery is well under way. probably in twelve months time I will lose patience or panick and buy at the next peak but I can't help thinking if the GFC was the worst financial event since the great depression it won't play out in the exact same way due to governments actions but those actions as I understand it were radical and large its quite possible no one really knows what ongoing changes it will create but theres a good chance it will spook everyone and send prices down in the near future.

[Phaedrus]

How can you position yourself within the current market if you aren't looking to the future?

By making sure that you are in the market when it is rising and out when it is falling. You don't know what the future holds, and you don't need to. Your actions simply need to be in synch with the market. The only certainty is that uptrends (and downtrends) do not last for ever.

No-one can see the future but you can form an opinion based on what you read and hear.

Sure you can - but it is not necessary to have such an opinion in order to invest profitably. What I am describing here is a reactive approach rather than a predictive one.

Wouldn't I be appropriately placed sitting on the fence waiting for the next possible/likely fall within the next 12 months?

There are times when sitting on the fence really is the best place to be - when the market is falling, for example. There are also advantages in fence-sitting if the market has no clear trend..

I am guessing you trade and follow shares regularly so would be in or out quickly if there are any big swings up or down.

In NZ, my activities would be best described as those of an "active investor". I buy NZ stocks for their high dividend yields and hold them for periods ranging from months to many years. I trade other markets more actively.

I don't follow the markets daily and am hoping to be a long term investor buying good companies at the right price.

Buying at the "right price" is not enough. You want to be buying at the right time too. That would be when the stock has fallen and then started to rise again.You don't have to follow the market daily to identify the best time to buy. A quick look once every week or so should be quite sufficient.

The stockbrokers providing me that advice would appear to have been a little too optimistic two years ago.

This is an example of badly mistimed entries. There may well have been nothing fundamentally wrong with the recommendations you were getting - what was wrong was the abysmal timing. Two years ago the NZSX50 was in a very clear well defined downtrend - no time to be buying anything.

The attached NZSX50 chart shows how simply a market can be monitored. It features 3 indicators - trendlines, a moving average and an oscillator. You can see that these all kept you in the market for 5 years when it was rising and got you out as soon as the uptrend weakened and before the market had fallen very far. Similarly, they signalled when to re-enter the market. These are by way of illustration only and are only a very small selection from many indicators that did esssentially the same thing. There are entire threads are devoted to this topic, such as this one.

[peat]

i wouldnt think that its worth sacrificing 3 % just for instant liquidity. Rabo will give you 3.4% for cash and you can access it within a day by transferring it out to your nominated trading bank account. Crashes do happen fast but imo not so fast that you need to have the money in the brokers account losing all the yield.

[Stranger_Danger]

A bell at the bottom? You realise the sharemarket isn't WINZ, right?

[Aaron]

You mean Work & Income? They are the safety net at the bottom if you get wiped out with bad timing. (I don't fully believe its "time in the market") they are not the bell indicating when the sharemarket has reached the bottom.

See the graph Phaedrus provided further up this thread. Its not the exact bottom or top but its pretty impressive if he bailed out and bought back in at those trigger points.
I would be described as a "Mum & Dad" investor by the media. Pretty unsophiscated and relying on stockbrokers and other experts.

My gut feeling is there is still a long way down to go. In the last crash I bought in on the way down and it was only all the discounted rights issues that I bought into that reduced the size of my losses. I am now waiting on the sidelines until I think we are somewhere near the bottom then my plan is to be a long term investor again.
The problem is that no one knows where the bottom is. Phaedrus doesn't either but he does have an idea when he would buy back in. Although his prediction in another thread re the NZX50 was pretty bold. Have to wait and see how that turns out.

[Aaron]

I would be interested in peoples opinions for the next 12-24 months.

1/ NZX, ASX and S&P 500. Will there be a big crash to test the March 2009 bottom. (From what I read I think markets will drop close the March lows sometime before the end of the year. This is based on governments taxing more and spending less to finally address the debt problem. This will affect economic growth and company profits)

2/ Interest rates are going up (Fast for Greek bonds and SCF debentures). If banks aren't lending then companies will need to issue bonds/debentures and will need to compete for investors improving future yields. (This will also negatively affect shares as bond yields get more attractive and less risk as they take priority over shares if the company craps out)
If I understand things correctly the US will want interest rates low to encourage inflation to inflate some of their debt away.)

3/ Inflation/deflation what is going to happen here (I am obviously picking asset deflation for shares and maybe NZ & Aussie houses short term) but if there is tonnes more money in the system won't this automatically cause inflation.

What does the next two years hold and what should I invest in. I think I'm too late for precious metals (gold) and don't know where to go to invest in gold anyway.

[shasta]

I would be interested in peoples opinions for the next 12-24 months.

1/ NZX, ASX and S&P 500. Will there be a big crash to test the March 2009 bottom. (From what I read I think markets will drop close the March lows sometime before the end of the year. This is based on governments taxing more and spending less to finally address the debt problem. This will affect economic growth and company profits)

2/ Interest rates are going up (Fast for Greek bonds and SCF debentures). If banks aren't lending then companies will need to issue bonds/debentures and will need to compete for investors improving future yields. (This will also negatively affect shares as bond yields get more attractive and less risk as they take priority over shares if the company craps out)
If I understand things correctly the US will want interest rates low to encourage inflation to inflate some of their debt away.)

3/ Inflation/deflation what is going to happen here (I am obviously picking asset deflation for shares and maybe NZ & Aussie houses short term) but if there is tonnes more money in the system won't this automatically cause inflation.

What does the next two years hold and what should I invest in. I think I'm too late for precious metals (gold) and don't know where to go to invest in gold anyway.

1. Probably a correction coming, especially if the European debt issues keep getting worse (& if the US keeps printing money), over next 2 years i'm guessing things may go sideways for a while, mini rallies, followed by drop offs, sorry to sit on the fence, but who really knows?

2. NZ is at the bottom of the interest rate/inflation cycle at the moment, as the economy improves the interest rates will rise, which will affect property & lastly wages before inflation rears its ugly head again, those leveraged may get caught at the top of the market, whereas those freehold will gain yet again.

3. Deflation is more likely in the present environment, long term inflation will return, with increased interest rates etc

4. As for investing in precious metals, Gold has had a good run, but all the debt fears in the USA & Europe is only helping surge the move into Gold, with India & China buying Gold, it does seem to be heading higher in the short term, over the next 2 years i do think we will see new highs, but with periods of stability & moving sideways. I still favour Silver & over the next 2 years, other precious metals like Platinum.

Buying Gold, u can do it a few ways

1. Buy the physical stuff, bullion, coins etc from the likes of Perth Mint
2. Buy GOLD:ASX which is equivalent to 1/10th of an oz
3. Buy into Gold ETF's, like Perth Mint ASX:ZAUWBA
4. Buy Gold stocks, producers, near term producers, or explorers (personally i like GDO, TRY, CXC, SLR & ARD for Gold/Silver)